Course on Land Rights and Land Value Capture

Land Rights and Land Value Capture Course Overview

Land Value Capture is a public revenue policy recommended for national action by consensus of all UN member states in both the UN Habitat II Agenda in 1996 and The Vancouver Action Plan, the 1976 founding document for UN Habitat. Land value capture can provide a substantial and practical means to raise the revenue needed to implement Local Agenda 21 sustainable community plans, meet the Millennium Development Goals, and provide needed community services.

Module One - Land Rights and Poverty - of this online course contains an exploration of the theme of land rights and land ownership.

Module Two - Land Prices and the Law of Rent - introduces the “law of land rent” - an in-depth analysis of the role of land under economic development as land values increase.

These first two modules will give course participants a heightened understanding of how many social problems are rooted in “the land problem.” By the end of the second module students will know how the enormous worldwide wealth divide is due in large part to fundamental injustice in the “people/planet” relationship.

Module Three - Land Value Capture - introduces “land value capture” as a key public revenue policy based on justice in land rights. Sections in this module describe how this approach to public finance can “hatch many birds out of one egg” by addressing a number of issues including provisioning affordable housing for all, funding infrastructure, helping to secure women’s rights, promoting land reform, and improving the environment.

Module Four - Economics of War and Peace - details the dynamics of how - absent equitable rights to land resources - a war system develops and how land value capture can be an important tool for resolution of conflicts over land and natural resources.

Module Five - Policy Implementation - first gives ideas about ways to mobilize citizen campaigns in support of this policy followed by specific details of policy implementation. Course participants will learn about components of a land value capture system, principles of land valuation, and the use of information technology to promote understanding and transparency in policy implementation.

Students completing 20 out of 24 online course assignments under guidance of a course facilitator receive a paper certificate from Earth Rights Institute and are eligible to work on research and implementation projects.

The course material may also be viewed as "read only" but no certificate will be issued on this basis.

Module One

Module One

Land Rights and Poverty

1.1.1-11: Introduction

Module 1, Section 1.1-11

Introduction

1.1

In many developing countries and some formerly communist societies, rural families comprise a substantial majority of the population. For these families, land represents a fundamental asset: it is a primary source of income, security, and status. But almost half of these rural families—some 230 million households—either lack any access to land or a secure stake in the land they till. As a result, acute poverty, and related problems of hunger, social unrest, and environmental degradation persist. - Rural Development Institute

 

1.2

The most pressing cause of the abject poverty which millions of people in the world endure is that a mere 2.5% of landowners with more than 100 hectares control nearly three-quarters of all the land in the world, with the top 0.23% controlling over half. - Susan George, How the Other Half Dies

 

1.3

All are indigenous to a place who are willing to cherish and be cherished by that place and its peoples. A people denied the option of connection with their land are a people dispossessed of both place and self. - Alastair McIntosh in Colonised Land; Colonised Mind

 

 

The distinguishing feature of universal poverty is landlessness. - Kevin Cahill, Who Owns the World

 

1.4 The right to land is not to be found in most human rights documents. The Universal Declaration of Human Rights asserts that "the equal and inalienable rights of all members of the human family is the foundation of freedom, justice and peace in the world." But the right to land and natural resources – the equal right to the earth itself – is not stated in the Declaration. The Declaration declares the "right to own property" but this is not the same as the right to the basis of all property – the land and natural resources of the earth.

1.5 Affirming the "right to work" and "the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing" begs the question – what if one cannot find employment? Must the state then provide all these basic needs, even to strong and healthy people who are willing to work for their living?

1.6 Also included in the Declaration is the right "to protection against unemployment." If economic efficiencies and labor saving devices result in fewer employment opportunities, how are people to survive without an income? Again, the Declaration seems to put this right as a responsibility of the State, but without information as to how the State can best secure this right.

1.7 The International Covenant on Economic, Social and Cultural Rights states that "All peoples may, for their own ends, freely dispose of their natural wealth and resources… In no case may a people be deprived of its own means of subsistence." But what about those who currently have no access to natural wealth and resources, nor any means of subsistence?

1.8 The Covenant recognizes "the right to work, which includes the right of everyone to the opportunity to gain his living by work which he freely chooses or accepts." But if there are more people seeking work than available jobs, how much freedom is there to freely choose work? The Covenant affirms "the right of everyone to an adequate standard of living for himself and his family, including adequate food, clothing and housing, and to the continuous improvement of living conditions" but we know that the market economy as presently constructed does not secure these rights for everyone, nor have governments generated sufficient capacity to secure basic economic human rights. Nowhere in this Covenant is to be found the right to the basis of all production – the earth itself.

1.9

Consider this... Without access to this planet and its resources you can neither eat, breathe, walk, sleep, work nor play. Land is more than somewhere to live - it is life itself. Without exception, everything around you, EVERY SINGLE THING you use and consume in the process of leading your life are products of the land. These are the simple facts: If you have no land to live from, you are dependent on money to purchase the products of the land; if you have no money to live from, you depend on employment to gain the money; if you have no employment, then dependent on the State; if the State refuses you, you beg for the charity of the rich; no charity, you steal or you die. Such is the chain which binds us to each other, and to the land. - BEarthright

 

1.10 Whose Planet are we Living On?

To live is to use Land - To own Land is to own Life itself

  • Nearly all of our planet is now owned by some person or organization
  • The majority population (60% to 90%) in EVERY inhabited country are landless - own no part of the planet whatsoever, not even their own homes
  • The richest 5% in every nation, rich and poor, North and South, East and West, now own between 70% and 95% of their own countries

- BEarthright

 

1.11 The reality is that a small minority of the people of the planet own or control most of the land and resources. Answers to questions such as "Who owns the earth?" and "How much is it worth?" are frequently difficult to find. Here are more numbers:

  • A United Nations study of 83 countries showed that less than 5% of rural landowners control three-quarters of the land."
  • "At best, a generous interpretation would suggest that about 3% of the population owns 95% of the privately held land in the USA." (Peter Meyer, Land Rush - A Survey of America's Land - Who Owns It, Who Controls It, How much is Left, Harpers Magazine, Jan. 1979).
  • 568 companies control 22% of the private land in the US, a land mass the size of Spain. Those same companies land interests worldwide comprise a total area larger than that of Europe - almost 2 billion acres. (ibid)
  • According to a 1985 government report, 2% of landowners hold 60% of the arable land in Brazil while close to 70% of rural households have little or none. Just 342 farm properties in Brazil cover 183,397 square miles - an area larger than California. (Worldwatch, Oct. 1988)
  • A joint project conducted by the Demographic Information Group and Population of South Africa (Popsa) cited that in 2001 blacks owned 20% of the land, whites 44% and coloureds 9%,and that muncipalities owned just over a quarter of South Africas land.
  • 60% of El Salvador is owned by the richest 2% of the population
  • 80% of Pakistan is owned by the richest 3% of the population
  • 74% of Great Britain is owned by the richest 2% of the population
  • In Scotland nearly two-thirds of the privately owned land is held by just 1,000 people. (recent survey by Andy Wightman)
  • The landowners of Europe, who get 60% of the EU agricultural subsidy of €48,000 million, own 60% of Europe and constitute less than 0.2% of its population.

Module 1, Assignment 1

Module 1, Assignment 1

Search the web to find out more about the ownership of land in your own country plus at least two others. Key in: "who owns land (then country name here)" What did you discover? Who and/or what percentage of the population owns the greatest amount of land in these three countries? Please record your findings in the comments section below. This is important research! PLEASE INCLUDE FULL REFERENCE TO YOUR SOURCES OF INFORMATION.


Resource:


Who Owns the World? The Hidden Facts Behind Landownership by Kevin Cahill. Book contents at: www.whoownstheworld.com/about-the-book/contents/

1.2.1-3: Thinking About Land Rights

Module 1, Section 2.1-3

Thinking About Land Rights

2.1 If you do not own enough of this planet to support yourself and you cannot support yourself without this planet, who is it who supports you? And do they support you..... or through their owning the land that supports you do they now own you, own your work, your space, your freedom to live as you choose?

  • If you own no land to support yourself, you must rent, hire or buy it from those that do, so that you may both live and make a living.
  • If you cannot use the planet to feed, clothe and provide for yourself then to stay alive, you must choose to either work for those who own your planet, to become a thief or a beggar, or to die.
  • This servitude has taken on many forms throughout history: slavery, serfdom, day-labour, employment, debt. The only variation being the share of the wealth produced left to the planet borrowers by the planet owners
  • This simple reality underlies much of today's poverty, inequality, lack of freedom, unemployment and powerlessness, experienced as the sheer struggle to get by that looms so large in so many peoples' lives
  • These latter day pharaohs, the planet owners, the richest 5% - allow the rest of us to pay day after day for the right to live on their planet. And as we make them richer, they buy yet more of the planet for themselves, and use their wealth and power to fight amongst themselves over what each possesses ~ though of course it's actually most of the rest of us who have to fight and die in their wars.

- BEarthright

 

2.2 In many parts of the world, the concentration of ownership and control of land is increasing. Even in countries with constituted democracies millions are being evicted, their lands grabbed out from under their feet. Democratic governance has failed to articulate and bring forth a clear and fair land rights ethic.

Land, that upon which we all stand, is the single most common characteristic of wealth worldwide. What the poor lack – land – the rich have in spades. In fact, land defines the wealthy to a far greater extent than cash. In the United Kingdon, there an estimated 420,000 millionaires, according to the tax authorities (Probate Office of HM Revenue and Customs, UK, 2005). Of at least 158,000 (37.6%) of these, their landholdings alone are enough to make them millionaires (UK Valuation Office). Of the remaining 222,000 millionaires, almost all have at least 40% of their wealth in the form of land assets (Merrill-Lynch-Cap Gemini World Wealth Report 2002). - Who Owns the World, Kevin Cahill, Mainstream Publishing, 2007, page 1

 

2.3 This failure of democracy is a primary reason that land tenure is contested all over Africa and elsewhere in developing countries. Women's rights are especially at risk, because land tenure in many societies are based on patrilineal systems in which property rights are held and transferred through men. The spread of HIV/Aids has made women's position still worse. In widowhood, they may be evicted from their land by their dead husband's kin.

