Closing of Kent County Land Bank presents unknowns for nonprofit developers

BY Sunday, January 06, 2019 09:10pm

GRAND RAPIDS — Executives at nonprofit development organizations think the dissolution of the Kent County Land Bank Authority will affect their operations, even if some of the specific effects will remain unknown until the agency is officially closed.

The Kent County Board of Commissioners on Dec. 20 voted to dissolve the Kent County Land Bank Authority, which is operating as Innova-Lab, after a lengthy discussion of the organization’s mission. Ultimately, the majority of commissioners decided the land bank had completed its initial mission, especially in light of improvements in the real estate market since 2011.

However, nonprofit developers who have come to rely on the Land Bank to clear messy titles argued the organization still can play a role in the current market, particularly given the affordable housing struggles in the region.

“It doesn’t seem like it cost the county really anything to have it in place,” said Jeremy DeRoo, executive director of LINC UP, a Grand Rapids-based real estate developer. “It seems to be more of an ideological difference between some of the commissioners and the role of a quasi-government agency in the real estate market.”

As it stands, the current Land Bank has 12 months to handle its liabilities and fulfill its agreements before it concludes. What happens after the Land Bank ceases operation remains unknown, according to sources, who note the county could establish another land bank at any time.

In the interim, Kent County will be meeting with stakeholders “to assess the current situation and develop a plan going forward,” said Lori Latham, the county’s communications and public relations director. She said the county has no concrete plans for after the Land Bank is retired.

Kent County Land Bank Authority Chair Ken Parrish, who also serves as county treasurer, said the group will begin to evaluate all projects and properties to map out courses of action for them.

LINC UP purchased three homes through the agency last year. DeRoo said the Land Bank has more properties LINC UP was hoping to buy for future projects. Because of the 12-month wind-down period for the Land Bank, DeRoo does not anticipate any effects on projects the organization has planned.

However, the dissolution of the land bank eliminates LINC UP’s ability to strategize on future investments with the organization, DeRoo said.

“It’ll make it more difficult to do single-family home ownership programs in Kent County,” he said. “The Land Bank was able to identify tax-foreclosed properties specifically, and create a pipeline of access to those for the creation of housing for low-income families. It’s really hard to do those projects in the open and private market because timelines just don’t align.”

When buying property with federal dollars, LINC UP must perform a due diligence process that can take six to eight weeks after signing a purchase agreement. In the private market, homes usually sell in 10 days, he said.

“Most sellers are not interested in having their house off the market for that long while we do our due diligence,” he said.

Without the Land Bank’s help, LINC UP will spend more time and money on projects, which translates to higher costs for buyers of the homes, all of which goes against the mission of getting more affordable housing online, according to DeRoo.

“That means that we’re essentially doubling the cost of moving offline properties back into the hands of the private market for low-income homeowners,” he said.

Kent County Commissioner Jim Talen spoke specifically about the Land Bank’s tools when it comes to encouraging more affordable housing. Taking away the Land Bank will create a barrier for developers to clear up titles for properties that are difficult to redevelop, he said.

Land banks are able to clear any cloud on a title in 60 days through an expedited quiet title action. Without this, Talen said, nonprofits and developers looking to construct affordable housing could miss a potential low-cost opportunity.

“A few thousand dollars can make a big difference in the long-term affordability of the house,” he said.

WHAT’S NEXT

In 2016, a subcommittee of commissioners reviewed the Land Bank and made recommendations on improvements, saying the body would be reviewed again in 2020. This year, staff from the county administrator’s office conducted an “implementation review” by interviewing stakeholders to see if those recommendations had been met.

The move came as some commissioners questioned the mission of the Land Bank after its executive director, David Allen, rebranded the organization as Innova-Lab and partnered with Champion Homes Inc. to begin developing modular homes throughout Grand Rapids.

Some commissioners and private real estate executives saw this as “mission creep” that positioned the Land Bank to compete with the private sector, while advocates viewed the realignment as an innovative move.

Before the vote, multiple representatives from nonprofits spoke about the need for the Land Bank and asked commissioners to take more time to consider their decision.

Dennis Sturtevant, CEO of Dwelling Place in Grand Rapids, said commissioners were missing context about the state of affordable housing issues in Kent County.

“The Kent County Land Bank Authority has demonstrated over the last few years that it’s one of the most innovative in the Midwest,” Sturtevant said.

The intergovernmental agreement commissioners voted to dissolve states that the disposition of the remaining assets, including properties owned by the Land Bank, are subject to agreement between the county treasurer and the state authority.

However, the Land Bank’s articles of incorporation specify that assets go to Kent County or to local units, if there are interlocal agreements requiring that.

What comes next for developers remains an open question, according to DeRoo. Likely, an agency or group outside of Kent County will continue to work as a land bank, he said. The tax foreclosed properties that have been flowing through the existing Land Bank will instead flow through the city of Grand Rapids or another agency.

“We’ll continue to be able to do what we do, it just won’t involve Kent County in any way,” he said. “That’s not for sure yet, but that’s how it was before the Land Bank existed.”

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