Cook County Land Bank
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A TECHNICAL ASSISTANCE PANEL REPORT Cook County Land Bank TAP Chicago, IL October 23-24, 2012 Urban Land Institute Chicago Sustaining Support The mission of the Urban Land Institute is to provide ULI Chicago gratefully acknowledges its 2012 sponsors, leadership in the responsible use of land and in creat- whose support is critical to local ULI initiatives: ing and sustaining thriving communities worldwide. PATRON ULI Chicago, a District Council of the Urban Land The John Buck Company Institute, has more than 1,000 members in the Chi- cago region spanning the land use industry including BENEFACTOR developers, builders, engineers, attorneys, planners, CohnReznick LLP investors, financial advisors, academics, architects and public officials. SUSTAINER Associated Bank TAP Sponsors Bank of America Merrill Lynch This Technical Assistance Panel was sponsored by Bryan Cave LLP Cook County Commissioner Bridget Gainer, in partner- Cannon Design ship with Cook County President Toni Preckwinkle and Chicago Title Insurance Company the Cook County Land Bank Advisory Committee. Crown Community Development Epstein Gould & Ratner LLP Technical Assistance Panel Program Kirkland & Ellis LLP The Technical Assistance Panel (TAP) allows local com- Magellan Development Group LLC munities or government agencies an opportunity to Pearlmark Real Estate Partners, L.L.C. access strategic advice from experts in development PSP Capital that they could not obtain through any other process. SB Friedman Development Advisors The goal of the panel program is to convene a multi- CONTRIBUTOR disciplinary ULI-member team of experts to examine Bucksbaum Retail Properties, LLC complex land use challenges and help sponsors find Deloitte creative, practical and implementable solutions based DLA Piper LLP (US) on community realities and best practices. Heitman LLC Kensington Realty Advisors, Inc. The panel process brings together perspectives from Mesa Development, LLC current market, land use and design, financing and Morningside Group development strategies. TAPs are typically two-day Plante & Moran, PLLC intensive working sessions addressing land challenges Wells Fargo proposed by the sponsoring organization, a local gov- ernment, non-profit organization, or developer, about SUPPORTER a specific development issue or policy barrier within a McGuire Woods LLP defined geographic area. Moran & Company TAP Staff ULI Chicago acknowledges and thanks the following individuals Cynthia McSherry, Executive Director, ULI Chicago and companies for underwriting Cook County’s sponsorship of Christine Kolb, Director of Community Outreach, ULI Chicago this report: Joanna Trotter, Community Development Director, Metropolitan Albert C. Hanna Planning Council Bank of America Merrill Lynch Chicago Association of Realtors ULI Chicago Staff Writer, Barbara Ray, Hiredpen, Inc. JP Morgan Chase Bank, N.A. RIK ENTERPRISES LLC Wells Fargo Bank, N.A. 1 Cook County Land Bank TAP Chicago, IL October 23-24, 2012 CONTENTS 2 The Challenge: Foreclosure & Vacancy in Cook County 4 The Response: A County-Wide Land Bank 5 Panel Recommendations 6 Mission 6 Governance Structure & Finance 10 Acquisition & Disposition 12 Conclusion 2 The Challenge: Foreclosure & Vacancy in Cook County Vacant and distressed properties have become a Combined with the real estate crisis, the severe loss growing problem for metropolitan areas following the of jobs and income during the economic crisis has set foreclosure crisis of 2008 and the ongoing deep reces- back progress in community and economic develop- sion and slow recovery. Foreclosures have left many ment more than 20 years in Chicago and Cook County. communities bereft of neighbors, facing declining The region had made tremendous strides at the local, property values, and with growing numbers of vacant city-wide, and county-wide levels to rebuild distressed and boarded up properties that draw crime and reduce communities in the 1990s and early 2000s. This prog- nearby home values.1 ress has been threatened, but leadership exists in local communities to tackle the challenges and rebuild their In Cook County, nearly 200,000 housing units are cur- economic and residential markets. rently vacant, and according to the Circuit Court of Cook County, an estimated 85,014 foreclosure cases Without intervention, foreclosure and abandonment are currently pending in its court. In 2005, there were will continue to be a deteriorating spiral for many only 14,442. While many are in the city of Chicago, communities. The eyesores sit empty, and vandals the suburbs are far from immune to the problem (see move in and strip the homes of copper pipes and other Figures 1 and 2 on opposite page). In addition to the valuable material. Eventually, the