 

Module 1, Assignment 2

Module 1, Assignment 2

Please read this article (click on the title): The new tragedy of the commons, by Camilla Toulmin.

Next go to the Forums section at the top of the course website, in the Thematic section click on Global Land Grab and read at least one of these articles.

Then add your comments about these readings below.

1.2.4-16 - Democracy and Land Rights

Module 1, Section 2.4-16

Democracy and Land Rights

2.4 Let us now look more deeply into this issue of democracy and land rights.

2.5 John Locke and the Crack in the Liberty Bell

2.7a

2.7b

2.7c Chief Little Bear, a member of the Blackfeet Tribe, with the Bell. Source: www.ushistory.org/libertybell/essay/stop22.htm

2.8 To fully understand the limitations in our current form of democracy (as can be symbolized by the crack that developed in the "Liberty Bell" that rang out for freedom in the United States during the American Revolution) it is necessary to trace the thread of the democratic ideal back to its fundamental tenets. Pondering the problem of persistent poverty within a democratic system of government, Richard Noyes - a former recent New Hampshire State Representative in the United States and editor of the book, Now the Synthesis: Capitalism, Socialism, and the New Social Contract - identifies the current land tenure system as "the one great imperfection, the snag on which freedom catches."

2.9 Noyes shows us that the "Age of Reason gave us a thesis with flaws." John Locke's Second Treatise on Civil Government, the political bible of the founding fathers, held that "the great and chief end of men's uniting into commonwealths, and putting themselves under government is the preservation of their property." The central understanding was that only through the guarantee of property rights could the individual really be free.

2.10 In further defining property rights Locke stated that "every man has a `property' in his own person," so that anything a man has "removed from the common state," anything with which he has "mixed his own labor," is rightfully his own. The securing of this right was to be the main duty of a democratic government. Locke also affirmed that "God has given the earth to the children of men," (Psalm 115:16)."

2.11 But the trouble lies with Locke's Second Proviso regarding property. He maintained that it was correct for the individual in a state of nature "to mix his labor with land and so call [the produced wealth] his own since there was still enough [land] and as good left, and more than the yet unprovided could use." Locke said that people in England who wanted land could go to America to stake a claim from the vacant commons, the terra nullia of Roman law. This was justification for the Europeans to take land from the native peoples. Because the native people did not have former paper titles to their land, the colonizers claimed that it was "vacant."

2.12 In the Second Proviso the reasoning of the primary mentor of the founders of democracy was faulty and limited. In his justification for land enclosures and privatization Locke failed to grasp the consequences for democracy of a time like ours when so few humans would come to control so much of the earth, to the exclusion of the vast majority. Nor could he have known how the forces of a industrial economy would drive land values to such heights, to the benefit of landowners and bank lenders rather than wage earners.

2.13 The property-in-land problem, insufficiently scrutinized by John Locke and the founding fathers, is the crack in the Liberty Bell. It is the root dilemma of democracy. Having life and liberty without land rights breeds unhappiness, unemployment, wage slavery, suffering, militarization and even death. Democratic government as presently constituted, because it is not grounded and embedded in the principle of equal rights to the earth, cannot build a world of peace and justice.

2.14 Although John Locke was clear on several important tenets for democracy while unclear on the land rights issue, he nonetheless did have the seed kernel of a vision for earth rights democracy. The quote below indicates his belief that all land is a commons and that exclusive private property in land is not of the same order of "sacredness."

2.15 John Locke (1632 - 1704):

God gave the world in common to all mankind. When the "sacredness" of property is talked of, it should be remembered that any such sacredness does not belong in the same degree to landed property.

 

2.16 Land Grab: An aggressive taking of land in order to expand territorial holdings or broaden power.

Module 1, Assignment 3

Module 1, Assignment 3

  1. Do a websearch on "land grabbing" and read at least three articles. Then write a few paragraphs describing what you learned including your thoughts, reactions and concerns.
  2. Write about incidents of land grabbing in your own community or country.

Put your writing in the comment section below

Here are some of the articles you might find on the web:

  • Corruption and Land Grabbing
  • Corruption and Land Grabbing in Cambodia
  • Land Grabbing in Cambodia (on Utube)
  • Eco-millionaires’ Land Grab Draws Fury
  • Kenya’s Shocking Land Grabbing
  • Land Grab – Australia and Aboriginal
  • Land Grab South Africa
  • Land Rights Campaign in Nairobi
  • Land Reform in Nairobi
  • Land Grabbing in Contemporary Kenya
  • Land Rights Struggle India
  • Great Land Grab in India
  • Southeast Asia Viet Nam Land Grab
  • Russia to Sink Flag in Artic Ocean
  • Land Grab Israel’s Settlement Policies
  • Behind the Green Curtain (Environmentalism and Land Grabbing)
  • American Indian Homelands: Matters of Truth, Honor and Dignity
  • The New Tragedy of the Commons – Africa Land Grabbing and Enclosure –

1.3.1-15: Reasons for Claims to Surface Land and Other Natural Resources

Module 1, Section 3.1-15

Reasons for Claims to Surface Land and Other Natural Resources

Jakarta slum

3.1 Why might it be right that the use of a natural opportunity be reserved for one person and not available to others? Here are some reasons that might be given:

  1. The person for whom the opportunity is reserved is a better person, inherently more deserving.
  2. The person for whom the opportunity is reserved is a stronger person and will attack and drive off anyone who intrudes on what he claims.
  3. The person for whom the opportunity is reserved got there first.
  4. The person for whom the opportunity is reserved has had exclusive use of it for a long time; it would be socially disruptive to try to change things.
  5. The person for whom the opportunity is reserved paid a previous exclusive user to transfer exclusive access to the opportunity to him.
  6. A political majority voted to assign the opportunity to the person for whom it is reserved.
  7. The person for whom the opportunity is reserved is using only his/her share; natural opportunities of the same value are available to everyone else.
  8. The person for whom the opportunity is reserved is using more than his/her share, but is providing adequate compensation to those who have less than their shares.

Homeless in Los Angeles

 

3.2 The stance of this course is that only reasons 7 and 8 deserve full respect as reasons to maintain a system of allocating natural opportunities.

3.3 However, throughout the world, exclusive claim to land is made on a number of the other six bases. Much land now claimed by some people was originally grabbed from others - "Might makes right." Some argue for rights to land based on former occupation or "prior claim." Others claim land rights via discovery and/or the ability to maintain and secure possession. Constitutional law and length of residency are others.

3.4 We will now use the US state of Alaska as a case study of a land rights history that includes most of the above eight points. Under the Alaska Constitution (Article VIII. Section 2. General Authority) all the natural resources of Alaska belong to the state to be used, developed and conserved for the maximum benefit of the people. Funds obtained via state leases of oil and other mineral resources are placed into the Alaska Permanent Fund and fund dividends are distributed as annual direct cash payments to each citizen who has resided in the state for at least one year – a right based on length of residency.

3.5 Using Alaska as a case study on land rights, let us ask this question: Upon what basis is made the exclusive claim of the people of Alaska to the oil resources of Alaska?

3.6 Uncovering the history of this claim we note that the state takes its name from the Eskimo word "Alakshak." The land rights of "prior claim" and "continuous occupancy" would appear to make Alaska the exclusive property of the indigenous people.

3.7 Russia claimed Alaska by "right of discovery" after it was sighted by Vitus Bering in 1741. Purchase was negotiatied by the US government's Secretary of State William H. Seward who bought Alaska from Russia in 1867 for $7.2 million, about two cents an acre. Was the "act of purchase" by the United States and thus the transfer of rights to exclusive claim legitimate on the basis of Russia's prior claim by discovery?

3.8 World War II had a substantial impact on Alaska as the United States sent thousands of workers there to build defense installments and the Alaska Highway. In 1942 the Japanese occupied several Aleutian islands, the only part of North America that was invaded during the war. "Might makes right" enables an exclusive claim to be secured and maintained and frequently is the origin of the claim itself. But does the ability to maintain a territorial boundary through military protection stand up as an appropriate basis for exclusive claim?

3.9 Is the exclusive claim of the people of Alaska to the oil resources of Alaska theirs by right of that state's constitutional law? Legally, yes, a legality that was put in place well after United States Federal and State Constitutional law was established for the "lower 48" states, and much later than the land of North America was grabbed by force of conquest from indigenous peoples. That a state "constitution and a democratic vote" of the people established a basis and a mechanism for equal rights to natural resources for residents of a particular territory is a profoundly important human rights achievement and should be acknowledged as such.

3.10 Nonetheless we must question whether democratic process itself is a sufficient basis for an exclusive claim to natural resources by people residing in a particular territory. If that territory contains resources essential for the well-being of everyone else on earth, then the absolute control of that resource by the people of that territory, no matter how democratic the internal politics may be, would give those people undue and unjust power and control over the people of the rest of the world.

3.11 Thus we see that the basis upon which the citizens of Alaska stake their exclusive claim to the oil and natural resources of Alaska is a complex historical weaving of territorial claims by discovery, purchase, military might and law.

3.12 The essential question then is this: Is it fair and just to exclude people from everywhere else in the world from benefiting from the extremely valuable, nature-created oil deposits of Alaska because of any of these territorial rights, rules and negotiations? Are any of these methods of claiming territory more moral and ethical, more in alignment with truth and justice, than others? In other words, is there a moral and ethical hierarchy, if you will, of territorial claims, some being more "right" than others?

3.13 We must conclude that while some of these means to claim natural resources may be more just or fair than others, the exclusive claim of the people of Alaska to the oil royalities of Alaska cannot be made on the basis of either prior claim, discovery, purchase, ability to maintain and secure possession, constitutional law, or length of residency.

3.14 Ultimately, the only rational, supportable, moral, just and ethical basis upon which the citizens of Alaska can assert a claim to the oil resources of Alaska is by birthright to the gifts of nature. And that cannot be an exclusive claim. The claim by birthright can only be legitimate if it is acknowledged that all other human beings have an equal claim to land and natural resources. The deepest ethical dimension of territorial rights recognizes that humanity is one and indivisible in its fundamental claim to the earth as a birthright of all.

(This section on the Alaska Permant Fund taken from (click on article title): The Alaska Permanent Fund: A Model of Resource Rents for Public Investment and Citizen Dividends.)

