Land Banks & Community Land Trusts Creating “Permanently” Affordable Housing

Land banks and community land trusts (CLTs) are non-profit corporations each formed under Ohio law.  They share similar missions to unlock the potential of vacant, abandoned, and/or tax-delinquent (VAD) properties.  And they have a history of partnering together in various jurisdictions.[1] But compare: a land bank is a quasi-governmental entity characterized under Ohio law as a public body[2], and viewed in some instances as performing essential government functions (with all the benefits – and challenges – that accompany such status); a CLT is a simple 501(c)(3)-designated private non-profit corporation (with certain preferred board governance arrangements[3]).  And these entity types differ as to their respective approaches to owning property: land banks often focus on temporary ownership of VAD properties; CLTs are built for long-term stewardship, with a particular view to locking-in land for income-limited residential use.

Land banks in Ohio are super-charged community improvement corporations, whose engines were designed to motor through the wave of VAD properties overwhelming local communities as a result of the 2008 Housing Crisis and Great Recession.  Land banks were built to clear title of delinquent taxes and liens, and reintroduce challenged properties back into the marketplace.  We now see land banks pivoting from a demolition-first approach to construction and renovation of attainable housing.  Indeed, the Ohio General Assembly has identified land banks as the preferred funding vehicle for tens of millions of taxpayer dollars supporting housing development.[4]

Now consider CLTs, which also work to address VAD properties.  But CLT acquisitions – which may involve conveyances from local land banks – aim towards long-term stewardship, not quick repurposing.  That is, CLTs acquires VAD properties with the goal of providing permanently affordable housing through a creative ground leasing strategy.[5]  By holding fee ownership of a given parcel of land, a CLT enters into a renewable ground lease with an income-qualified buyer who purchases the structure built on that land, at a subsidized price.  The homebuyer owns the building and makes mortgage payments, maintaining both the housing structure and the underlying land.[6] But the land itself remains owned by the CLT. 

Here’s the transformative impact: the CLT’s ownership provides an opportunity for the homeowner – who bought the house at a lower, subsidized price she otherwise may not have commanded in the market – to then build equity in that home.  She will extract that equity upon an eventual sale of her house.[7]  That is, in selling her interest in the CLT-owned property, the sale proceeds will return her invested  equity (the down payment and mortgage loan principal payments) plus a certain percentage share of the property’s appreciation in value.[8]  Such a “Shared-Equity Homeownership Program” allows entrance into the homeownership market by folks who otherwise may be kept in rental housing, and it builds equity that turns into a family’s generational wealth.

Can land banks – themselves – operate a Shared-Equity Homeownership Program?  And marry the land bank’s special statutory powers[9] with such a wealth-building effort?  Yes and no.

Certainly land banks are empowered to undertake many actions to further their missions, including equity-building programming.[10]  But land banks are statutorily limited as to the number of occupied properties they may hold at any one time.[11]  Meaning that a land bank administering a Shared-Equity Homeownership Program would be capped in the size of its inventory of shared-equity properties: by their very nature, those properties are occupied.

One way to workaround this limiting factor is for a land bank to operate a CLT as its wholly-owned subsidiary. [12]   This is the approach taken by the Central Ohio Community Improvement Corporation, which is the Franklin County, Ohio, land bank.  Under this arrangement, the CLT also partners with the City of Columbus’ municipal land bank, such that both land banks evaluate properties they acquire to determine whether to transfer them to the CLT.[13]  But note that a land bank operating a CLT cannot relay its real property exemptions to the CLT; the CLT likely will hold its properties in a taxable status, based on the fact of their transfer from the land bank and their use as private residences.[14]

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^{[1] See generally Kim Graziani, Land Banks and Community Land Trusts: Partnering to Provide Equitable Housing Opportunities Now and for Future Generations, Center for Community Progress (December 2021) (describing multiple partnership structures between land banks and community land trusts in Albany, New York, Atlanta Georgia, and Columbus and Franklin County, Ohio).}

^{[2] See R.C. 1724.01(A)(3). A land bank is a special type of community improvement corporation referred to as a county land reutilization corporation under Chapter 1724 of the Ohio Revised Code. The Ohio Attorney General has called community improvement corporations, “quite literally an agency of a county or a municipal corporation. As such, [they] fall[] squarely and unequivocally within the statutory definition of a ‘public body’ set forth in R.C. 121.22(B).” See Ohio Atty.Gen.Ops. No. 79-061, at 2-204 – 2-205.}

^{[3] CLTs have historically operated with “tripartite” boards, meaning that a CLT’s board make-up is divided into three equal categories of representatives: (1) one-third is made up of people living on CLT land, (2) one-third is made up of community members, and (3) one-third is made up of technical experts, funders, or other stakeholders.  See Lauren Lowery, et al., Community Land Trusts: A Guide for Local Governments, National Lease of Cities & Grounded Solutions Network 16 (August 16, 2021).}

^{[4] See generally Welcome Home Ohio: County Land Banks Setting the Table for Affordable Housing Development (July 17, 2023), https://www.brickergraydon.com/insights/publications/Welcome-Home-Ohio-County-Land-Banks-Setting-the-Table-for-Affordable-Housing-Development.}

^{[5] Graziani, at 6-7.}

^{[6] Id.}

^{[7] Id.  But note the land has restrictive covenants recorded, to keep the housing unit thereon from being sold at market-based prices.  Rather, the house is sold, over and over again, at lower-than-market (i.e., subsidized) prices.}

^{[8] Id., at 13.}

^{[9] See, e.g., R.C. 5722.04, which requires a county auditor as part of his or her required regular sale of forfeited land list properties to separately advertise any forfeited nonproductive land selected by a land bank.  The County Auditor must sell the selected parcels to the land bank if no bid is made for the amount due.  See also R.C. 5723.04(B), which requires a county auditor to transfer forfeited property to a land bank upon the land bank’s request.  And see R.C. 5722.11 and R.C. 5709.12(F): properties owned by a land bank are exempt from real property taxes, as a matter of right, and based only on ownership by the land bank.}

^{[10]  See generally R.C. 1724.02.}

^{[11] See R.C. 1724.02(A)(3): land banks cannot acquire real property if doing so would cause the number of occupied real properties held by the land bank to exceed the greater of 50 properties or 25 percent of all property held by the land bank as part of its land reutilization program.  For the purposes of R.C. 1724.02, “occupied real properties” includes all real properties that are not unoccupied as the term is defined in Section 323.65 of the Ohio Revised Code.} 

^{[12] Graziani, at 20.}

^{[13] Id.}

^{[14] R.C. 5722.11; R.C. 5709.12(F).}