The Role of Land Banking in Expanding Affordable Housing

11 June 2025

Affordable housing is a pressing issue in many parts of the world. Home prices continue to rise, wages often fail to keep pace, and many people struggle to find decent housing within their budget. But what if there was a way to secure land for future affordable housing developments before prices skyrocket? That’s where land banking comes in—an often-overlooked strategy that could be a game-changer in the fight for housing affordability.

In this article, we’ll break down what land banking is, how it works, and why it plays a crucial role in expanding affordable housing opportunities.

What is Land Banking?

At its core, land banking is the process of purchasing and holding land for future use. Think of it as buying a piece of property today with the intention of developing it down the road.

Local governments, nonprofits, and even private developers often use land banking to acquire vacant, underutilized, or distressed properties. Instead of letting the land sit idle or fall into the hands of speculative investors who might drive up prices, land banks hold onto these parcels until the time is right for development—ideally, for affordable housing projects.

How Do Land Banks Work?

Land banks operate under a simple principle: strategic land acquisition at lower costs to ensure affordable housing development in the future. Here’s how the process typically works:

1. Identifying Land – Governments or organizations pinpoint vacant properties, abandoned lots, or foreclosed land that could be repurposed for housing.
2. Acquiring Properties – Land banks purchase these parcels, often at significantly reduced prices from tax foreclosures, donations, or direct purchases.
3. Holding & Maintaining Land – Instead of selling the land for profit, land banks hold onto it, ensuring it remains available for future housing projects.
4. Transferring for Development – Once a suitable housing plan is in place, the land is sold or leased to developers committed to building affordable homes.

This process keeps land prices in check and prevents speculative investors from inflating costs—making housing more accessible to low and middle-income families.

Why is Land Banking Important for Affordable Housing?

So why should we care about land banking? Simple—it addresses one of the biggest hurdles in affordable housing development: the high cost of land.

1. Controlling Land Prices

One of the main reasons home prices soar is the rising cost of land. Investors and developers often buy prime real estate, hold onto it, and sell it later at inflated prices. This trend makes it nearly impossible for affordable housing projects to take shape.

Land banking removes speculative pressure, ensuring that land remains available for housing projects without insane price hikes.

2. Revitalizing Blighted Areas

Many cities struggle with vacant lots, abandoned buildings, and underutilized land. These neglected spaces often become eyesores, attract crime, and decrease property values in surrounding neighborhoods.

By acquiring and repurposing these unused lands, land banks revitalize communities, turning abandoned spaces into vibrant residential areas. It’s like giving a second life to forgotten parts of a city, making housing more available in places that truly need it.

3. Encouraging Long-Term Planning

Too often, real estate development is driven by short-term profits rather than community needs. Land banking shifts the focus toward long-term planning, ensuring that land is used wisely for future housing projects.

Rather than waiting for developers to dictate what gets built, land banking empowers local governments and housing organizations to plan sustainable developments tailored to community needs.

4. Reducing Development Costs

Affordable housing projects often struggle with financing, and high land costs make things even tougher. Land banking takes some of that pressure off by securing land at lower prices, making housing projects more financially viable.

By controlling land prices, developers can allocate more funds toward construction, infrastructure, and resident services—leading to better quality, more sustainable housing.

Challenges of Land Banking

Of course, while land banking sounds like a perfect solution, it’s not without its challenges.

1. Initial Funding Issues

Acquiring land requires money upfront, and many local governments or organizations may struggle to secure the necessary funds. Since land banking is a long-term strategy, returns aren’t immediate, making funding a challenge in some cases.

2. Maintenance Costs

Vacant land needs to be maintained—which means mowing grass, preventing illegal dumping, and keeping the area secure. These added costs can become a financial burden if the land sits idle for too long.

3. Bureaucratic Red Tape

Government-run land banks often face bureaucratic hurdles, from zoning issues to legal complexities. Navigating these processes can slow down the development timeline, making it harder to get affordable housing projects off the ground.

Despite these hurdles, the long-term benefits outweigh the challenges, especially when it comes to providing sustainable, affordable homes for future generations.

Successful Land Banking Strategies

To make land banking work effectively, cities and organizations need to adopt smart strategies. Here are a few key approaches that have shown success:

1. Partnering with Nonprofits & Developers

Land banks don’t have to work alone. Partnering with nonprofit housing organizations and mission-driven developers can speed up the process of turning land into homes. These collaborations ensure that affordable housing remains the focus.

2. Leveraging Public-Private Partnerships

In some cases, private developers are willing to work with land banks to create mixed-income housing projects. This balance ensures that affordable units are built while maintaining economic diversity in neighborhoods.

3. Utilizing Community Land Trusts (CLTs)

Community Land Trusts (CLTs) are non-profit entities that hold land in trust for community benefit. By combining CLTs with land banking, cities can ensure that affordable housing remains available permanently, rather than being swallowed up by rising real estate prices.

4. Implementing Clear Development Plans

Land banks need a clear roadmap. Having set goals for when and how the land will be developed ensures that it doesn’t sit vacant indefinitely. Establishing timeframes, funding plans, and community input prevents delays and maximizes impact.

Final Thoughts

Land banking might not be the most glamorous real estate strategy, but it’s a powerful tool in expanding affordable housing. By securing land before prices skyrocket, revitalizing neighborhoods, and focusing on long-term development, land banks help make housing more accessible for all.

The key to success lies in strategic partnerships, financial planning, and community involvement. While challenges exist, the potential benefits far outweigh the drawbacks. In a world where affordable housing is becoming increasingly rare, land banking could be the missing piece of the puzzle needed to create sustainable, inclusive communities.