3.15

Land is not property ~ land is life.
Land is not created by people ~ it creates people.
We need land ~ but land doesn't need us.
We need land
It creates people
Land IS life.
Behold the Mother of All
These are the Powers in the Gift of Land
- BEarthright

 

Module 1, Assignment 4

Module 1, Assignment 4

Please view these two videos, then share your views on what you learned:

The Land Owns Us www.globalonenessproject.org/library/articles/land-owns-us
Bob Randall, a Yankunytjatjara elder and traditional owner of Uluru (Ayer's Rock), explains how the connectedness of every living thing to every other living thing is not just an idea but a way of living. This way includes all beings as part of a vast family and calls us to be responsible for this family and care for the land with unconditional love and responsibility.

We Are Caretakers www.globalonenessproject.org/library/interviews/we-are-caretakers
Bob Randall, a Yankunytjatjara elder and traditional owner of Uluru (Ayer's Rock), explains explains the Aboriginal understanding of land ownership as one of shared responsibility and kinship with the environment, … that the real law of survival is to take care of the land and one another-not just for ourselves but for our children's children's children.

1.4.1-7: Concluding Quotes

Module 1, Section 4.1-7

Concluding Quotes

4.1 James Fintan Lalor (1807 - 49), Irish patriot:

The Irish Famine of 1846 is example and proof. The corn crops were sufficient to feed the island. But the landlords would have their rents in spite of famine and in defiance of fever. They took the whole harvest and left hunger to those who raised it. Had the people of Ireland been the landlords of Ireland, not a human creature would have died of hunger, nor the failure of the potato been considered a matter of any consequence.

4.2 Leo Tolstoy (1828 - 1910), Russian author:

The land is common to all; all have the same right to it.

4.3 Ralph Waldo Emerson (1803 -1882), American poet and essayist:

Whilst another man has no land, my title to mine, and your title to yours, is at once vitiated.

4.4 Patricia Mische, Co-Founder, Global Education Associations (contemporary):

The more we grow in awareness of our own sacred source, the more we discover that our own sacred source is the sacred source of each person and all that is in the universe.

4.5 Erik Eckholm, wrote in his World Watch monograph, The Dispossessed of the Earth … Land Reform and Sustainable Development:

Many of the international community's widely shared goals - the elimination of malnutrition, the provision of jobs for all, the slowing of runaway rural-urban migration, the protection of productive soils and ecologically vital forests -- are not likely to be achieved without radical changes in the ownership and control of the land.

4.6 Thomas Jefferson (1743 - 1826) author of the (American) Declaration of Independence wrote:

The earth is given as a common stock for men to labor and to live on... Wherever in any country there are idle lands and unemployed poor, it is clear that the laws of property have been so far extended as to violate natural right. Everyone may have land to labor for himself, if he chooses; or, preferring the exercise of any other industry, may exact for it such compensation as not only to afford a comfortable subsistence, but wherewith to provide for a cessation from labor in old age. (Notes on Virginia, 1791)

4.7 Henry George (1839 – 1897) author of Progress and Poverty:

The equal right of all men and women to the use of land is as clear as their equal right to breathe the air. It is a right proclaimed by the fact of their existence. For we cannot suppose that some men and women have a right to be in this world and others do not.

Module 1, Assignment 5

Module 1, Assignment 5

Write your own statement or quote on land rights. Please include in the comments section below.

Module Two

Module Two

Land Prices and the Law of Land Rent

2.1.1-2: Introduction

Module 2, Section 1.1-2

Introduction

1.1 In this course we are presenting a basis for understanding how it has come to be that fewer than three hundred multi-billionaires now have as much wealth as three billion people - half the population on earth at this time. We are asking why millions of people die from hunger and disease each year when there is enough to meet basic needs for everyone. In Module 1 we focused on the issue of Land Rights and Poverty and learned that a disproportionately few people have laid claim to a vast amount of land and natural resources the world over. Module 2 explores another key to understanding the “land problem” – the problem of land price escalation and how wages do not keep pace with the price of housing and other basic needs.

1.2 Luning Wang tells us this about life in his city:

I live in Shanghai, a modern city. Full of rich men live in big house. Full of peasant workers live in shelter. They cast their land and go here to make money. They work as labourers in the factories and building sites. Some are selling small goods and fruit on the street. Full of educated young men graduated from college work in foreign companies day and night to earn their hope. They are busy hard working late until night. The house price is much high than ever. It seems all the people in the city are working for the house. They need to work for their whole life to pay back the debt of the bank. All their money and resources have been kidnapped by the house.

 

It is likely the case that regardless of where you are residing on the planet right now, you, too, are aware of the problem of rising land prices alongside relatively stagnant wages.

   

Module 2, Assignment 1

Module 2, Assignment 1

Please write what you have observed about land prices and general wages in your own community. Be sure to also tell us the country in which you live.

2.1.4 & 2.2.1-4: The Problem of the Modern World

1.4 In 1885, Wilson A. Bentley, a self-educated farmer, became the first person to photograph a single snowflake using a microscope combined with a bellows camera. http://snowflakebentley.com/
snowflake
Bentley demonstrated that if you take the time to look deeply and have the proper equipment you can discover amazing structures. As a student of this course you are on a quest to learn more about land rights and the land tool called “land value capture.” Our next mode of discovery will draw from a line of thought buried within the history of land economics.

Module 1, Section 2.1-4

The Problem of the Modern World

2.1 In his essay “The Problem of the Modern World” John Mohawk states, “When land became a ‘commodity’ and lost its status as provider and sustainer of life, Western civilization began its history of subjugation and exploitation of the earth and earth based cultures. For nearly five centuries people have been coerced from their landholdings. The problem, in the English-speaking world, has its roots in the sixteenth century.”
earth in shopping cart

2.2 Before land privatization, industrialization, and the widespread use of money as a medium of exchange, people everywhere on earth lived in tribes which had defined territories. There were rules of access whereby people of diverse tribes could enter each other’s territories. Within a tribe there were rules and customs regarding land utilization. Sometimes the chief allocated and re-allocated land sites for clans and individual families. Land rights and control often passed to elder sons. Yet there were tribes, for example the Hopi of the American southwest, that passed the decision making over land allocation to a family’s youngest daughter.

Homeless French man in Parisred car in display window above man with bike cart

2.3 Conflicts between tribes were usually border clashes over territory. Violence between human beings has been with us since thigh bones were used to bash in human sculls. One way or another new land rules would be established in peace treaties. However, it is important to note that in tribal societies there were no prisons. No one starved while others feasted. No one was homeless while others were sheltered from the elements. Times of both plenty and scarcity were shared by all.

2.4 Today’s world sees enormous wealth existing sometimes literally alongside abject poverty. The inventive capacities of human beings and the freedom to produce and exchange wealth have given us the possibility that everyone on earth could have their basic needs securely met with plenty of leisure time to develop mental, spiritual and creative potentials. The fact of persistent poverty and shrinking middle classes within developed countries indicates that there is something deeply flawed within the depths of the so-called “market system” structures. The fact that there are hundreds of millions of homeless people on our planet, that tens of thousands starve to death every day, and that more than a billion of us live in abject poverty when there is indeed “enough for everyone” is a stark reminder that some great, underlying injustice exists on earth.

 

2.5 Module One of this course brought to focus the reality that only a few people have come to own and control vastly more than their fair share of the land and natural resources of the planet. We will now briefly trace how the tribal land tenure systems of Europe transformed into market systems in which land came to be bought and sold and treated as a commodity for speculation and profiteering. Understanding this process should shed light on the difficulties that the people of Africa and elsewhere have faced in their efforts to move from colonialism into democratic structures of post-colonialism.

 

There is a frenzy now across the country by the rich and powerful in Cambodia to acquire land. - Miloon Kothari, UN special rapporteur on adequate housing, news.bbc.co.uk/2/hi/asia-pacific/4207138.stm

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2.3.1-18: The Enclosure Period

Module 2, Section 3.1-18

The Enclosure Period

3.1 To understand how it came to be that this most basic and obvious human right - the right to the earth itself - was somehow left out of the founding documents of democracy, it will serve our purpose here to go back to the centuries of European history that John Mohawk is talking about, to the Enclosure Period. This is the time of violent direct suppression of the indigenous people of Europe. Between the thirteenth and seventeenth centuries, masses of peasants were evicted from their holdings or saw their common lands fenced off for sheep.

3.2 The Enclosures began after the signing of the Magna Carta in 1215. This was the great charter that King John was forced by the English barons to grant. Traditionally interpreted as guaranteeing certain civil and political liberties, the right to land for the common people was not among them. The first legal act to enforce enclosures was the Statute of Merton of 1235 which spoke of the need to “approve (meaning improve) the land in order to extract greater rent.”

3.3 The enclosures redefined land as “private property” and thereby gave it the status of a commodity, tradable within an expanding market system. Since the majority of people were denied access to the land and were forced to become wage laborers, labor also became a tradable commodity. The enclosures were justified by its perpetrators as necessary in order to make “improvements.”

3.4 Hear the words of Robert Ket, who led the Peasants’ Revolt of 1549 against the enclosures, heavy taxes, and other abuses (1992 Special Issue of The Ecologist, “Whose Common Future?”):

3.5

The common pastures left by our predecessors for our relief and our children are taken away. The lands which in the memory of our fathers were common, those are ditched and hedged in and made several; the pastures are enclosed, and we shut out. Whatsoever, the fowls of the air or fishes of the water, and increase of the earth - all these do they devour, consume and swallow up.... We can no longer bear so much, so great, and so cruel injury; neither can we with quiet minds behold so great covetousness, excess and pride of the nobility.... While we have the same form and the same condition of birth together with them, why should they have a life so unlike unto ours, and differ so far from us in calling?

 

3.6 The rebellion of 1549 was one of many peasant revolts in old Europe. Sixteen thousand insurgents formed a camp near Norwich and “scoured the country around, destroyed enclosures, filled in ditches, leveled fences.”

3.7 Over several hundred years 4,000 Private Acts of Enclosure were passed covering some 7,000,000 acres. Probably the same sized area was enclosed without application to Parliament. About two thirds involved open fields belonging to cottagers while one third involved commons such as woodland and heath. In the census of 1086, more than half the arable land belonged to the villagers. By 1876, only 2,225 people owned half the agricultural land in England and Wales; that 0.6 per cent of the population owned 98.5 per cent of the agricultural land. As newer agricultural methods and technologies were applied, landowners could raise the rents of their lands by phenomenal amounts. As the cash economy developed, the rent money accumulated into the hands of the landholders and the plight of the people worsened. To survive, they sometimes were forced to borrow money from the landholders at high rates of interest.

