Land Banking Key Solution For Vacant, Abandoned Properties, Says Emory Professor

The federal government needs to play a critical role in the use of land banking programs to alleviate one of the consequences of the nation's mortgage foreclosure crisis – vacant and abandoned properties, says Emory Law professor Frank S. Alexander, one the nation's leading experts on local government land banks.

In a paper released Oct. 29 by the Brookings Institution's Metropolitan Policy Program, Alexander says that more and more communities are "stressed by the catastrophic mortgage foreclosure crisis and the long-run decline of older, industrial regions," and are struggling to deal with vacant and abandoned properties. Read the paper at: http://www.brookings.edu/papers/2008/1028_mortgage_crisis_alexander.aspx .

"To alleviate this drag on national prosperity, the federal government should advance policies that support regional and local land banking for the 21st century," writes Alexander, who directs the Project on Affordable Housing and Community Development at Emory's Center for the Study of Law and Religion (CSLR). Alexander, CSLR's founding director, is the author of the leading text in the country on land banking, "Land Bank Authorities: A Guide for the Creation and Operation of Local Land Banks."

Land banking enables local governments to acquire vacant and abandoned properties and convert them to productive use or hold them for long-term strategic public purposes. Common re-uses of such property are affordable housing, mixed-use developments, or mixed-income housing, all provided by not-for-profit entities.

The Emergency Assistance Act in the Home and Economic Recovery Act of 2008, passed in July, recognized land banking as a federal concern and funded it with $3.92 billion, but Alexander says neither the bill's clarity for implementation nor the amount of funding it provides are enough.

"It does not come close to meeting the costs associated with the two million foreclosures projected by the end of 2008 and the local revenues lost from vacant and abandoned properties," he writes, adding that earlier drafts of the bill called for $15 billion in loans and grants.

"The role of land banking is not to replace or supplant the open market; it steps in when there is a failure of market conditions," says Alexander.

Alexander reports that during the mortgage crisis of the past two years, foreclosures doubled nationwide -- in August 2008 alone, one of every 416 households received a foreclosure notice. And, almost 600,000 vacant, for-sale homes were added to weak real estate markets. This decline has compounded the long-term problem of vacancies and abandonments in older, industrial regions.

"When left unaddressed, these problem properties impose severe costs on neighborhoods, including reduced property values and tax revenues; increased arson and crime; and greater demands for police surveillance and response," explains Alexander.

In addition to capitalizing local and regional land banking, Alexander recommends that federal policy provide incentives for reforming local code enforcement and state tax foreclosure procedures, and incentives for communities to develop inter-jurisdictional entities that will allow them to address property issues across city and county boundary lines.

"Forty years ago, land banking was encouraged to be a part of federal housing and urban development policy. It is time for it to be implemented. The need is greater than ever; the time is now; and the opportunity is here," he concludes.

-----
www.georgiafrontpage.com
Georgia Front Page
www.fayettefrontpage.com
Fayette Front Page
www.artsacrossgeorgia.com
Arts Across Georgia

Emory's Alexander Asked to Weigh in on Defeated Bailout Bill

As Congress wrestled over the weekend with the now defeated financial bailout bill, Emory University housing expert Frank Alexander was asked to look at the impact of the proposed legislation on easing the crisis in the residential real estate market. Would this bill help ease this country's mortgage and home ownership crisis?

Alexander says the answer is no, but the reason is complex.

"The proposed legislation has two purposes," says Alexander. "One is to deal with the liquidity and credit crisis; the other is to deal with the mortgage crisis and homeownership preservation concerns. If this legislation is passed and Secretary [Henry L.] Paulson acquires large investments in mortgage-backed securities, he most likely would not have the authority to address the home ownership preservation activities contemplated by the statutes."

"The reason this bill wouldn't help the mortgage crisis is not the wording of the statute, but the nature of the product that would be acquired by the Secretary of the Treasury," Alexander explained in a letter dated Sunday, Sept. 28, to Rep. Dennis Kucinich, chairman of the House Domestic Policy Subcommittee.

"When and if the Secretary elects to acquire the mortgage related asset of any single financial institution, the Secretary will not be acquiring a portfolio of whole loans, or even a controlling interest in a securitization of loans," wrote Alexander.

And that is the heart of the problem:

"When the Secretary buys a fractional interest in large pools of mortgage backed securities, he is not acquiring controlling interest of the mortgages themselves," Alexander explains. "So he may be purchasing a five, 20 or 30 percent interest in a mortgage backed security, but that minority interest is not necessarily sufficient authority to modify the loans."

Or as Alexander said in his letter: "The Secretary will lack the authority to authorize, require or even permit a program designed to encourage or facilitate home ownership preservation or foreclosure avoidance actions."

The bill in its most recent form, says Alexander, "has many provisions that make it far superior to the bill that was submitted on behalf of Secretary Paulson eight days ago. I probably would have voted for the bill today (September 29, 2008)."

But in order to address home ownership preservation, says Alexander, the Troubled Asset Relief Program outlined in the legislation should have as one of its goals the acquisition of Troubled Assets, "which will provide the Secretary with a controlling or majority interest in the underlying pool of whole mortgage loans. In such a context the Secretary will be in a position to implement the Homeownership Preservation goals of this legislation."

Alexander, founding director of Emory's Center for the Study of Law and Religion (CSLR), earlier this spring gave testimony before a congressional subcommittee on how federal funds could be targeted to neighborhoods most affected by rising rates of vacant and abandoned properties.

-----
www.georgiafrontpage.com
Georgia Front Page
www.fayettefrontpage.com
Fayette Front Page