Hold Properties on an Interim Basis to Restore Market Equilibrium

Where housing prices have dropped precipitously and the supply of available properties far exceeds demand, the best strategy for vacant and abandoned properties may be to remove them from the market until conditions stabilize. This arrangement is typically achieved through land banks – entities specially set up to acquire and manage vacant properties. For example, Denver, Colorado's Neighborhood Stabilization plan [PDF] sets aside funds to "strategically acquire vacant foreclosed properties that are not feasible to rehabilitate, demolish them and hold them as vacant parcels (land banking) until the market is ready to absorb new development of owner-occupied housing units."

While it may be possible to "mothball" vacant properties and restore them when the market is no longer saturated, it is important to note that this approach may require a great deal of monitoring and maintenance. In many communities, vacant properties may become targets for theft, arson, and other illegal activities. Moreover, in cities that have a lost a significant share of their population and appear unlikely to regain earlier levels in the foreseeable future, demolition or redevelopment for a nonresidential use may be more appropriate responses. In the case of buildings with significant historic or architectural value, however, higher priority may be placed on preservation of the structure (Mallach 2008a).

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