3.8 By the early 1800s tenant farmers in Ireland had to give their entire crops to the landlords as rent. When their subsistence potato crops failed from blight, there was nothing to fall back on. Some three million people died of starvation and disease between 1845 and 1849, while one million fled to the US and Canada. Ireland’s population of eight million was cut in half. During the famine Ireland exported to England enough grain, cattle, pigs, butter and eggs “to feed the Irish people twice over” as one Irish historian put it.

3.9 A poem from the Enclosures period:

The law hangs the man and flogs the woman
Who steals a goose from off the commons
But turns the greater scoundrel loose
Who steals the commons from the goose.

For More on Enclosures:

3.10 Alastair McIntosh, a modern day Scottish bard, tells us:

 

The "Highland Clearances," which forced Scottish people off their land from the late eighteenth to early twentieth century, were an event of cultural genocide which paralleled and in many respects, pioneered patterns of colonial conquest elsewhere in the British Empire. The effects persist in the national psyche to this day; an aching sense of loss, concealed only by a thin plaster of relative material affluence, and a growing sense of the importance of reclaiming the commons.

 

3.11 The first wave of the Scottish Highland enclosures, in the second half of the eighteenth century, forced a previously self reliant peasant peoples onto marginal land. This was to clear the interior lands for sheep whilst also creating a waged labour force for the industrialist dominated industries.

3.12 Here is Alastair’s The Scottish Highlands in Colonial & Psychodynamic Perspective In this article he tells us: Today throughout Scotland, just 4,000 people own 80% of private land.This figure would represent 0.08% of the resident population were it not that many are absentee landlords ‑ English aristocrats, Arabian oil sheiks, Swiss bankers, South African industrialists, racing car drivers, pop stars, arms dealers and others not noted for their socio‑ecological awareness.

3.14 Enclosure meant not only the removal of land from subsistence communities, but a profound step towards viewing both the land and its people as things to be traded and exploited. The Enclosure Acts were the greatest single cause of the degradation of labour, driving people into cities where they were forced to work menial factory jobs for starvation wages.

3.15 Many people could not find employment after they had been thrown off their lands. By the time Elizabeth I ascended to the throne, England consequently had some 80,000 itinerant poor with no visible means of subsistence.

3.15 "Improvement," as the reason for the necessity of the Enclosures was termed by its apologists, was associated with “profit” in the same way that today’s term, "development," has become associated with "economic growth." As such, “privatisation” can be viewed as a continuation and extension of the Enclosures.

3.16

The cruelest and most important fact of all is that the criterion for the best use of land ceased to be the number of people it could support, and became the amount of profit it could make. - Alastair McIntosh

Wealth and poverty in Manila (slums and cityscape)

 

3.17 W. R. Lester, in writing about Unemployment and the Land in 1936 had this to say about the colonialization of Kenya, essentially the continuation of the Enclosures that had begun centuries before in Europe:

So white settlers have set about 'civilizing' these people by destroying their tribal land system. They are taking the lands from the natives and wherever they have done so, the result has been an abundant supply of 'labour on the market' with wages kept down by the competition of landless men, just as they are at home.

 

This is confirmed by evidence given before the Native Labour Commission (Kenya) in 1912 13. Settler after settler came before the commission and demanded in the most precise terms that the natives should be forced out of 'Reserves' to work for wages by cutting down their land so that they should have less than they could live on. Lord Delamere, himself owner of 150,000 acres, said:

If this policy is to be continued, that every native is to be a landholder of a sufficient area on which to establish himself, then the question of obtaining a satisfactory labour supply will never be settled.

 

The process of reducing men to unemployment and poverty is here stated in all its nakedness and simplicity.... In refusing land (to the people) an 'adequate' supply of labour on the market would be guaranteed.

3.18 The above section explored how the common lands of Europe were enclosed, privatised and turned into a market commodity. As a result, the work of the “common people” was also commodified as they were turned into wage laborers. Great numbers of people were forcefully deprived of access to land and thrown into the labour pool. The enclosure and land commodification process continues to this day throughout the world.

shantytown in Malina

Module 2, Assignment 2

Module 2, Assignment 2

Do you see a similarity between this history of the Enclosures and the current problem of millions of people living in slums? Please write about enclosure and/or land commodification in your own community or country, and/or what you know about your ancestors’ experience of enclosure.

2.4.1-3: The Problem of Treating Land as a Market Commodity

Module 2, Section 4.1-3

The Problem of Treating Land as a Market Commodity

4.1 When both land and people’s labour become market commodities, the only way for most people to gain access to land is to pay for it with cash. But land is in limited supply. The “market” cannot create more land. The competition for land combined with the fact that it is now treated as a commodity for speculation and profit further drives up the price.

4.2 While efficiencies in production create a plethora of physical products, wages do not keep up with the costs of basic necessities when there is no longer free access to land from which to make a living. People must pay an ever greater amount of money to pay the price to either purchase – with interest - or rent land and shelter. Lower income people are being crushed. Millions are homeless, even in “rich” countries. Many well-educated middle class people are having a difficult time keeping up, too.

4.3 Students in Nicaragua who have been studying this problem made a simple chart of housing price escalation over a 14 year period. Here is their chart:

Module 2, Assignment 3

Module 2, Assignment 3

Find statistics and charts about land prices and average wages in your city or community over the past ten years. Ask real estate companies, government agencies, or university economics departments, find news stories and/or search the internet for this information. If you cannot find the data for land values alone, use housing costs as a proximate. Note if land prices in your area are currently “booming” or “busting” – going up or down.

This diagram shows a drastic increase in the costs of land compared to other costs of housing during a 38 year period in the United States:

Describe how this problem – of land and therefore housing costs increasing faster than wages – affects you and your family and/or friends.

2.5.1-9: The Original Factors or Terms of Wealth Production

Module 2, Section 5.1-9

The Original Factors or Terms of Wealth Production

 

5.1 The classical economists originally used three major terms in the description of the factors of the production of wealth - Land, Labor, and Capital. The term “Land” was used in a broad sense to connote all natural opportunities or forces. “Labor” meant all human exertion applied to the production of wealth. “Capital” referred to all wealth used to produce more wealth – tangible items like tools and technologies. Capital was not the same as money, which as a symbol system was viewed as a convenient method of exchanging goods and services, more efficient than barter.

5.2 The output of production is distributed in returns to these three factors. Land rent is that part that goes to owners of land as payment for the use of natural opportunities. (Note: classical economists simply used the term “rent” which in this context ONLY refers to the return to the owner of land.) Wages are that part that constitutes the reward for human exertion. Interest is that part that constitutes the return for the use of capital (again, defined as wealth produced from labour on land used to produce more wealth, not money or “finance capital.”)

5.3 These terms mutually exclude each other. The income of any individual may be made up from any one, two, or all three of these sources. But to discover the laws of the distribution of wealth we must keep them separate.

The classical economists had a clear understanding of how and why land values increase as population increases and society develops. David Ricardo was the first to formulate the Law of Rent, building on ideas of those who preceded him. He wrote that, when an economy is growing, “rent is not only absolutely increasing, but that it is also increasing in its ratio to the capital employed on the land.”

Adam Smith and Henry George asserted that gains in land value/rent, generated by the efforts of the community as a whole, should be captured for the benefit of the community as a whole. George, in his book Progress and Poverty, explained how the failure to capture increase in land values for public benefits eventually and inevitably results in significant market distortion, severe maldistribution of wealth, and numerous social problems.

Neo-liberal economists eliminated land as one of the three factors of production, subsuming it into capital. They base their arguments on only two factors, labor and capital. Their variety of economics also discarded important concepts about what happens to land values as market economies progress along with the understanding of the root causes of the wealth divide. (For more information on this topic see The Corruption of Economics by Mason Gaffney and Fred Harrison.)

5.4 The error of so-called “neoclassical economics” has now been clearly revealed and can be traced to an erroneous viewpoint. It is this flaw that is preventing the neoclassical economics model from solving the problem of poverty alongside progress.

5.5 We live in a society where capitalists hire labor. They thus seem to be the initiators or first movers in production. Neoclassical economists look to capital as the prime factor in production. They see land as its instrument, and labor as its agent or tool. This viewpoint is in the form and course of their reasoning, in the character of their illustrations, and even in their choice of terms. Everywhere capital is the starting point, and the capitalist the central figure.

5.6 Although Adam Smith clearly defined the three factors of production as Land, Labour, and Capital, he later adopted the view that Capital employs Labour. Yet Smith retained a fundamental understanding of the Law of Rent. He said: Every improvement in the circumstances of society tends either directly or indirectly to raise the real rent of land, to increase the wealth of the landlord. (Wealth of Nations, Book I, p. 275). This part of Smith's economic thought is rarely mentioned. For more quotes from economists who had some understanding of the Land Problem and the Law of Rent please go to Quotes at the top of the course website and click on the Economists section. For more on the problem of how neoclassical economics obscures the issue of land and natural resource rights read this paper which formed the basis for the aforementioned Corruption of Economics. http://homepage.ntlworld.com/janusg/coe/!index.htm.

5.7 When we consider the origin and natural sequence of things, we see that capital does not come first, it comes last. Capital as “wealth used to produce more wealth” is not the employer of labor -- it is, in reality, produced by labor, both mental and physical labour, beginning with labour on land and natural resources.

5.8 There must be land before labor can be exerted. And labor must be exerted before capital can be produced. Capital is a result of labor, a form of labor, a subdivision of the general term. It is only stored-up labor, used by labor to assist in further production. Labor is the active and initial force. Therefore, labor is the employer of capital, not vice versa -- and it is even possible for labor to produce wealth directly from raw materials without being aided by capital.

5.9 So the natural order is this: Land, Labor and Capitol. Instead of using Capital as our initial point, we should start from Land.

Module 2, Assignment 4

Module 2, Assignment 4

Wherever you are right now simply look around for a few moments. Consider that everything you see that is human made was originally some form of natural, raw material. If you have any thoughts, please contribute them below.

