How Land Banking Could Help Builders Battling Shortages

Land banking offers a potential solution for builders to generate strategic capital and minimize the risks associated with land ownership in the midst of national shortages, according to John Burns Real Estate Consulting. Land bankers can help builders facilitate land deals in an efficient and collaborative process being put to the test by a growing number of industry professionals.

First, the land banker purchases lots from a builder and assumes the risks associated with holding land, such as entitlement risk, market risk, etc. Then, builders are able to purchase land as they go, adding acreage to their projects as they build out. If the original builder ultimately decides not to repurchase the lots, the land banker sells them to another builder, keeping the risk out of the hands of the builder.

As the old adage goes, you can’t make more land. For home builders, anything that helps facilitate land deals is huge. That’s where Steve Benson and his team come in—they provide land banking services for builders. Steve is the CEO of Essential Housing, and on this week’s podcast he walks us through the nuances of land banking, a booming method to get deals done.

A look into his crystal ball

• COVID-19 has fundamentally changed the housing industry. People are shifting the way they interact with their homes, and Steve believes these shifts are just the beginning.
• Scale is one of the toughest parts of land banking, but Steve sees land banking as a fast-growing strategy. The increased sophistication Steve’s team has brought to land banking is transforming the way builders finance their work in process inventory.

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