OMAHA MUNICIPAL LAND BANK NO SILVER BULLET
by Lynn Sanchez
After the national housing bubble burst, Omaha was in the same leaky boat as a lot of other cities.
Saddled with bad properties no one wanted, the city ended up holding on to them indefinitely. Located in the oldest, poorest parts of town, they were a detriment to neighborhoods and a drain on city resources; mowing, and snow removal; collecting tax liens; dealing with “zombie” mortgages that even banks had walked away from; spending $10,000 to $14,000 per demolition.
And landlords had the ear of the city council in property matters, not residents who were forced to live next to dangerous eyesores.
About six years ago, the Omaha Municipal Land Bank (OMLB) was created as a public-private tool to address these languishing properties. From the city’s perspective, it had the potential to be a triple-win — change “vacant spaces to vibrant places,” get properties back on the tax rolls, and build partners to share the cost burden. And the bonus; presenting it as a vehicle for returning property back into the hands of neighborhood citizens.
Today, the Omaha Municipal Land Bank has not had a full time Executive Director since May of 2019. This is the second executive director hired to head the organization who has departed without an official explanation.
In 2014, most Omahans had never heard of a land bank. Up until 2008, only five states had land bank legislation. Today there are an estimated 170 land banks in the U.S.
Land banks are the gardeners who prepare the plot so the community can cultivate it. As a governmental nonprofit, they purchase unproductive properties with code violations, as well as those that are condemned, vacant or owe back taxes. A small percentage of properties are donated.
Funding sources include revenue from property sales, federal, state and foundation grants, and general fund appropriations from local and county governments. Land banks don’t rehabilitate or sell housing, they instead serve as a clearinghouse for other nonprofits to acquire land to develop.
OMLB holds a depository of properties tax free for up to five years for trusted nonprofits such as Habitat for Humanity and Holy Name Housing, allowing them additional time and flexibility to rehab or build. Properties may also be turned into public spaces, retail, commercial, and industrial projects or urban agriculture.
In 2013 the state legislature passed Senator Heath Mello’s LB699, authorizing land banks in Nebraska. It opened the door for the creation of an Omaha Land Bank, pending the approval of the city council. Advocates from the Housing and Revitalization Action Team from Omaha Together, One Community (OTOC) jumped on the issue, vigorously lobbying the council and the mayor. When investment companies protested that a land bank would “cherry pick” properties, OTOC showed up armed with photographs of some of the most horrific derelict properties in the city. OTOC’s team also pushed for hand-in-hand legislation, the Vacant and Abandoned Property Ordinance, adopted in November 2015. This allowed the city to charge a $500 fee every 90 days until owners of these properties registered them, or resolved the issues they caused.
Omaha started its Land Bank from scratch in 2014. No experience, no director, no board, no staff, no bylaws or procedures other than what was laid out in Mello’s bill and the “Land Banks and Land Banking” handbook published by the Center For Community Progress.
Seven voting board members, all volunteer, were appointed by the mayor, one from each council district. They came from the worlds of real estate, banking, development, the Chamber of Commerce, nonprofit affordable-housing and landlords. Another six non-voting members served as consultants, including District 2 Councilman Ben Gray who said the city envisioned OMLB as a tool to add more affordable housing. “We were talking about, ‘How do we address affordable housing?” he remembered. “‘What’s not available now that could benefit both individuals and organizations to help build more affordable housing?’”
Gray traveled to several cities to research successful land banks, eventually recommending Omaha model theirs on Cleveland’s Cuyahoga Land Bank, which has been the catalyst for demolishing 8,000 derelict properties there since 1999.
It took OMLB two years preparation before it offered its first properties for sale in December 2016. There were a few growing pains along the way. In August 2015, the newly-minted agency hired its first director, attorney Brittany Jefferson from the Little Rock Department of Housing and Neighborhood Programs. And while they professed their excitement about her land bank experience at the time, Jefferson was quietly ousted by the board the following February after barely four months. There was no official explanation.
To fill the suddenly empty position, Councilman Gray recommended Marty Barnhart as the interim director. He seemed like the perfect fit for the job.
The minutes from February 2016 OMLB board describe the ideal candidate as “very strong at engaging with the community and building relationships and partnerships with neighborhood groups, non-profit organizations, contributing donors and being creative with the partnerships….Be able to promote what the organization does, communicate clearly what the organization is doing and what the purpose and vision is.” This was in addition to managing the organization and its properties. Barnhart was then the administrator of a women’s shelter, but for years had directed the Douglas County Land Reutilization Commission and had expertise regarding tax delinquent properties.
“The goal was to get the land bank set up, get it ready for a full time director, and for me to step away,” he said. “In May 2016 the board approached me and asked me if I would put my hat in the ring and consider being their full time director.”
Besides money from the city, philanthropic heavyweights such as American National Bank, First National Bank, Mutual of Omaha, The Kiewit Foundation, the Robert B. Daugherty Foundation and the Suzanne and Walter Scott Foundation became OMLB donors.