2.6.1-4: The Law of Land Rent

What is Land Rent?

Classical political economists (Adam Smith, John Locke, David Ricardo) observed that no rent could be commanded for land as long as comparable land was available for free. However, when the best land is used up or enclosed by particular individuals or groups, then the next best quality of land is utilized (although at a higher cost of production) and then the next best (at a still higher cost of production) and so forth. As a result, “land rent” was defined as the different in the cost of production on the poorest or least favorable tract of “no rent” land being used and the cost of production on areas of land with better soil or more favorable locations.

The uniqueness of land as an Economic asset stems from its fixed supply and immobility. It is an indispensable part of all kinds of Economic activities i.e., Agrarian, Industrial or Service. Land rent is the price annually paid for the exclusive right to use a certain location, piece of land or other natural resources.

The market value of any particular parcel of land is a product of the locational advantages enjoyed by it which in turn are facilitated by nature and the benefits and services provided by the community. Land value can be considered as the relationship between a desired location and a potential user. The ingredients that constitute land value are utility, scarcity and desirability. 'Land Rental Value' is the annual fee individuals are willing to pay for the exclusive right to use a land site for a period of time.

Whatever is not collected as Land Rent will be capitalized into the Market Value of lands by the landowners. Exorbitant rates of market value of land are impediments to emerging entrepreneurial activities involving land. Landowners sell the Capitalized Land Rent, i.e., Land Value which is uncollected by the community even though it is unearned income. This widens the disparity between landowners and non land owners.

Because of the type of property-in-land system in place in much of our world, there is profit to be made from simply holding (owning, claiming) valuable land sites or large tracts of land. As development intensifies cost of land further increases due to land speculation and hoarding. The landless and coming generations must pay a steadily rising amount for land access. Eventually, increasing numbers of people who could otherwise be productive and well able to meet their basic needs are driven to subsistence levels and worse because they cannot pay the inflated land costs.

The rental value of land sites comprises at least about 20% to 30% of gross domestic product (GDP) in most countries, an amount that in poorer countries is sometimes greater than all government spending combined. The land value capture capacity of land is an even larger fraction of GDP where population is densest and competition for good land consequently most intense. Where extraction of oil or minerals is the major industry of a country or region, total natural resource rents can even exceed 50% of GDP. Economists call private pursuit of this publicly created value “rent seeking.” Many now view this as a method of obtaining unearned gains at society's expense and thus a root cause of the worldwide grossly inequitable distribution of wealth.

Justice requires that land values, which are created by society and nature, be made available for public improvements. This is the responsibility of good government.

Note: The What is Land Rent? section draws from Land Rent Structure an article by Sanjeeb Mishra, a member of the Indian Administrative Service, and District Magistrate and Collector, Ganjam (Orissa, India).

Module 2, Section 6.1-4

The Law of Land Rent

The theoretical and analytical insights of classical economists concerning land and land values hold important keys for how to harness market forces to more readily secure affordable access to land, hence enabling people to procure adequate shelter and fulfill other basic needs. Correcting market distortions by capturing land values for use by the public sector while reducing or eliminating taxes on labor and production, is a major one of those keys.

6.1 This series of graphs will help you better understand the problem of land price inflation, the root cause of the maldistribution of wealth, and how the few come to own and control most of the capital as well as the land. NOTE: These ten graphs are on the Henry George Institute website. After #10 please return back to this Land Rights course website.

  1. Understanding Economics: The Law of Rent
  2. Law of Rent 2 – First Comer – Keeps All Wages
  3. Law of Rent 3 – Second Comer – Rent Begins
  4. Law of Rent 4 – Third Comer – Further Rise of Rent
  5. Law of Rent 5 - Fourth Comer – All Land Used
  6. Law of Rent 6 – Other Natural Differences
  7. Law of Rent 7 – Growth of Population
  8. Law of Rent 8 – Effect of Industrial Growth
  9. Law of Rent 9 – Land Speculation
  10. Law of Rent 10 – Speculation Abolished

The predictability of the "law of rent" - that land values will continually rise, and faster than wages - fuels frenzies of land speculation and inevitable bust that follows the boom.

6.2 Adam Smith did have some understanding of this problem of rent. He said:

Every improvement in the circumstances of society tends either directly or indirectly to raise the real rent of land, to increase the wealth of the landlord.

6.3 Speculation Eliminated – A closer look.

6.4 Click On: One Step Deeper – This Law of Rent chart shows that by eliminating speculation and land hoarding and using the land efficiently the community can afford to provide infrastructure and services even while spending less public revenue than before!

Module 2, Assignment 5

Module 2, Assignment 5

Questions and Answers - Please answer in the responses section.

  • How does the Law of Rent relate to the section on the Enclosures?
  • What might be the reasons why slum dwellers move from rural areas to the cities?
  • Who owns or controls the land of a particular slum that you might be familiar with?
  • Who pays the land rent to whom in slum areas?
  • Can you see the Law of Rent operating in your community or city? Describe how.
  • Where is land rent highest in the area where you live?

Module 2, Sections 6.5-6: Land Value Scape

Module 2, Sections 6.5-6

6.5 LandValueScapes help reveal what is going on around us in terms of changes to property and land values, so that we are better informed in government, business and as citizens when we make decisions about ‘place’. They are important visual “land tools” for both urban planning and the topic of this course – land rights and land value capture. You will be learning about this and other land value capture tools in Module 5 of this course.

 

 

 

Conclusion

6.6 Please view: Ricardo’ Law – The Great Tax Clawback Scam – Fred Harrison on YouTube describes the scam of “progressive” taxation and how families on the lowest income levels subsidize the lives of the rich. www.youtube.com/watch?v=6ZkfmY1PMng This video is the conclusion to Module 2 and will serve as a summary of sorts of the key points you have learned. It will also be helpful as an introduction to the land value capture policy you will learn about in Module 3. After viewing this video you may continue on to Module 3 or else first learn more about The Enclosures from this Optional Reading:

 

More on Enclosures

Thomas More (1478-1535), Chancellor of England, who some say was the most learned justice and scholar in the realm at the time, made passionate pleas against the cruel injustices when whole villages were being pulled down to make way for the more profitable industry of sheep farming and families were turned adrift onto the roads to starve. His plan for a better England was based upon a thorough Common Ownership.[17] More was murdered as a martyr. The root meaning of this word martyr is “one who remembers and cares.”

In England in 1648 the Diggers were sounding a lot like land rights prophets. Gerrard Winstanley, in his New Law of Righteousness, clearly saw the forces at play when he said, “The rich, in their enclosure saying ‘this is mine’ and the poor upon the commons saying ‘this is ours, the earth and its fruits are common.’ ... Leave off dominion and lordship one over another for the whole bulk of mankind are but one living earth!”[18]

Over several hundred years 4,000 Private Acts of Enclosure were passed covering some 7,000,000 acres. Probably the same sized area was enclosed without application to Parliament. About two thirds involved open fields belonging to cottagers while one third involved commons such as woodland and heath. In the census of 1086, more than half the arable land belonged to the villagers. By 1876, only 2,225 people owned half the agricultural land in England and Wales and that 0.6 per cent of the population owned 98.5 per cent of it.[19] As newer agricultural methods and technologies were applied, landowners could raise the rents of their lands by phenomenal amounts. As the cash economy developed, the rent money accumulated into the hands of the landholders and the plight of the people worsened. To survive, they sometimes were forced to borrow money from the landholders at high rates of interest.

Ireland’s story at the end of the Enclosures period is that of many in the Third World today. In 1801 Britain made Ireland part of its empire and dissolved the Irish Parliament. By now the Protestants had the upper hand and were given a voice in the British Parliament while the Catholic majority had none. Heavy taxation was placed on Irish goods, and the British controlled almost all of Ireland’s farmland. Tenant farmers had to give their entire crops to the landlords as rent. When their subsistence potato crops failed from blight, there was nothing to fall back on. Some three million people died of starvation and disease between 1845 and 1849, while one million fled to the US and Canada. Ireland’s population of eight million was cut in half. During the famine Ireland exported to England enough grain, cattle, pigs, butter and eggs “to feed the Irish people twice over” as one Irish historian put it. This information is from an article by Elizabeth Ward called “When Ireland was Europe’s Ethiopia.”[20]

Martin Luther

Until the 16th century the Church was the Catholic Church. Its corruptions provoked the rise of Protestant Reformism. In 1524 the peasants of Swabia, a region in what is now Germany, brought Martin Luther a document Twelve Articles, appealing to him for his understanding. The peasants said it was their intention “to excuse in a Christian way the disobedience and even the rebellion of the peasants” and to describe “the basic and chief articles ... concerning the matters in which they feel they are being denied their rights.” The peasants based each one of their Articles[9] on specific chapters and verses of the Old and New Testament. They requested release from serfdom, relief from heavy taxation, fair and just laws, and access to what was once their commons - the forests, fields and water resources - to meet their basic needs. In response Luther wrote his Admonition to Peace urging the princes to be kind and the peasants to be peaceful and the appointment of an arbitration commission. Before the Admonition to Peace could be published, the land was flooded with insurrection, arson, pillage, and murder.

The disturbances among the peasants were establishing an association between the Reformation and revolution that was alienating many of Luther’s supporters while his refusal to identify the Reformation with the program of The Twelve Articles antagonized many of the common people. For Luther the real problem was to defeat the Devil. It was more important to him that law and order be maintained and the gospel be preached than that the pleas of the peasants be addressed. The peasants had gone to Luther for moral and spiritual support and to respectfully communicate their conditions and requests to him. Instead of standing in solidarity with the poor and oppressed as Jesus had done, Luther wrote pamphlets calling for the punishment of “the thieving, murderous gangs of peasants.”[10] Regarding the peasants as unruly pagans, Luther believed their rebellions were instigated by Satan.

