What’s a land bank and should it pay property taxes? House tax panel weighs in

How does the public benefit? That’s a core question with any piece of proposed legislation, but, for the state’s nonprofits, the answer can determine your tax status.

Take a land bank. That’s a public authority or nonprofit organization designed to acquire, hold, manage and possibly redevelop property to meet such community goals as increasing affordable housing or stabilizing property values.

But should a land bank pay property taxes? That question is addressed in HF4265, a bill sponsored by Rep. Matt Norris (DFL-Blaine). It would place in statute the purpose of a land bank: to acquire, hold or manage vacant, blighted, foreclosed or tax-forfeited property for future development, redevelopment or disposal.

And its public benefit would be expanded to include providing for the development of affordable housing to households at or below 80% of area median income and allowing the property to be held by a land bank organization for future development.

Under the proposal, abatements granted on either basis would be limited to a period of no more than five years.

The House Property Tax Division laid the bill over, as amended, Wednesday for possible inclusion in a larger bill.

“Land banks have proven to be a valuable tool for the preservation of affordable housing and Main Street businesses,” Norris said. “One of the costs incurred while holding that property is property taxes. Reducing that property tax bill reduces holding costs and allows the land bank to sell the property to the ultimate owner for a lower cost. … This bill gives local jurisdictions the option to abate property taxes for land bank-held properties.”

Tom Streitz, president and chief executive officer of Land Bank Twin Cities, spoke of his organization’s success with keeping people in their homes and small businesses in place by buying properties from landlords who were intent on pricing tenants out.

“All savings realized by this abatement lead directly to the benefit of low-income homeowners with lower mortgage payments and to renters with lower rental payments,” Streitz said. “In the end, the community and the taxing jurisdiction has a lot more money. A dollar temporarily forgiven to the land bank results in a 320% return to the taxing jurisdiction.” 

The Department of Revenue believes the only organization in the state with eligible property is Land Bank Twin Cities, which is due to pay about $500,000 in property taxes in 2024 on property potentially eligible for an abatement under the bill.