municipality must immediate impact on a neighborhood, foreclosures step in - if it can afford to - and demolish the home also leave municipalities with a declining tax base, de- or business. The vacant land becomes a harbinger of linquent property tax rolls, and growing maintenance disinvestment, and the community slides downhill. issues. In Chicago, if a foreclosed property is quickly put back on the market, the average cost to local gov- The challenges facing Cook County are not only in the ernments is only about $430. If the home languishes realm of housing. Issues of land assemblage, encum- and is abandoned and requires demolition, the cost to bered titles, and distressed commercial and industrial the local municipality is $34,199.2 properties are equally important with respect to eco- nomic opportunities for Cook County residents and a Properties that are vacant and abandoned are some- stable tax base for local communities. times tax delinquent, which is an added drain on public resources with their upkeep costs (boarding up, mowing lawns) and loss of tax revenue. Outstanding tax liens or other liens, such as unpaid water bills, are a major hurdle for private or public-sector developers who might be interested in rehabbing the property. The complicated process of clearing the liens can take up to two and a half years at times. 1. Studies have shown that each foreclosure causes homes within about an eighth of a mile to lose from 0.5% to 2% of their value. See Todd Swanstrom, “Resilience in the Face of Foreclosures: How National Actors Shape Local Responses.” In Urban and Regional Policy and Its Effects, ed. By Margaret Weir et al. (Washington, DC: Brookings Institution, 2012). A study in Chicago found that for each 1 percentage point increase in the foreclosure rate, violent crime ticked up by about 2% in the area. See Dan Immergluck and Geoff Smith, “The Impact of Single-family Mortgage Foreclosures on Neighborhood Crime,” Housing Studies, vol. 21 (2006). 2. William C. Apgar and Mark Duda, “Collateral Damage: The Municipal Impact of Today’s Mortgage Foreclosure Boom.” (Minneapolis: Homeownership Preservation Foundation, May 11, 2005). 3 Foreclosure by Census Tract Vacancy by Census Tract Figure 1: Foreclosures are facing virtually all Cook Figure 2: While housing vacancies tend to concentrate County communities. in certain areas of the County, nearly all communities are facing higher levels of vacancies than in the past. Percent of Residential Properties with a Foreclosure Overall Vacancy Rate in 2010 Census, by Census Between 2005 and 2011, by Census Tract Tract Foreclosure Map Source: Record Information Services, Cook Vacancy Map Source: Record Information Services, Cook County County Assessor. Prepared by Institute for Housing Studies at Assessor. Prepared by Institute for Housing Studies at DePaul DePaul University. University. Cook County Land Bank Technical Assistance Panel 4 The Response: potentially just as useful to safeguard healthy commu- nities from deterioration.”4 A County-Wide Land Bank On July 24, 2012, the Cook County Board passed a As the problem has grown, local leaders and stake- resolution sponsored by President Toni Preckwinkle holders have begun seeking innovative solutions. and Commissioner Bridget Gainer to establish an Advi- The Cook County Board recently formed an Advisory sory Committee to investigate the establishment of a Committee to explore a land bank for Cook County. Cook County land bank. A land bank is an entity that can acquire, hold, man- age, and develop foreclosed or tax-delinquent vacant To complement the Advisory Committee, Cook County properties. It can provide communities with a legal Commissioner Gainer engaged ULI Chicago to orga- tool to hold, sell, or develop these properties with the nize a Technical Assistance Panel (TAP). Chaired by long-term interest of the community and surrounding Scott Goldstein of Teska Associates, Inc., the panel 3 property owners in mind. brought together a diverse set of real estate experts to provide objective industry expertise and pragmatic As the Center for Community Progress explains: “Land recommendations for the land bank. Members of the banks often provide marketable title to properties panel included industry experts on real estate law, previously impossible to develop due to complicated affordable housing, community development, private- liens and confused ownership histories. While land sector development, and land planners, as well as banks are generally associated with older urban com- leaders of three of the most successful land banks in munities that have significant abandonment, they are the nation from Minneapolis/St. Paul; Flint, Michigan; Questions for the Panel • Mission: What is the central mission of the land bank, and how does it intersect