Beginning with the first act of enclosure and throughout the following period of several hundred years, as the land was enclosed the women and men and the earth based religion of the peoples of northern Europe were brutally repressed. Women who practiced healing and agriculture, who had their own lands and were leaders of their communities were tortured, hanged, or burned at the stake. The Holy Inquisitions was a women’s holocaust; about 85 percent of those killed were women. Some say their murders numbered in the millions.[11] I consider this to be the most significant story of the past two thousand years for women of European descent. Much of what we have learned about history is just that - “his story.” The women’s holocaust is a terrible “her story” and my sisters are still recovering on deep levels of their collective psyche from that horrific repression, torture and murder. The European indigenous women were strong and clear wild women with equal status to their men. They could stand their ground because they had access to the common lands. The imperial forces called them witches. Martin Luther said, “I would have no compassion on the witches! I would burn them all.”[12]

How did the forces of Christianity, based upon the stories of a loving, healing Jesus, come to be aligned with the forces of an imperialist state and a corrupted church? To answer this question let us now fast forward to the twentieth century and the questions of a man in another part of this world.

Early Christian Teachings

Charles Avila was a Catholic seminarian in the Philippines in the 1960s. One of his professors in the Divine Word Seminary constantly criticized the Church’s utter lack of identification with the poor. He persuaded Avila and other students to accompany him on his regular visits to prisoners in various Philippine jails. During his visits Avila heard story after story of how these people had been evicted from lands they had tilled for generations. He came to realize that what was referred to as “the Peasant Question” was literally that: the question the peasants asked. It was a question on the level of “first principles” which are very rarely subjected to review, but which form the threshold of all our thinking. The Peasant Question was this: ‘What is just with regard to the land?’

Avila learned from the leading lawyer in the peasant movement that the philosophy of ownership which was the basis of property laws and practices in the Philippines, as well as of most modern legal systems, actually went a long way back in history - all the way back to Roman law. Roman law developed the ownership concept which legitimized the accumulation of wealth by a few at the expense of the impoverishment of the many. As Avila was thinking about a topic for his seminary dissertation, he wondered whether there might be early Christian philosophers of the period of the Roman Empire who had anything significant to say about the ownership concept. Most of the faculty warned him that he would be wasting his time pursuing this topic; his social justice professor, however, urged him to dig into the Latin and Greek writings concerning that period.

Avila scoured through 383 volumes and discovered that the early Christian leaders indeed had all dealt with the question of ownership and Roman law. The writings he discovered were of great assistance to the Filipino peasant movement. In 1983 Avila published his research and these patristic writings as a book entitled Ownership: Early Christian Teachings.[13] Over and over again, Avila found, early Christians had railed against the Roman law concept of ownership as an “exclusive and unlimited right to dispose of a thing, to the exclusion of all others.” The Roman land law of “dominium” meant the legalization of property in land originally obtained by conquest and plunder. The original Judeo-Christian land ethic had been that of koinonia - land was God’s gift to the community as a whole for the autarkeia or self-sufficient livelihood of all.[14]

One of Jesus’s tasks was to restore the original intent of the Jubilee, the period every fifty years when lands were to be returned to their original owners or their heirs: “[The Lord] has anointed me to preach good news to the poor..to proclaim release of captives...to set at liberty those who are oppressed, to proclaim the acceptable year of the Lord.”[15] As theologian Walter Brueggeman explains in Land: the Foundation of Humanness the “acceptable year” is the year of the Jubilee. The “release of captives” is the release of debt slaves who had lost their land because they could not pay their mortgage. A crucial aspect of Jesus’s mission was the re-assertion of the land rights of the poor and displaced. The Bible expresses the fundamental recognition that the earth is the Lord’s, to be fairly shared and stewarded by all:

The land must not be sold beyond reclaim, for the land is Mine; you are but strangers resident with me. (Lev. 25:23)

The profit of the earth is for all. (Eccles. 5:9)

Woe unto them that join house to house, that lay field to field, till there be no place. (Isaiah 5:8)

Restore, I pray you, to them even this day, their lands, their vineyards, their olive yards, and their houses. (Nehemiah 5:11).

 

(More quotes from the Ancients, Spiritual and Religious teachings are in the Quotes section.)

Christianity lost its mission of economic justice when it became the official religion of the Roman Empire and was adapted to or grafted onto, the Roman land law of dominium. From that time forward Christianity went hand-in-hand with the forces of conquest of the land-grabbing imperialist state. As Archbishop Desmond Tutu once said, “Before the Europeans came to Africa, we had the land and they had the Bible. We bowed our heads to pray, and when we opened our eyes, we had the Bible and they had the land.”

The important and vital truth not enunciated or affirmed in our founding democratic covenants is the truth that we, each and every one of us, has an equal right to the earth as our birthright. How did we lose this simple truth, the primal perception that the earth is the birthright of all people?

Module Three

Module Three

Land Rights and Land Value Capture

3.1.1-3: Brief Review of Modules One and Two

Module 3, Section 1.1-3

Brief Review of Modules One and Two

1.1 In Module One – “Land Rights and Poverty” – you learned that the ownership and control of land is highly concentrated worldwide and that the human right to land and natural resources is seldom to be found in human rights documents. Democratic institutions have not affirmed the human right to the planet as a birthright, even though land is a gift of nature and without it we cannot live. Module One drew your attention to the injustice of so many people living in poverty when there is land available from which they could make a simple livelihood – if only they had access.

1.2 Module Two –“ Land Price and the Law of Land Rent” – gave a deep historical context (albeit a European one) to our current land problem by describing how land, formerly viewed as a commons, was ruthlessly privatized and enclosed for the exclusive use of a few, resulting in the impoverishment of vast numbers of people. European colonization, which began as internal colonization, spread to vast reaches of the world as this same process of land and resource grabbing continued under the guise of “improvement” and “development.”

1.3 You learned that when land is treated as a commodity for profit and speculation, land prices eventually rise faster than wages of working people. Careful study of the “law of land rent” shows that this problem is the root cause of the maldistribution of wealth. Now just a few hundred multi-billionaires have more wealth than half the population of the planet. Those who have no or few capital or land assets must then borrow and pay interest for housing mortgages or pay high rents relative to wages for the rest of their lives.

3.2.1-5: What is Land Value Capture?

Module 3, Section 2.1-5

What is Land Value Capture?

2.1 Module Three – “What is Land Value Capture?” – introduces a way to build a fair economy via an ethical and practical approach to public finance policy. Simply put, Land Value Capture equitably returns to everyone the value – “land rent” - that attaches to land due to natural opportunities and the contributions of society as a whole. Sometimes called "land value taxation" this is not a tax that burdens productive ativities; rather, it is a type of property tax focused solely on the value of landsites and natural resources. Taxes on wage income and productive activities can then be reduced or ideally, entirely eliminated.

2.2 When land rent is captured for social purposes and needs, there is no private profit to be made in the unproductive activities of land speculation and real estate investment. Thus land is no longer treated as a for-profit commodity, and the boom (and consequent bust) cycle is eliminated. Land prices are stabilized. In areas where a few have been hoarding or underutilizing land, land value capture is a steady nudge urging these lands to be released so that others who need them can use them.

2.3 Full implementation of land value capture policy provides a solid source of public revenue to pay for social needs such as water and sanitation systems, schools, libraries,access to information technology and the internet,roads for transport and/or public transport systems, and other public services.

2.4 When land speculation is no longer an economic incentive, funds previously directed to profiteering in land become available to invest in productive enterprise and for improving the stock of housing and other buildings. With no or greatly reduced need to borrow to buy land people are also freed from the extra burden of high land mortgage interest payments.

2.5 Production of genuinely needed basic goods and services is encouraged in yet another way with the land value capture policy approach. A corollary of the public collection of land rent is the reduction or best the complete elimination of taxes on wages and productive capital. Removing the tax burden from the backs of workers means they will receive their full payment for their labor. People who want to begin their own individual or family owned enterprise or cooperative will be encouraged to do so because their productive capital – tools, machines, communication and other expenses – would not be taxed. Nor would houses and other buildings be burdened with taxes, further increasing the capacity to buy, build and renovate needed dwellings and other structures.

Montessori classroom       Signatures against poverty     two women working

Pure rent is in the nature of a ‘surplus’ which can be taxed without affecting production incentives. - Samuelson Hancock and Wallace, Economics, 2nd Australian ed., p. 623

3.3.1-9 Land Value Capture: “Third Way” Economics

Module 3, Section 3.1-9

Land Value Capture: “Third Way” Economics

(These beautiful diagrams about Dividing the Fruits of Labor were developed by the Henry George Institute, which also offers online land economics courses.)

3.1 Land value capture is a key policy for building a “third way” economic system which affirms the positives from both the right and left sides of the political spectrum.

 

 

 

3.2 From the right, land value capture retains and furthers the FREEDOM to produce and exchange wealth by untaxing productive efforts and maintaining land affordability. The private sector thrives when transportation and other public benefits are available. Land value capture is a correction to a flawed market system which concentrates wealth in the hands of a few.

 

 

 

3.3 From the left, land value capture is based on the fundamental and equal economic human right to the basic means of all production – surface land and natural resources. The left’s concern for FAIRNESS in the distribution of wealth is affirmed and furthered via land value capture when it is correctly and fully implemented. In tandem with the reduction of most other forms of taxes the stronger the implementation, the faster the wealth gap closes.

3.4 In short, this third way policy furthers both economic freedom and fairness, efficiency and equity in wealth production and distribution. People benefit when their wages are not taxed and land and thus housing prices are stable and affordable. Everyone’s life improves when there are well-funded public benefits and services such as sanitation, transportation, education and health care.

3.5 Australia provide evidence of some of these affects. This country's states have had significant experience in land value capture, reported in numerous studies over at least 60 years, proving the comparative advantages of the system.

 

  • Malvern (city): A marked construction spurt was experienced after the municipality adopted land value capture, the most extensive building occurring in Malvern's most blighted neighborhoods. Before the tax shift, they accounted for only 22% of building permits, but in the 5 years following initiation of land value capture, that percentage climbed to 47%.
  • Victoria (state): 12 studies of rural communities show that towns using land value capture averaged construction and renovation growth of 29%, compared to 2.6% in neighboring communities which taxed buildings much more heavily than land values.
  • Western Australia (state): 17 localities taxing land values only, experienced a 34% increase in total number of new dwellings built during the period studied, compared with 0.02% decrease in new dwellings in nine neighboring localities taxing buildings as well as land.

 

3.6 Harrisburg, the capitol city of Pennsylvania, was once the second most economically distressed city in the US and had high unemployment and large areas of blight and boarded up buildings. Harrisburg gradually implemented land value capture and now taxes land values six times more than building values. During a 20 year period thousands of buildings were renovated, good jobs created, and there has been very significant drops in rates of crime and arson. The city’s economic resurgence has garnered national acclaim and Harrisburg has won a number of civic awards.

