REGIONAL SPOTLIGHT: Land bank is built to fail

By Bruce Stahl and Audrey Spalding

Philadelphia is new to land banking. It is also naive about it. City Council's proposed land-banking ordinance incorporates the most harmful practices of the oldest land bank in the United States, St. Louis'.

More than 40 years ago, St. Louis set up a land bank in response to an exodus of residents and the vacant property they left behind. The hope was to return the property to private, productive use.

Instead, the land bank has compounded the crisis. Most troubling is the city's policy of giving its elected aldermen inordinate influence over property purchases. Offers can be and usually are rejected if a neighborhood's alderman does not approve.

One rundown St. Louis building had offers from four different buyers, all rejected by the land bank. But when the area alderman showed up at a land bank meeting and asked that it be sold to another buyer, it was.

Unfortunately, the same policy has been written into Philadelphia's land bank bill. In its current form, it would forbid the bank from entering into a transaction without the approval of the district Council member. This will almost certainly thwart development.

That's what often happens in St. Louis, where a 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."

To get land back to productive use as quickly as possible, a land bank should accept all reasonable offers, even if politicians oppose them.

Philadelphia should also take note of St. Louis' misguided efforts to hold on to properties for future development. Research by the Show-Me Institute revealed that from 2003 to 2010, the St. Louis land bank rejected nearly half of all purchase offers, mostly because it was holding properties for future development. But these hoped-for future developments rarely materialize.

Philadelphia's land bank proposal similarly establishes goals that may undermine efforts to return land to productive use. They include such laudable priorities as encouraging "affordable or mixed-income housing that is accessible or visitable," as well as "community facilities that provide needed services and enrichment opportunities; side and rear yards; urban agriculture; and community open space." Such goals may have the unintended consequence of providing reasons for the land bank to reject purchase offers that don't fit its vision.

St. Louis was fortunate in that these poor practices were not written into the land bank law and could be easily changed; indeed, the bank has cut its rejection rate nearly in half in the wake of Show-Me Institute research on the subject. In Philadelphia, however, some of these poor policies are written into the legislation, which would make the city's land bank not only likely to fail, but also very difficult to reform.

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