Overview of Land Banking Strategy and Importance for Builders

Land banking is becoming an increasingly popular strategy among builders to spread risk, expand their pipeline, and be prepared for the future. This episode features an interview with Steve Benson, CEO of Essential Housing, one of the largest land bankers in the country. Land banking involves a builder partnering with a land banker to acquire land and enter into agreements. The builder has the option to acquire lots as they need them, while the land banker funds the development. The land banker takes on the market risk, meaning if the market price for lots remains favorable, the builder will continue purchasing lots. However, if the market shifts, the builder has the option to terminate the agreement, leaving the land banker with unsold lots. This strategy allows builders to mitigate risk, allocate capital efficiently, and expand into new markets.