3.7 Mayor Stephen Reed has written that land value capture “has been and continues to be one of the key local policies that has been factored into this economic success."

3.8 In the case of Allentown, Pennsylvania’s third largest city, the citizens pushed for land value capture by means of a home-rule charter initiative. They voted for a municipal charter that froze or eliminated all other taxes and permitted tax increases on land values only for 12 years. This city now experiences a more locally generated economic revitalization, the logical and expected result of this kind of tax shift. Allentown's new construction and renovation grew by 82% in dollar value, in the 3 years after the system began. This was 54% more than that of Bethlehem, a nearby city of similar size, despite the latter's receipt of much federal grant money.

3.9 In none of the above cases was there full land value capture and national income taxes were still a burden on workers. But since these well-studied examples (just a few of many positive experiences of land value capture around the world) show substantial improvements it can be anticipated that capturing 100% of land values, while shifting taxes away from labor and productive activities, can result in prosperity for all.

3.4.1-9: Land Value Capture is a Sufficient Source of Public Finance

Module 3, Section 4.1-9

Land Value Capture is a Sufficient Source of Public Finance

 

Most often, the taxable capacity of land is such that land value capture can yield more than local government needs to fulfill its basic responsibilities for the provisioning of basic services for all. – Joshua Vincent, Director, Center for the Study of Economics

 

4.1 Economists who have an inadequate understanding of land rent sometimes state their opinion that it is an insufficient base for public finance. They say that land rent cannot provide the required funds needed to finance social necessities. This mistaken perception can usually be traced to the lack of up-to-date and correct land value assessment records. Economists with expertise in land value capture policy have determined that land rent is in fact a substantial amount of the GDP of most countries, ranging anywhere from 20% to 30% and even more.

4.2 For example, please carefully study this graph compiled by land value capture economists with Land Values Research Group in Australia:

4.3 You will note that in 1974, resource rent was only 12% of GDP while net incomes of labour and productive capital was 63%. Taxes amounted to 25% of GDP. By 2004, as the overall economy grew steadily during the twenty year time period, we see the workings of the Law of Land Rent. Resource rent has increased to 31%, or nearly one third of GDP. The tax burden increased 6% during that period while incomes of labour and capital took a big hit, going down to just 38% of GDP, a loss equal to 25% of GDP.

4.4 Taxes currently fall mostly on labour and productive capital. Still using the Australia diagram as our model, removing the 31% of GDP of taxes and adding it to the return to labor and capital increases that percentage to 69%, which is 6% higher than in 1974. The 31% of GDP which is resource rent would be captured back for the benefit of society as a whole. It would adequately provide the funding base for education, transportation and other public infrastructure, police and fire protection, good urban and regional planning, etc. With incentives for investing in the “bads” of profiteering in the gifts of nature eliminated, both public and private funds would be directed to the “goods” that people need and want.

LVRG graph: Earned and unearned incomes, 'Classical' distribution of GDP 1911-2005

4.5 The following diagram is another way of representing the information based on the Australian data. “As Is” shows the three way division of wealth among:

  1. Rent
  2. Taxes
  3. Net Income of Labor and Productive Capital

 

4.6 The second diagram - “If We Captured Land Values”- is an ideal model which has eliminated taxes on work and production with full rent captured for the benefit of society as a whole.

4.7

How much revenue can land yield by itself?" I assure you it can yield more than local governments need. The taxable capacity of land is camouflaged in our times by a consistent modern tendency to underassess it, relative to buildings. - Mason Gaffney, The Taxable Capacity of Land

 

4.8 In his recent book Double Cross, Ron Banks has estimated that if the UK were to raise its revenues from natural resources rather than use existing taxes, each man, woman and child would be better off by an astonishing £15,000 per head, per annum. If Banks is only half-right, this would mean that a family of four could be £30k a year better off!

4.9 Optional Reading: Who Says Cities are Poor? They Just Don't Know How to Tax Their Wealth!

Module 3, Assignment 1

Module 3, Assignment 1

Please read at least four of the case studies of Land Value Capture in the SWOTs section at the top of the course website. Then write an essay summarizing what you have learned so far in this module. Following your essay write down any questions you have about this material. Post your writing, as usual, in the box below along with the list of the four case studies that you read.

3.5.1-4: Rent-Seeking

Module 3, Section 5.1-4

Rent-Seeking

5.1 Money is a symbol of wealth, it is not wealth itself although of course it is used to acquire tangible wealth. Money is an efficient mechanism for exchange of wealth. But when land is treated as a market commodity with a monetized price, the price escalates and inflates. There are no land factories making more land so that supply can meet demand at an affordable cost. A productive economy then evolves, or rather devolves, into a “rent-seeking” economy.

5.2 Considering the current nearly worldwide rent-seeking system, it is no surprise that workers desire to own homes not only as a basic necessity but also so in order to have a small stake in the land price inflation game. As wages lose purchasing capacity, the average working person is vulnerable to all sorts of schemes through which they can buy a tiny piece of land for their house to sit upon. The recent and ongoing collapse of the home mortgage system in the United States, sending shock waves throughout the banking systems of the world, is one indicator of the problem of treating land as a for-profit market commodity.

5.3 Here are two more examples of how an improperly harnessed tax system can have disastrous results for so many people:

  1. As China's economy rapidly heats up, those dealing in rising urban land values have been making enormous profits from real estate while others plunge into poverty. For instance, Yuchen Zhang, a Beijing real estate developer, built his $50 million castle complete with moat, uniformed guards, and a spiked fence to defend it. The 800 peasants who used to grow wheat on Zhang's 1.5 square mile estate are now landless.
  2. The Rand Corporation, a U.S. think tank, in its 2001 annual report, listed the April, 2001, sale of 11.3 acres of its Main Street, Santa Monica, California property for $53 million, or $4.69 million per acre. The gain on sale of Rand's land was shown to be $44.984 million, making the original purchase price $8.016 million, or $709.38 per acre. Who created this land value boon for Rand? The 84,084 people of Santa Monica as a whole, who would have each received $534 if the land value increase had been captured by the city and distributed to all residents as their fair share of the profits from such a spectacular rise in city land values.

 

5.4

Pius Fischer in his book Rent-Seeking,Institutions and Reforms in Africa...identifies rent-seeking behaviour as one of the main causes of poor economic performance, observed, among other places, in many countries of Africa. Rent-seeking describes the ability to capture incomes without producing output or making a productive contribution.

In a Rentier Economy, The Landlords Get the Free Lunch

 

In a rent-seeking economy, as land prices inflate the “haves” invest their funds into capturing the economic surplus represented by land rent and thus become the “have mores.” The private appropriation of land rent via real estate investment, speculation and profiteering is an unproductive activity lacking any social utility. Rent-seeking is plain and simple an efficient and effective way to concentrate wealth and power in the hands of a few while making life that much more difficult for everyone else.

 

Module 3, Assignment 2

Module 3, Assignment 2

1. Please give one or two examples of individual or institutional land rent-seeking in your own city, region or country:

2. Do a websearch using the phrase “rent-seeking” and scroll through a few of the pages of articles online. What did you learn?

3. Optional reading on general rent-seeking: High-Level Rent Seeking and Corruption in African Regimes: Theory and Cases.

3.6.1-9: Real Estate Speculation and Land Price Bubbles

Module 3, Section 6.1-9

Real Estate Speculation and Land Price Bubbles

6.1 One of the most destructive aspects of finance capitalism is the borrowing of money to purchase land in the expectation that the land rent will increase in order to repay the loan while making a profit from land. In other words, borrowing money to play the game of rent-seeking. There may be different phrases in different languages, but in English this game is sometimes called “making a killing in real estate.”

6.2 Meanwhile tens of thousands of people die of hunger each day because they cannot access productive land from which to make a living. Just as slavery was abolished, so must be real estate speculation and land hoarding.

6.3

6.4 Land speculation produces no tangible wealth and leads to land price bubbles. When the bubble bursts, the banking system managers try to stabilize the situation by manipulating interest rates. But if the interest rate is placed too high, the economy slows and the “real” economy goes into recession. Workers lose their jobs and source of income. If the interest rate is placed too low, the real estate speculation game starts again and the land price bubble (and thus the housing price bubble) begins to grow. Once again, those who must work for their living have to work longer and harder to buy their house lot. When they take out a mortgage before the bubble bursts they are left with negative equity.

6.5

6.6 There is in fact no “just right” interest rate when the land problem is the real culprit. The average person suffers if the interest rate is high or low. See-sawing the interest rate back and forth in this way is commonly understood as an attempt to stabilize the economy but the end result is the same. The rich get richer at the expense of the rest. The wealth gap grows, sometimes faster, sometimes slower, it is just a matter of speed. Land rent is privatized and those who work for a living are penalized.

 

6.8 Note again what you have learned about the two dimensions of the land problem:

  1. a small percentage of people now own and control a largely disproportionate amount of land and natural resources; and
  2. as development proceeds, land rent increases faster than wages and the return to other economically productive activities due to the treatment of land as a market commodity.

 

6.9 The core solution to both market malfunctions and the growing wealth gap lies not with interest rate manipulations but in solving the land problem. This is the primary goal of land value capture and from which flows a number of additional social benefits which we will describe as we continue through this Module Three.

Module 3, Assignment 3

Module 3, Assignment 3

Please view Real Estate for Ransom here www.realestate4ransom.com. As supplementary to this assignment you may also view this Land Values Research Group powerpoint on Land Price Cycles and Wages: australia.ppt. If you have any comments, please make them below.

The land problem is an ancient one and land value capture or equitable land distribution was used in centuries past to restore economic justice. In this next section you will briefly review a few of these ancient truths.

3.7.1-5: Ancient Truths, Ancient Roots

Module 3, Section 7.1-5

Ancient Truths, Ancient Roots

7.1 Confucius (BC 551-479), Chinese philosopher, said:

When the Great Way prevailed, natural resources were fully used for the benefit of all and not appropriated for selfish ends... This was the Age of the Great Commonwealth of peace and prosperity.

 

Mencius, the philosopher and contemporary of Confucius in ancient China, said:

In the market places, charge land-rent, but don't tax the goods.

