Land banking

Land banking is the practice of aggregating parcels of land for future sale or development. While in many countries land banking may refer to various private real-estate investment schemes, in the United States it refers to the establishment of quasi-governmental county or municipal authorities purposed with managing an inventory of surplus land. Land banks are quasi-governmental entities created by counties or municipalities to effectively manage and repurpose an inventory of underused, abandoned, or foreclosed property. They are often chartered to have powers that enable them to accomplish these goals in ways that existing government agencies can not. While the land bank 'model' has gained broad support and has been implemented in a number of cities, they are implemented differently so as to best address both municipal needs and the state and local legal context in which they were created. The period of deindustrialization in the United States coupled with increased suburbanization in the middle of the 20th century left many American cities with large amounts of vacant & blighted industrial, residential, and commercial property. Beginning in the early 1970s municipalities began to seek solutions to manage decline or spur revitalization in once prosperous city neighborhoods. The first land bank was created in St. Louis in 1971. While additional municipalities continued to adopt them at a trickle it wasn’t until the mid 2000s that land banks became viewed as a tested, reliable, and accepted model and experienced widespread implementation – particularly after the success of the Genesee County Land Bank. In 2009 the Department of Housing and Urban Development issued a report embracing land banks as a best practices model for municipalities dealing with the effects of the real estate market collapse and the ensuing foreclosure crisis. Land banking in the UK was previously the preserve of the landed gentry or real estate developers. Many reputable listed commercial building companies engage successfully in land banking for future building projects. Companies also purchase land sites and easily divide them into smaller plots, then offer these plots for sale to individual investors. This relatively new practice in the UK does not fall under the control of the Financial Services Authority. Many people are wary of this form of investment as many plot based land banking companies have failed or been closed down. There are currently no audited successes recorded for UK plot based land banking despite the UK having gone through a major property boom in the period 2002 – Jul 2007. A landbanking scheme that is a Collective investment scheme is a 'regulated activity' for the purposes of the Financial Services and Markets Act 2000 and, according to section 19(1), may only be operated in the UK by a person who is either authorised or exempt. Section 26 provides that an agreement made by a person in contravention of this is unenforceable and any sums paid to him may be recovered together with compensation for any loss suffered. After recent FSA enforcement of this regulation many companies selling UK land plots have moved outside of the European Union and only offer land plots to non UK residents who are not protected by FSA regulations.