We Should Buy a Municipal Land Bank with a DAO
A (Slightly Crazy) Idea to Fight Urban Decay and Build YIMBY Footholds in America's Legacy Cities
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Wait, what’s a Municipal Land Bank?
I was 24 and my startup’s runway was dwindling. At the time, I was a bit drunk on Jane Jacobs and laser-focused on building walkable, mixed use spaces in American cities. A potential investor told me: "Look, if you can secure land with attractive development rights you'll have all the money you want to build!"
That's when I learned about municipal land banks. Municipal land banks are agencies that handle blighted properties. Back taxes, mortgage defaults, lawsuits, and abandonment can tie up a piece of land. No one can build on it. No one can buy it. No one can sell it. The land is dead.
Enter land banks. The land bank acquires blighted land does a lot of tedious legal wrangling to make the property sellable. Then they often sell it at a loss. As a guy at one land bank told me, "Yeah, it's a pretty thankless job."
I made this offer to a land bank:
We'll buy whichever properties in your portfolio form the largest contiguous piece of land.
Then we'll give the Land Bank a generous equity tranche in the future development…
… but only if the Land Bank helps us navigate the city bureaucracy to unify the land into a single parcel and to remove onerous zoning and other restrictions.
The land bank guy was silent for a while. It was clear that no one had ever offered to share upside with them before. It was "a compelling idea" he said. But it was a grey area and, in the end, they decided the concept was too risky.
I've always wondered if the ask was too big for the size of the offer.
But what if we had made an offer so audacious, so over-the-top that the Land Bank would look like it was violating its mission if it refused?
"Hello! Can I buy this abandoned neighborhood?"
What would it take to buy an entire land bank and then unleash hundreds of entrepreneurs to develop the land?
Let's look at the concept with a real example: the Omaha Municipal Land Bank in Nebraska.
Their mission is to "partner with our community to transform Omaha’s distressed properties into positive neighborhood assets." The Omaha Land Bank has 289 properties. Some are in far-flung parts of the city. But the majority concentrate in North East Omaha, near the border with Iowa.
While the land is too dispersed to treat it as anything like a single parcel, there are many clusters of 2-5 adjacent lots:
And the properties, taken as a whole, represent a big chunk of this area of the city.
Some network sleuthing revealed that we can fetch all of the Land Bank's properties via a hidden API. I converted it to a Google Sheet (code samples in footnotes for the geeks).
Let's look at the data.
The properties are overwhelmingly residential (6 zoned commercial, 1 industrial). Taken together, they represent 1,693,299 square feet of land — roughly 39 acres of urban infill. And the total cost? A paltry $1,966,275 — a bit more than a dollar per square foot. While $2 million is a lot for most individuals, it's nothing in real estate.
Enter LandBankDAO. LandBankDAO would approach some of America's ~120 municipal land banks [Edit: Thanks to reader TierraDelFuego who pointed out that there’s more like 250 Land Banks] with above-market offers on the bank's entire portfolio.
Sell us everything: take it or leave it. In Omaha, LandBankDAO might offer 2.2 million for the 1.9 million in property.
The condition of the deal is that zoning and other land-use restrictions are removed or changed to the most flexible designation possible for every property in the portfolio. These are many of the worst properties in a city, so the usual NIMBY refrain of "you're going to destroy our amazing neighborhood" seems like a tough sell.
If you need more sugar, offer the Land Bank or city some tokens as equity too. Or put the tokens in a charitable trust for an important social cause.
With a memorandum of understanding signed with a land bank, LandBankDAO marshals the capital via a typical DAO distributed ownership scheme and a Wyoming DAO/LLC (similar to CityDAO's legal structure).
LandBankDAO would then own a bunch of property in Omaha under an attractive development regime. (It's likely that the value of LandBankDAO's portfolio would increase as soon as the zoning changes were secured.)
So, if this is a good idea, why doesn't some developer do it?
First, LandBankDAO is a bet on the statutory power and political influence of Land Banks to change land policy for its properties. This may not hold in all or even most cities. If you can’t get that concession, it all breaks down: negotiating these 289 changes piecemeal would be a nightmare.
Second, finding a profitable use for so many dispersed parcels is difficult, even for a seasoned development firm. Which brings us to...
Let's assume LandBankDAO has secured their portfolio and the freedom necessary to develop it. What now?
We need to discover productive uses for 289 properties! The good news is that there's a lot of pent-up creativity in DAOs, as anyone in them will tell you. The bad news is that this creativity is often poorly managed and incentivized.
LandBankDAO can offer long-term land leases for each parcel. LandBankDAO auctions these leasing rights to members, starting at very low prices so there's little chance that a parcel sits idle.
Members of the DAO have exclusive access to this auction. They may partner with other DAO members or raise capital from third parties. DAO members with deep pockets might bid on larger parcels. A small time investor might pick up a modest lot with a single home. Members pay a modest land lease and receive the right to develop parcels for revenue — apartments, restaurants, houses whatever.
With almost any reasonable use on the table, lessees have a wide scope of potentially profitable ways to develop the land. Corner bodega? Daycare? Church? Tiny house cluster? Parking lot (god forbid!)? The structure of LandBankDAO incentivizes lessees to discover the right use.
LandBankDAO members win on both sides. If they find a productive use, they make money on the revenue generated on their leased parcel. As these blighted areas come back to life, they also win as a residual claimant on the land portfolio as a whole. The neighborhood gets better; the land grows in value; the members enjoy capital gains.
LandBankDAO ends up looking a bit like a real estate swarm: a holding company with umbrella ownership over a large chunk of North East Omaha land, but with tiny “child” firms that develop, manage, and own income-generating assets on that land.
Let’s fight blight in American cities by buying out a Municipal Land Bank.
Thanks for reading and don’t forget: Startup should build cities!
Run this in your terminal to get all the Omaha Municipal Land Bank data.
curl "https://public-omlb.epropertyplus.com/landmgmtpub/remote/public/property/getPublishedProperties?limit=300&_dc=1655993364837&sEcho=5&iColumns=1&sColumns=&iDisplayStart=0&iDisplayLength=25&mDataProp_0=parcelNumber&page=1" > omaha_properties.json
From the same directory that you wrote
omaha_properties.json, run this Python (3) script:
import json import csv with open('omaha_properties.json') as json_file: data = json.load(json_file) properties_data = data['rows'] out_file = open('omaha_properties.csv', 'w') csv_writer = csv.writer(out_file) count = 0 for prop in properties_data: # headers if count == 0: header = prop.keys() csv_writer.writerow(header) count += 1 csv_writer.writerow(prop.values()) out_file.close() print("DONE")