Immediately, Barnhart began to network in the community where there was a lot of fear this might be a land grab by the city of Omaha to the detriment of the communities surrounding these properties. “I did a lot of work, a lot of neighborhood meetings so that people would be comfortable with the processes, but also know THEY were the most important component,” he said. “I wanted procedures and policies in place that would help them to buy property, to own property and to make their neighborhood a place they would continue to call home. I made that emphasis very clear when I went out to speak, that THEY were the change agents. Change happens on the street. It doesn’t happen at City Hall.”
Outside funding allowed properties to be sold at far below market rate so that “anyone with nearly any kind of income should be able to afford a land bank property,” said Barnhart.
Prospective purchasers, developers or community members had to be committed, each one vetted by the OMLB leadership. Many of the property listings read like warning labels: “This 3 bed, one bath home is in bad shape. There is approximately a (12) twelve foot section of the foundation that has collapsed. The center floor beam is compromised and the floor is sagging.” Purchasers were required to show a clear plan of action, including estimated job costs and proof they had the financial capability to finish projects within two years. Gray said they also wrote protective wording into the ordinance stating that purchasers could not “change the characteristics of the neighborhood” when building.
One of their first priorities was buying property tax lien certificates. This prevented outside investors from cashing in on their generous 14 percent interest rate. Douglas County has about $5 million a year in tax liens, Barnhart said. Anonymous investors with no ties to North Omaha had been obtaining land this way for years, either sitting on it indefinitely or foreclosing after a redemption period. Private developers weren’t interested, as the taxes owed often totaled more than the property was worth. Tax liens are the number one way North Omahans lose homes.
“We wanted to end that idea,” said Gray.
Once in place, Barnhart hit the ground running.” “That whole first year was a year of listening for me, over 900 appointments,” he said. “‘What do you want to see in the land bank? What should it do?’ Talking to city officials, talking to grant individuals and organizations. No staff was even hired till January 2017 other than myself.”
Barnhart expressed a desire to “stay in the position for a decade or more,” early in his tenure according to a June 2016 interview with the Omaha World Herald. “It was the land bank’s interest to protect the community, and the number one thing was to add housing,” he said. “We need housing so badly in our Northeast area and across our state, it’s our number one need.”
To that end, they also steered potential buyers from the community towards Omaha 100 and Family Housing Advisory Services to assist in getting financing to bring their projects to life.
Though several big land bank success stories made a splash in the local news, progress has been moderate. Starting at zero inventory in 2016, about 42 land bank properties were sold during 2017. Another 69 properties were sold during 2018. Exact figures from 2019 were not yet available at the time of publication, but an OMLB spokesperson estimated that number at 50, not including properties held for nonprofits.
Then, in May 2019, history repeated itself as the OMBL director abruptly left the position without official explanation. When asked if he wanted to elaborate on why, Barnhart answered simply, “No.”
Since his departure, Troy Anderson, the mayor’s chief of staff, has served as interim director. At the time of publication, a new director has not been hired.
Looking back on the past six years, representatives from OTOC who attend monthly board meetings said their organization is satisfied. Records are well-kept and the city is doing “pretty well” with properties compared to eight years ago, they say.
The board has had trouble keeping District 2 and District 4 seats filled during its tenure, with Barnhart saying it was difficult to find people to invest their time and resources into the crucial positions for Northeast and Southeast Omaha.
Turnover from land bank purchases has been a drop in the bucket against the thousands of problem properties across the city. The OMLB website lists the Omaha’s current status as over 7,000 properties with code violations, over 3,000 properties with demolition violations and nearly 4,000 with “unfit/unsafe” designations, with more than half located east of 42nd street.
“Time is one of the biggest factors,” said Barnhart. Tax foreclosure properties take between one and three years to enter the salable inventory if taxes are not paid off by the owners. Code violations or condemned properties may take up to a year.
Money is another factor. “It takes money to bring these properties in, to maintain them, and to assemble the inventory,” Barnhart said. “That was really the biggest problem I had, early on.”
At the December 2019 board meeting, Interim Director Troy Anderson outlined various budget details, including $50,000 in consultation fees to be paid in 2020 to update the organization’s strategic plan. Interview requests to Anderson and Board President Mike Riedmann for further information were not responded to.
Balancing the public good and financial reality is what every city department grapples with.
In fact, besides general directives for community outreach and engagement, there is no specific language in the Land Bank legislation or strategic plan requiring them to prioritize buyers from the community or guide buyers to financial resources.
“No, it wasn’t in the legislation. It was in our process,” Barnhart confirmed. “Every time a property came into the land bank inventory and was for sale, the first people we notified were the neighborhood associations.”
The new strategy, the new director may not consider this a “business-minded approach.”
After almost a year since his departure, Marty Barnhart misses being part of the OMLB. “It was something that I loved very much and I enjoyed very, very much,” he said “I love our community, I’ve been in our community almost all my life, I graduated from Central High School, I met my wife there, I’ve been very invested in our community all my life and I love Northeast Omaha and every community there; they know of my love for them and also of my involvement and my investment in long-term success for our city.”
OMLB Board Meetings are open to the public on the Second Wednesday of each month at 9 am, Jesse Lowe Conference Room, 3rd Floor, Civic Center, 1819 Farnam Street