The $26 billion settlement between state attorneys general, the federal government and five of the nation's largest banks offers a cautionary tale and some real opportunities for communities grappling with the foreclosure crisis.
While the most apparent beneficiaries are the homeowners who will receive modest compensation (on average $2000) for the mistreatment then endured, a greater opportunity may exist for ailing cities and towns.
As announced, affected states and cities will be compensated by the banks -- each receiving many millions of dollars. There will be a natural temptation to use the 'windfall' to plug budget holes and address emergencies. States and communities will be wiser, however, if they use these dollars to address the epidemic of vacant and abandoned properties that is not only the visible and enduring legacy of the foreclosure crisis but also threatens wellbeing of both neighborhoods and government coffers now and for the future.
From mortgage modification programs, to vacant property registration and code enforcement ordinances; from reform of tax delinquent property sales to the creation of land banks, from acquisition and sale of vacant buildings to their use as rental housing, governments and community groups are experimenting -- an often successfully with tools and strategies that transform blight into asset.
While all the tools are important, fundamental to every successful 'turnaround strategy' -- and therefore particularly deserving of inquiry and funding -- has been land banking, whether done by a formally designated 'land bank" or another entity with the power to acquire and dispose of property. Whereas before, foreclosed and abandoned property could linger for years in legal limbo, land banks allow communities to tackle safety and health problems quickly and move properties more quickly into productive reuse.
Land banks give local communities the ability to create amazing and inspiring projects on the ground -- the kinds of projects that transform neighborhoods and lend hope and real economic gains to struggling neighborhoods. In my hometown of Flint, Michigan, the land bank has demolished hundreds of eyesores, spurred the redevelopment of empty homes and shuttered commercial properties, and breathed new life into forgotten historic buildings. In Kalamazoo, the local land bank is working with residents to expand a wildly successful community garden project that puts food on people's plates and encourages healthy life choices.
In Toledo, the local land bank is working with public and private partners to revitalize a 111-acre brownfield -- now being retooled as almost a million square feet of industrial manufacturing space designed to foster cutting edge green and emerging technologies. In Atlanta, community development groups are working with the local land bank to transform one neighborhood -- where the foreclosure rate topped 50 percent and abandonment was intensifying -- into a diverse, mixed-income, environmentally sustainable community.
In each of these -- and scores more throughout the nation -- land banking has been a means not simply of removing blight, but of fostering redevelopment. Land banks have helped stabilize neighborhoods, enhanced property values and replenished tax rolls by returning properties to them. So powerful and impressive is this 'grassroots' evolution that even Federal Reserve Board Chairman Ben Bernanke is now counseling that land banks be used to address the plethora of foreclosed properties.
Why isn't land banking the standard practice in every community facing rising vacancy and abandonment? Hesitancy about it has most often resulted from local officials' legitimate fear of taking control of properties without having the financial resources to secure, entitle or repurpose them. With states and cities now expecting to receive millions in settlement dollars that barrier should, or at least could, disappear. This is one time when recipients of the settlements should really forego the momentary thrill of 'wiping out' this debt or that and invest these precious resources in land banking and related activities that can act as the foundation not only for more stable neighborhoods and city centers, but the foundation on which to rebuild needed housing, stores, parks, schools and more -- and in doing so provide the employment and tax revenues that are critical components of any sustainable community.