Sowing Insolvency at the LRA

Sowing Insolvency at the LRA

A recent policy change at the Land Reutilization Authority (LRA), the city’s land bank, is concerning for a city seeking to reverse population loss and struggling to keep up with infrastructure liabilities rendered more difficult by the ever-present rip tide spreading out the region.

When a property owner doesn’t pay property taxes and no one purchases it at tax sale, it ends up in the hands of the LRA. The LRA has thousands of vacant buildings and lots. The St. Louis Development Corporation (SLDC) Real Estate Department maintains, markets, and sells these properties and performs land assemblage for future development.

At the Jan 25, 2023 meeting of the LRA Board, they considered a resolution “Side Lot Sales Policy and Sale of Qualified Properties.”

LRA has acquired parcels through tax sale over the years of varying small or irregular sizes and that are not buildable lots (defined by the City Code as less than 4000 square feet). As these properties are of minimal value to developers or purchasers because the parcels cannot be improved, LRA over the years has endeavored to sell them but has had very limited success. Generally, when these parcels are purchased, adjacent property owners are the purchasers and indicate they have been maintaining them or have experienced challenges due to minimal maintenance or neighborhood-related challenges.

The Side Lot Sales Policy authorized by this resolution provides for a reduced price and streamlined application and sale process for adjacent property owners to use as extended yard or otherwise to incorporate into their existing property. The following parameters will govern this policy, which is further summarized in Exhibit A:

  • Property Eligibility:
    o Class A
    o Lots smaller than 4,000 sq. ft.
    o Lot must not be adjacent or contiguous to another LRA property
  • Applicant Eligibility:
    o Must be owner of the adjacent, contiguous occupied property;
    o Must be current on all real estate taxes on all property owned within the City of St. Louis
  • Sale Price: $100.00, subject to usual application and closing costs
LRA Jan 30, 2023 Agenda PDF page 9

If there is a “missing tooth” vacant lot next to your home, you can purchase the lot from the LRA for $100. The goal being to get lots off the LRAs portfolio that are presumed unattractive to builders looking to leverage scale by building many homes or bigger buildings on larger lots. The purchaser can take care of their side lot instead of relying on the overwhelmed LRA

From a land productivity perspective this policy is problematic. A side lot property owner now has typically twice the frontage. That’s twice the street, alley, street lights, pipes, wires, etc, but their property didn’t become twice as valuable. As with low-productivity auto-oriented development patterns, the land’s productivity is less able to meet the long-term liabilities of the infrastructure serving it. It is made up by worse or less infrastructure or higher taxes. With each side lot sold it bakes in the cake a little less potential land productivity.

In parts of the city, the sale for a side lot might be for the best. It’s unlikely the market will support new construction for a long time. The liability to the city of the LRA taking care of the vacant lot and the positive of a little bit of property taxes is better than it remaining tax-exempt in LRA hands for who knows how long.

The vacant LRA lots less than 4,000 square feet that are eligible are pre-approved for sale as side lots. Page 12-35 of the Jan 30, 2023 meeting agenda lists the 900+ properties that qualify. These lots are deemed unbuildable by the city via the zoning code which has a minimum lot size of 4,000 sf in the A. Single Family zone, so it’s not as if the LRA and SLDC came up with this from nowhere. If one wants to build on a smaller lot, they have to apply for a variance if the lot was created after ordinance 45309 went into effect in 1950, which is most of them. Despite the fact that many existing occupied and valued buildings are on lots less than 4,000 sf in St. Louis, this magical number was picked. This regulation is a policy preference to spread out places and reduce land productivity, no matter the market conditions or the cost of the infrastructure and services we might like to have.

What if someone wants to build on an “unbuildable” lot? They can apply for a variance before the Board of Adjustment. We’ve seen lots smaller than 4,000 sf built on recently contradicting the zoning code’s assumption as if there is a geometrical barrier to build on one rather than it a result of market conditions. The homes built by McBride at La Collina sold quickly and are on 2,496 sf lots. Imagine if they had met the minimum lots size. Fewer houses, less economic activity, fewer residents. Maybe the development wouldn’t have worked at all, and we’d still have vacant land.

NextSTL – La Collina Photo Tour

Another example is on the 1600 block of Forest Ave in the Franz Park neighborhood (Dogtown) a new home was built on a 2,000 sf lot. The assessed value of the vacant lot was $1,940 and is now $83,780. That means about $7k in property taxes, new residents, and the economic activity they undertake with no new street pavement, pipes, and other infrastructure built. That is the power of infill- prodigiously tilting the balance towards solvency.

But if the vacant lot is owned by the LRA and on their list of side lot eligible lots, they are rejected by default. This happened twice at the Match 29, 2023 LRA Board meeting.

There were offers to buy 4246 Juniata St in Tower Grove South and 3837 Folsom Ave in Tiffany for $5,312.50 and $8,000 respectively. They were rejected. Since then the lot on Juniata was purchased as a side lot, presumably for $100. That’s right; this policy resulted in $5,212.50 fewer dollars going to the LRA, one less house built, one less home for a family to live in, and missing out in the huge upside that infill produces. Meanwhile housing costs in Tower Grove South continue to rise.

The policy preference of holding lots less than 4,000 sf for side lots and rejecting by default offers to buy to build new homes on then should be changed. Perhaps in areas seeing investment and rising housing costs, the policy preference should be for new construction and the lots should be held for that (unless truly unbuildable like 6429 Alabama Ave which is a sliver 1 ft x 125 ft).

This policy belies the LRA’s statutory directive to “provide new housing, industry, job, and enhanced tax revenues.” It along with the minimum lot size in the zoning code should be changed as soon as possible, lest we continue to sow insolvency.


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