Land-bank bill advances in Ohio Senate: It would help counties put vacant homes on market quickly

By Jim Siegel, The Columbus Dispatch, Ohio

Mar. 11--As the state's foreclosure crisis continues to overwhelm the private market's ability to buy up vacant houses, state lawmakers appear ready to help counties better control the situation.

While some foreclosure-prevention legislation is languishing at the Statehouse, an Ohio Senate committee gave unanimous approval yesterday to a bill that would allow counties with populations of more than 60,000 to operate land banks.

The goal, supporters say, is to let counties speed up the process of turning blighted, abandoned properties into something functional. The normal process of moving through the courts into a sheriff's sale can take 18 to 24 months.

House Bill 313, which next heads for a full Senate vote, is not to benefit the banks or the owners who lost the house, said Gene Krebs, co-director of Greater Ohio, a research group focused on smarter land use.

"This bill is really for the eight property owners who have been paying their mortgage and cleaning their yard who are adjacent to that vacant property," he said. "This property gets stabilized and put back onto the market as quickly as possible."

Current law allows only a land bank in Cuyahoga County, which recently got nearly $41 million in federal stimulus funds to demolish or renovate homes in 20 targeted neighborhoods. In January, the Cuyahoga County Land Reutilization Corp. reported that it had acquired about 40 properties and had about 60 under contract.

The bill would allow more than 30 additional counties, including Franklin, to establish land banks. County Treasurer Ed Leonard, who is interested in the idea, noted that speculators who bid on vacant and abandoned properties at times will sit on the property or do only minimal repairs, hurting the values of entire neighborhoods.

If a house is labeled as abandoned, the court could sell it to the land bank without offering it through a sheriff's sale, he said.

"It's something we're going to take a close look at," Leonard said, adding that he wants to delve into the pitfalls and benefits experienced in Cuyahoga County. "It may take us awhile to crunch the numbers. When interest rates are low, it might work. If interest rates start creeping up, it might not work as well."

The land bank would generally be funded by borrowing against unpaid real-estate taxes, including interest and penalties. The land bank would pay the schools and other public entities all back taxes owed, so the title is clean.

Ohio set another record last year with nearly 90,000 new foreclosure filings, a 3.8percent increase over 2008. A new report by the nonprofit Policy Matters Ohio found that 64 of Ohio's 88 counties saw an increase in foreclosure filings, and in 34 counties, filings grew by double-digit rates.

"The number of foreclosures in the state remains at crisis levels, and all signs point to more growth," said David Rothstein, Policy Matters researcher.

If these were more normal times, bill supporters say land banks would not be necessary. "The market can no longer respond to the vacant property that is out there. That is what this is in response to," said Dawn Larzelere, associate director of Greater Ohio.

jsiegel@dispatch.com

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