Louisville Landbank: Fueling a Reviving Inner-City Real ...



Louisville Landbank:

Fueling a Reviving Inner-City Real Estate Market

Richard Genz

May 2001

How it Started

Louisville’s Landbank is a patient organization, and that patience has turned into bedrock for inner-city redevelopment. Clearing titles, knocking down decrepit buildings, and maintaining vacant lots is unglamorous work, but having a system for getting it done is part of Louisville’s formula for attracting investment.

The Louisville/Jefferson County Landbank Authority systematically forecloses on tax-delinquent properties, clears land titles, and then offers lots at nominal prices. Redevelopment has to meet city standards for quality and neighborhood compatibility.

The Landbank started in the late 1980’s. All four entities levying property taxes had to collaborate to get it going: state, county, school district, and city. The Landbank isn’t a bank in the financial sense. It aggregates property and holds it. All properties are located inside the City of Louisville. The city pays for operations, including legal, demolition, maintenance, and marketing.

To pre-empt fears that the bank would repeat the urban-renewal era with its geographically concentrated land takings, the Landbank made a point of acquiring tax -delinquent parcels in all parts of town. However, most properties were in the poor neighborhoods of west Louisville, where the real estate market was moribund. The Louisville Courier Journal reported that real estate in parts of the area “became so undesirable that as homeowners died, their heirs often didn’t bother to claim the shotgun houses left behind.”

Adapting a St. Louis model, Landbank staff instituted mass foreclosure lawsuits on 20 or more parcels at a time. In the beginning, the Landbank was taking 200 to 300 lots per year. Eventually the bank aggregated 3,500 parcels. Most were small, 30 x 160 foot lots in residential areas. During the peak of the bank’s acquisition period, 10 staff members worked full-time on the foreclosure suits. The pace slowed in recent years, to fewer than 100 properties annually. Some parcels were donated by private owners, but the bank has never purchased land.

Parcels were simply “banked” for a time when market conditions would support disposition and renewal. Once acquired and cleared, it costs the city about $600 per year to maintain a parcel. Code enforcement staff handle that job.

Clearing and Maintaining

Most structures on the lots were demolished, except for the few that were suitable for rehab with city funds. In the early years, some demolition debris was buried on-site, causing problems for redevelopment. Demolition specifications were later developed to ensure clean, buildable sites.

Because most parcels had been used residentially for decades, pollutants haven’t been a big problem. The Landbank has an unwritten policy of replacing residential lots that turn out to have environmental problems. It also uses authority from the legislature to issue “no further remediation” letters, protecting buyers and lenders from environmental liability.

Leveraging Lots into Results

The Landbank is organized as a single-purpose operation. Although it’s not responsible for revitalizing neighborhoods, the one-stop lot shopping, cleared titles, and low offering prices have themselves become factors that support the reviving market.

For years, the Landbank office was a low-profile operation. That has changed now that some parts of west Louisville are coming back, spurred in part by a HOPE VI-funded revitalization project called Park Duvalle. Relying only on word-of-mouth marketing, the Bank is receiving a steady flow of phone inquiries from developers looking for cheap lots, which sell for about $300 each. CHDO’s get preference. In Russell, one of the city’s important African-American neighborhoods, the Louisville Courier Journal cited “dramatic” progress and referred to “the Russell miracle.” “The Land Bank Authority…is credited with quietly fueling the revival,” it reported in 1996.

Until recently, the Landbank simply tried to move lots out of its inventory whenever the opportunity arose. Some low-quality units went up, and build-out was slow. Lately City Council has urged the Landbank to be more selective. A design review is performed for proposed construction, and builders have one year to complete homes. A new program promotes redevelopment by offering second mortgages to buyers of homes on Landbank lots.

Infill tax credit projects on Landbank lots are popular with developers. One tax credit developer has acquired 48 lots from the bank for development of single-family lease-purchase homes. The land subsidy lowers rents to $412 per month, putting them within reach for households at 50 percent of median. (In good neighborhoods, small, serviced lots suitable for starter homes cost about $10-12,000 in Louisville.) At the end of 15 years, the 1250 square-foot, all-brick homes will be available for purchase by tenants for a guaranteed price of $55,000.

The bank’s inventory is now down to about 1,000 parcels, and marketing is the main activity. Landbank officials offer one caution to cities that would replicate the concept. “Don’t get into this unless you can achieve critical scale in the neighborhood.” Isolated parcels here and there, they say, don’t offer enough development potential to have an impact on the community.

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