Community Impact Assessment of the Kent County Land Bank Authority, 2012–2016
April 25, 2017
In 2016, the Kent County Land Bank Authority (KCLBA) contracted the Michigan State University (MSU) Land Policy Institute (LPI) to investigate the economic impacts of Land Bank activity in Kent County, MI. Several studies have examined the negative consequences of foreclosure, abandonment, vacancy and blight, and in 2013, LPI released a study of the Ingham County Land Bank suggesting positive impacts of land bank activity (Borowy et al., 2013). Yet, to our knowledge, no studies have empirically estimated the economic impacts or property value effects of land bank activity in stronger regional markets, such as Kent County, where foreclosure and abandonment have slowed since the Great Recession.
This study utilizes many of the quantitative methods and techniques used in previous economic impact studies with the intent of shedding light on the impacts of land banking in new economic contexts. The primary objective of this research is to determine whether and to what extent Land Bank activities in Kent County have a positive impact on nearby property values and the regional economy more broadly.
Overall, the study attempts to answer the following questions:
- What is the effect of Land Bank activities on nearby sale prices?
- What are the total economic impacts of Land Bank construction, renovation and maintenance activities on the regional economy?
- How do community members and stakeholders perceive the Land Bank, and what insights or context can they provide?
To answer these questions about the Land Bank’s impacts, LPI utilized a mixed-methods approach. These methods include:
- Hedonic Property Price Analysis,
- Regional Economic Impact Analysis, and
- Social Perceptions Assessment.
First, the hedonic pricing method breaks down the sale price of Kent County properties into their component attributes, including a variety of building characteristics and neighborhood metrics. By statistically controlling for major factors that affect sale price, this method allows isolation of the average impact of a Land Bank property on homes sold within 500 feet. The Kent County Bureau of Equalization and the Zillow Group provided parcel data, as well as residential sales data from 2010 to 2016. For each parcel, these records include sale price, sale year, assessed value, bedrooms, bathrooms, square footage and more. This data was spatially combined with activity data from the Land Bank to determine which properties in Kent County were sold after the conclusion of Land Bank demolition, rehabilitation, maintenance or construction nearby.
Although the housing market throughout most of Kent County is strong, Land Bank activity has occurred almost exclusively in neighborhoods with weak or moderate markets, as determined by a cluster analysis of average home values. The Land Policy Institute’s hedonic analysis results suggest a positive and statistically significant impact of Land Bank activity on nearby sale prices. Holding other factors constant, selling a home in Kent County after the conclusion of KCLBA activity within 500 feet is associated with a $7,064 increase in sale price, on average.
Second, a regional impact analysis was performed. The hedonic analysis rigorously isolates neighborhood-level impacts of the Land Bank on one variable of interest: Sale price. To quantify the broader impacts of the Land Bank within the regional economy, LPI used the economic modeling tool IMPLAN, which uses local multipliers to estimate the number of jobs and economic output resulting from different kinds of investment. The Land Bank provided categorized Land Bank expenditures from 2012 through 2016 as inputs for analysis. The estimated economic impact of four years of KCLBA activity throughout Kent County is 266 jobs and $42,899,413, suggesting that for each dollar spent by the Land Bank, $1.77 of value is generated in the regional economy.
The results of the hedonic property price analysis and the regional economic impact assessment suggest that the KCLBA generates positive, significant economic impacts within Kent County neighborhoods and the regional economy. These measurable results may not capture effects that are more difficult to quantify, such as improved neighborhood aesthetics, renewed community pride, new homeownership, and small business opportunities. To better understand these qualitative impacts as well as the broader context of Land Bank activity in Kent County, LPI interviewed two dozen community stakeholders and surveyed 89 residents throughout late 2016 and early 2017.
Third, 24 interviews were conducted among nonprofits, KCLBA contractors, local government officials, neighbors of Land Bank properties, local businesses, and others. Common themes throughout the interviews include:
- Interviewees who were unaware of the Land Bank’s activities prior to interacting with the organization may have had initial doubts, but after working with or interacting with KCLBA, ultimately they are appreciative and supportive of their efforts to revitalize neighborhoods.
- Between the positive benefits identified and the respected leadership of the KCLBA, the majority of interviewees viewed the KCLBA positively. Many who offered suggestions for improvement or concerns about the KCLBA also acknowledged positive outcomes of their relationship or work with KCLBA.
- Interviewees desired to understand how the KCLBA acquires properties from local units of governments and the process the Land Bank uses to prioritize projects. Many want more dialogue and collaboration in that prioritization process.
- Interviewees also wanted to understand and facilitate how the Land Bank can support affordable housing, historic preservation and diversity goals for communities.
- Lastly, many interviewees desired to know the direction and goals of the KCLBA now that the housing crisis has subsided in Kent County.
In addition to providing valuable context and insights, the interviews also helped the research team develop an online survey that was used to quantify insights from neighborhood residents. Survey questions were broken out into questions about the participants’ neighborhoods; demographic information; perceptions of land banking, in general; opinions on before-and-after photographs of building removal, rehabilitation and redevelopment in Kent County; and perceptions of the KCLBA and its impacts on communities.
Eight-nine (89) survey responses were collected with nearly all (93%) respondents identifying Grand Rapids as their home. Respondents were distributed across all age ranges. Most owned their home and identified as white/Caucasian. A majority did not have children living with them, and more than 77% obtained a Bachelor’s degree or higher. Overall, most respondents thought their own neighborhoods were attractive and safe, and had been so for many years. A majority of respondents were familiar with what land banks do and viewed them favorably. The bulk of the survey asked participants to respond to a series of before-and-after photographs of residential and commercial renovation, redevelopment and removal by evaluating each intervention’s impact on property values, crime rates, job creation, affordability, demographic diversity, architectural quality and sense of community.
- For residential properties, respondents valued renovation the most, followed by redevelopment. This speaks to the concern for neighborhood and historic preservation that was echoed during the interviews.|
- While renovation and redevelopment of residential properties were thought to increase the sense of community and decrease crime the most in neighborhoods, they were also seen as working against affordability.
- In general, respondents found the least value in removal only, but were more favorable of removal of commercial structures than of residential ones. For residential activities, removal invoked negative perceptions relating to property or home values, crime, job creation and demographic diversity.
- For both residential and commercial activities, respondents varied most in their responses on impacts relating to job creation and demographic diversity.
- A majority believed that all commercial activity would result in positive impacts on property values and crime rates.
- A plurality thought that renovation and redevelopment of commercial properties would decrease affordability, while removal alone would not impact affordability.
- More respondents thought that removal of a commercial structure over removal of a home would result in decreased crime.
- More respondents felt that redeveloping a business would increase architectural quality and sense of community more than redeveloping a home would.
In open-ended responses survey respondents offered many of the same favorable comments about the KCLBA given by the interviewees: The Land Bank helps breaks the cycle of disrepair made by investors who do not maintain properties, cleans up properties that the private sector would not, returns properties to tax rolls, improves neighborhoods, reduces blight, helps communities, and is responsive to neighborhood concerns and complaints. Like the interviewees, survey respondents also expressed concerns about transparency in acquiring and prioritizing projects, loss of free enterprise, affordability and displacement of long-time residents.
When asked explicitly which activities they felt were valuable uses of the Kent County Land Bank Authority’s resources, respondents tended to favor residential activity over commercial. It is interesting to note that previously in the survey, most respondents suggested that the Land Bank’s commercial activities had more positive impacts on neighborhood and economic factors than its residential activities.