The Rochester Land Bank Corp. is the beginning of a kind of pipeline. Vacant or abandoned houses, many of them in need of repair, enter at one end, and exit at the other fit for sale.
“What we’re trying to do is create some … better-quality housing,” says Paul Scuderi, the nonprofit’s executive director.
The process has turned houses that once blighted Rochester’s streets, reduced nearby property values and generated little or no tax revenue into salable additions to the city’s housing stock and tax base. Once rehabilitated and occupied, the homes could improve their neighborhoods for the long term. An abandoned or vacant house can fall into disrepair; provide opportunities for vandalism, drug use or other criminal activities; and in other ways become a blight on its neighborhood.
“It reduces the value of other properties on that street by at least 15 percent,” says Dana Miller, chairman of the Land Bank’s board of directors.
Since the Land Bank was created in 2013, 155 vacant or abandoned properties have transitioned to salability. At least one-third of these properties were acquired by low- or moderate-income buyers who wanted to own their own homes.
The past year has posed challenges for the Land Bank, however. A moratorium on municipal tax foreclosure auctions has cut off its primary source of new properties. And its funds for acquisitions are tight.
A longstanding problem
The city of Rochester established the Land Bank to address a problem that has plagued the city for years.
“Large numbers of homes across the city were just sitting, deteriorating,” Miller says. “We would get constant phone calls from the neighbors, saying, ‘What are you doing about this house? Why is this house vacant?’”
All on the nonprofit’s staff are city employees who have taken on additional duties. Scuderi is Rochester’s director of real estate, and Miller is deputy commissioner of neighborhood and business development.
The city has provided little in the way of financing for the Land Bank, though through a shared services agreement, it provides operating support including legal and financial services, property maintenance activities, office space and equipment, and all management and staff. The Land Bank depends heavily upon grants to fund its operations, the largest of them from the state attorney general’s office. Its annual budget currently totals about $1 million; state grants account for 74 percent of revenues, while real estate sales in 2020 contributed 26 percent.
“The average sale price of houses from the Land Bank to our renovation partners is $13,848,” Miller says.
Over the last year, replenishing the Land Bank’s housing stock has been difficult. In December, Gov. Andrew Cuomo came to the aid of state residents who were unable to pay their mortgages due to the pandemic with a moratorium on municipal tax foreclosure auctions. In May, the protections were extended. As a result, the Land Bank will be cut off from the source of almost all of the properties it normally acquires until the end of August. In addition, it has spent most of the money available for acquisitions.
The Land Bank’s fiscal year ends on June 30, and it is now conducting its annual audit. Scuderi declines to say how much it has in its coffers before that process is completed.
The Land Bank is one of 22 statewide that have been created under the 2011 New York State Land Bank Act. That act gives the Land Bank the right to be the sole bidder for vacant, abandoned or underutilized city properties that are in foreclosure due to nonpayment of city taxes, and are being auctioned off.
“The Land Bank can acquire properties at the opening bid amount, the amount that’s owed in taxes,” Miller says.
Almost all of the properties that the Land Bank acquires are single-family houses. Their condition determines what happens to them next.
“Is it too far gone, and needs to be demolished, or is it able to be rehabbed?” Miller says.
Developer partners
Properties that can be rehabbed are auctioned off to “developer partners,” as Scuderi calls them, that have track records of successfully rehabbing and selling the properties they obtain from the Land Bank. Most are individuals or businesses looking to turn a profit.
“They’re typically real estate investors,” Scuderi says. “They buy properties, fix them up, hold them, rent them or sell them.”
For-profit developer partners compete for the Land Bank’s offerings.
“You go with the highest bid,” Scuderi says. “In the majority of cases, the auction price will exceed the tax foreclosure amount.”
Other developer partners are nonprofits that need only pay the taxes owed on a property in order to take ownership of it. The arrangement allows the organizations to stretch the money they devote to buying and rehabbing houses.
“We’re not having to compete, and bid up the prices of these houses,” says Joe Di Fiore, executive director of the City Roots Community Land Trust. “That really adds up (over) several houses.”
Once they’ve bought the houses, nonprofits like City Roots rehab them and offer them for sale to low- or moderate-income buyers.
“We sell them to city residents that are first-time homebuyers, and they also have to be low-income,” Di Fiore says.
