Don’t Bank on It: When it Comes to Vacant Property, Learn from Saint Louis’ Failures

The idea of land banking is new in Philadelphia. It is also naive. The Philadelphia City Council’s proposed land banking ordinance incorporates the most harmful practices of the oldest land bank in the United States, the Saint Louis land bank.

More than 40 years ago, Saint Louis City set up a land bank in response to the exodus of its residents, and the vacant property they left behind. When the land bank was created, the hope was that it could return vacant property back to private, productive use.

Instead, the land bank has adopted policies which have compounded the vacancy crises. Most troubling is the land bank’s policy of giving area aldermen an inordinate amount of influence over whether someone can purchase property. Offers from residents are rejected simply because their local alderman does not express his approval of the sale.

Offers to buy vacant land bank property are often from neighborhood residents. The properties are generally in a state of disrepair, and the bidder is planning to repair the property in an attempt to make his or her neighborhood a better place to live. If the resident does not have the blessing of his local alderman, the offer is typically rejected.

Consider the case of 2925 Union, a rundown, 1-story brick building in Saint Louis that received offers from four different buyers. The Saint Louis land bank said no to all four offers. When the area alderman showed up at a land bank meeting and told the land bank to sell the property to another buyer, it did.

Tragically, this policy of deferring to area officials will be written into law if Philadelphia’s land bank ordinance is adopted. In its current form, Philadelphia’s ordinance forbids the land bank from entering into a transaction if the district council person expresses disapproval. This policy will almost certainly thwart development byresidents who do not have their councilman’s approval, even if the resident plans to put the property to productive use.

Our fear is not unfounded. This happens frequently in Saint Louis. The former deputy mayor for development told us that “the sort of working arrangement we have with the aldermen is that if they don’t want to do something, we don’t want to do it.”

In order to quickly get land back into private, productive use, a land bank should accept reasonable purchase offers, even if politicians oppose them.

Philadelphia should also heed Saint Louis’s failed attempts to hold property for future development. Show-Me Institute research revealed that between 2003 and 2010, the Saint Louis land bank rejected nearly half of all purchase offers. The most common reason for rejection was that the property was being held for future development. Unfortunately, the hoped-for future developments rarely materialize.

In Philadelphia, the land bank proposal establishes goals that may undermine efforts to return the land to productive use. The goals include otherwise laudable priorities, such as encouraging “affordable or mixed-income housing that is accessible or visitable” and “community facilities that provide needed services and enrichment opportunities; side- and rear-yards; urban agriculture; and community open space.” These goals may have the unintended consequence of providing a reason for the land bank to reject purchase offers that do not fit the land bank’s vision. Again, our fears are grounded in experience – this public policy failure has occurred repeatedly in Saint Louis.

To be clear, Saint Louis’s adverse policies are not written into law, and can be suspended at any time. Indeed, it appears that in response to the Show-Me Institute’s research the land bank bank’s rejection rate was cut nearly in half. But in Philadelphia, these poor policies will be written into law.

Bruce Stahl is a research assistant and Audrey Spalding is a policy analyst at the Show-Me Institute, which promotes market solutions for Missouri public policy.