To be eligible to make an offer for one of City Roots’ homes, a prospective buyer has to earn no more than 60 percent of the area median income, which currently is $48,120 for a family of four. So far, the nonprofit has purchased five of the Land Bank’s properties.
Another of the Land Bank’s nonprofit developer partners has a long history of rehabbing and selling abandoned or vacant single-family houses in Rochester.
“Our work really does have the two-pronged approach of turning those properties into community assets again, and helping the neighborhoods in which those properties might be sitting and dragging the neighborhood down,” says Theodora Finn, president of the Rochester Housing Development Fund Corp.
Many of the properties the RHDFC acquires are in need of extensive work, which could include the installation of new roofs, kitchens, or furnaces. When necessary, lead or asbestos hazards are dealt with.
“We rehab homes to a standard that means that when that low- or moderate-income buyer looks into it, they don’t have to invest (in) expensive renovations,” Finn says.
The homes are then sold to first-time, low- to moderate-income buyers.
“The majority of the homes are limited to buyers with incomes at or below 80 percent of the area median income,” Finn says.
For a family of four, that income figure is $60,550.
Since it was founded in 2011, RHDFC has turned about 800 houses around, including 49 that it bought from the Land Bank. The last of the former Land Bank properties sold in mid-July.
Making a difference
Measuring the Land Bank’s overall impact in the city is difficult. Checks with multiple sources in city government did not reveal how many vacant or abandoned houses were on Rochester’s streets when the nonprofit was created, or exist now.
But each house rehabbed and sold to a low- or moderate-income buyer is a success story, especially now, given the tight housing market.
“It’s very difficult for buyers right now,” says Tysharda Thomas, associate real estate broker for New 2 U Homes LLC. “Interest rates are so low, but the supply of homes is very low as well.”
The New York State Association of Realtors reports there were only 438 homes for sale in Monroe County in May, down from 1,145 in May 2019. The scarcity has driven the median price of a Monroe County home to $206,000, up $51,000—or 33 percent—compared with 2019. Houses that once were within reach of some low-income buyers are now out of bounds.
“That $89,000 house is now the new $150,000 house,” says Thomas’ husband, Christopher, who owns New 2 U and is also a real estate broker.
Before Chiya Glenn turned to RHDFC, the mother of twin teenage daughters struggled to find a house that she could afford on her pay as a PROS advisor/mental health counselor for Rochester Rehabilitation.
“The market was terrible,” she says. “Every house that was within my price range (was) going overbidding by $80,000.”
On July 27, she began moving into her new South Goodman Street home.
“My kids really wanted (to) be able to make a room their own, and not have to be in the guidelines of a landlord,” Glenn says. “To see the kids’ faces light up when they picked their bedrooms, that was enough for me.”
Rising home prices, the general scarcity of available housing stock and the Land Bank’s inability to obtain new properties have exacerbated a problem that has long afflicted Rochester.
“There historically has been a lack of high-quality home ownership opportunities for low- and moderate-income people,” Finn says.
RHDFC has had difficulty buying houses on the open market, even when the properties are below the nonprofit’s usual standard.
“We sometimes can’t even get in to see them,” Finn says. “They’re sold before we’ve even had that chance.”
City Roots has secured a portfolio of eight properties but still can’t answer the housing needs of low-income city residents.
“We’re getting calls on a daily basis for housing, and we just don’t have enough in our own supply to keep up with it,” Di Fiore says.
If the Cuomo administration’s tax foreclosure moratorium ends as scheduled on Aug. 31, the Land Bank could begin pumping out homes to be added to Rochester’s housing stock, at least while the money lasts.
The nonprofit depends heavily upon grants from the attorney general’s office, which funds the state’s land banks from settlements that it obtained from the nation’s largest banks over their misconduct during the nation’s housing crisis. Since 2013, the office has given nearly $8.7 million to the Land Bank, including the latest grant of $610,000. That money is running out.
“We have some monies for acquisitions, and for professional and administrative fee costs,” Scuderi says.”
He hopes the attorney general’s office will continue to fund the Land Bank, but can’t be completely sure what the future holds.
“They’ve always told us every single time, ‘This may be the last one. I don’t know if we’re going to have any more money to give you guys,’” Scuderi says. “We’re always looking for alternate sources of revenue so that we can be self-sufficient.”
Mike Costanza is a Rochester Beacon contributing writer.