 

Sun Yat-sen (1866-1925), Chinese revolutionary, "Father of the Nation", first president of the Republic of China, wrote:

The (land tax) as the only means of supporting the government is an infinitely just, reasonable, and equitably distributed tax... The centuries of heavy and irregular taxation for the benefit of the Manchus have shown China the injustice of any other system of taxation… When modern, enlightened cities levy land taxes, the burdens upon the common people are lightened, and many other advantages follow.

 

7.2 Economic historians (see the chapter on Mesopotamia and Classical Antiquity by Michael Hudson in the book Land Value Taxation Around the World) who have studied systems of land tenure and taxation back through antiquity have discovered that the more fiscal policy (from the Persian word “fisc” the basket used to collect money or goods from Persia’s provinces) is related to “benefits received” and “ability to pay” the fairer and more democratic the society. But as public and communal lands were privatized, wealthy landholders increased their political power and democracies devolved into oligarchies. The richest people avoided taxation while shifting the tax burden onto wealth producers. This is the situation again today as can be seen from this diagram from a Worldwatch book by David Roodman - The Natural Wealth of Nations:

7.3

7.4 Approximating the composition of the world's $7.5 trillion tax pie reveals that 93% of taxes fall on work and invesntment while only 3% is collected from environmentally damaging activities. A mere 4% of global tax revenue is captured from natural resource use and access fees.

7.5 Where once governments relied on property taxes which captured land rent, they have increasingly shifted to sales and payroll taxes that fall mainly on the lower 90 percent of the people. In the ancient past when exploitative conditions of economic injustice emerged there would be declared “clean slates” and “jubilees” which cancelled debt and redistributed land. Land Value Capture is resonant with these earlier ways to end monopoly and build a fair economy.

Module 3, Assignment 4

Module 3, Assignment 4

Please scroll through these sets of quotes, which you can also link to from the top of the course page:

  1. Philosophers, Statesman and Other Notables on the Land Problem and Land Value Capture / Taxation READ MORE
  2. Quotes from the Ancients, Scriptural and/or Religious READ MORE
  3. Economists Quotes READ MORE

If you have any comments, please make them below, and write your own "land rights" quote.

 

Optional Student Activity: Those interested in “Liberation Theology and Land Reform” may wish to read articles found here: http://www.landreform.org/reading0.htm

The remainder of Module Three will describe how land value capture can significantly improve the living conditions of those presently living in slums (a Millennium Development Goal) and its relevance to urban planning, gender equality, environmental concerns and climate change.

3.8.1-14: Land Value Capture as a Key Policy for Improving Conditions of Slum Dwellers

Module 3, Section 8.1-14

Land Value Capture as a Key Policy for Improving Conditions of Slum Dwellers

8.1 Slum dwellers have migrated to urban areas either because land conflicts and appropriations have forced them off their rural lands and/or in the hope of finding employment. Their informal settlements have insecure land tenure, very poor quality housing and little or no water, sanitation, transportation and other public services. Many slum dwellers also experience food insecurity and health problems. Yet most slum dwellers are able and willing to work and actively seek wage employment or self employment.

8.2 A resident of Cambodia writes:

There has been a lot of coverage lately about the problem of child prostitution in our homeland. It has stir quite emotions here and abroad. There are many contributing factors that may cause child prostitution. I have picked one big and general contributing factor that seems to be the underlying factor to this sickening act.

 

First, please forgive me while I vent my emotions a bit. Around the world, Cambodians people are viewed as a peaceful, conservative, traditional people. Now, as these stories being bombarded in the press, Cambodia and its people are being mentioned with such countries such as Vietnam and Thailand...where child prostitution have been known to occur as frequent as the ticking of the clock.

URBAN SPRAWL is defined as a movement of residences of "good" and "richer" people from the big cities to the outskirt of towns and cities. While at the same time, the less fortunate families such as the farmers and the ranchers are moving into the cities.

The farmers are moving into the cities in hope of finding better paying jobs (like the textile factories) or they have lost their land due to corruptions. Now since there is a continuous mass migration of the farmers into the cities and all are looking to find that "better" paying job and when there are not enough jobs for everybody, what are these people going to do to put to feed their families? Most cannot return to their farms because they have lost it or sold it.

Moms, dads, aunts, uncles, and strangers are selling kids to the brothels.

Khmers was once a proud race. Our ancestors have left us with a historical monuments (Ankors) as to how they use to ruled this region in the world. Where are we now?

 

8.3 As we have previously noted, land value is highest in the urban centers of exchange and enterprise and increases as population grows and development intensifies. How could application of a full and robust land value capture system of public finance improve the lives of slum dwellers? Assuming that such a system is gradually but steadily implemented in stages during a five to ten year period, we can expect that:

  1. The city would have a significant source of revenue without having to tax wage income or productive activities, so slum dwellers who find employment would bare no tax burden on their productive activities, thus increasing their purchasing capacity. Market forces would be harnessed for real wealth production, not for land speculation and real estate investment and profiteering.
  2. Slum dwellers who begin small business enterprise would likewise have no pressure to pay taxes from their earnings. There would be no complaints that they were operating in “the gray economy.” Their efforts would more readily be considered as legitimate and socially acceptable.
  3. Economic incentives harnessed by land value capture would put “infill development” pressure on underutilized or vacant land sites, thus enhancing economic development and the potential for jobs and housing for slum dwellers.
  4. The necessity for clear and transparent land tenure records in order to implement land value capture would reveal who is making what claims to the land that slum dwellers inhabit. Thus it will be a matter of public record who is currently collecting land rent from slum dwellers and how much they are taking as private appropriation of these funds which should in fact be captured for public benefit of slum communities.
  5. As a slum is a highly concentrated population per any given land area, and as slums are usually located in less desirable and therefore on lower cost land than land elsewhere in the city, an accurate assessment of the value of the land of slums and the apportionment of the land value capture fee to be paid will be significantly less per individual or family than in other areas of the city.
  6. The recorded payment of the land value capture fee by those using any particular land area of the slum will confer rights to continue to use that land area, thus helping to settle land disputes and security tenure for land users.
  7. Absentee landlords who claim title to slum lands will have to pay their fair share of land rent into the public fund. If they do not then their security of land title will be at risk
  8. Those who own buildings and useful structures in slum areas will not need to pay taxes on any of the improvements they make to their current buildings or to any new ones. Slum dwellers, their land tenure now secure by their payment of the land value capture fee to the local authorities, would be encouraged to make improvements to their dwellings. Absentees, now unable to profit from the private capture of land rent, will also now have an incentive to make building improvements and hire slum dwellers to do so. Employed slum dwellers will be better able to afford improved housing. Or absentees might decide to simply abandon their land claims, or put their land up for sale to slum dwellers.
  9. Other areas of the city will be improving as well due to the elimination of land speculation and land price inflation combined with the elimination of taxes on wealth creation. As land prices stabilize or even decrease, residents will have more savings to invest in further improvements, again with the possibility of more jobs for slum dwellers and more affordable housing being built which can give slum dwellers the opportunity to move out of the slums.
  10. Also, as land price decrease or stabilize, slum dwellers who might choose to pool their savings, as some are already doing in Nairobi and elsewhere, can more readily afford to buy land on which to form new communities and build new dwellings.
  11. As increasingly affordable land becomes available due to the pressure against land hoarding exerted by the land value capture policy, some former slum dwellers, gaining access to land in outlying areas, would start growing food to bring to market, thus further building a local based economy.
  12. Now, in addition to these private incentives for improvements to be made by slum dwellers and other residents of the city, the land value capture system will have created a substantial amount of public funds which can be utilized for public benefit. All accounting of funds received via land value capture would be by law a matter of public record readily accessible to all.
  13. With knowledge of their fair share of the public funds, slum dwellers and their allies would be politically empowered to insist that the money generated from land value capture be used to meet their basic human needs for clean water and sanitation, public transportation, health services and education.
  14. These public services, combined with the steady decongestion of the slum areas as former slum dwellers found opportunities for employment and livelihoods elsewhere, would improve the quality of life and health for slum dwellers.
  15. As living conditions and public services improve throughout the city, land values might again begin to increase. Public authorities would need to capture the full land rent and utilize these funds for public benefit.
  16. It is conceivable that a city after a few years of land value capture in place could reach the stage of harmonious and balanced growth and development. Public authorities in consultation with the citizenry might then decide to distribute a portion of land rent back as direct “citizen dividend” payments, yet another beneficial result of a public finance policy based on the human right to land rent, the “social surplus.”

 

8.4 Lastly, to secure land tenure for slum dwellers or squatters, land boundaries should be clearly demarcated, use rights for specific parcels clearly established, and land values accurately assessed. These lands might best be legalized as leaseholds at least for a period of time because land values escalate immediately, often substantially, once legal land tenure is established. After such tenure is granted and titles secured for individuals on specific private parcels, poor people sometimes sell their parcels for immediate (but one-time only) cash benefit. In many cases such landless people sink into poverty again. With land value capture by means of government-leased land, land is secured for use rights of occupants, conditional only upon payment of a land lease fee. This could be quite low at first, a kind of subsidy, rising as the occupant¹s economic condition rises.

8.5 With a lease system, poor people do not need to purchase land for housing and thus do not need to pay compound interest on mortgage costs of land. They need borrow funds only if needed, for the cost of the dwelling itself.

8.6 Similarly, the private sector construction industry, when building multi-level apartment units, for instance, need not carry land mortgages for land purchase. Thus they can put more capital directly into increasing the supply of adequate, affordable housing.

8.7 Additionally, municipalities with a strong established land value capture system can use some of these funds to establish zero- or low-interest revolving home loan funds for poor and low-income people.

8.8 Student Activity 1: What questions or concerns do you have about the possible impact of land value capture on slum dwellers? Please send your questions to the course facilitator.

8.9 Here are some questions you might have, for example:

8.10 Question: What if a person living in a slum has no capacity whatsoever to pay their apportioned land value capture payment fee because they have no source of cash income or need what little they have to buy food? Would they be evicted?

Answer: Slum dwellers should have the legal option to contribute a certain number of hours of his/her labor for the benefit of the community equal to what they would pay in cash as their land value capture fee. Grassroots community leaders would decide where such labor would be best directed.

8.11 Question: But what if the person is too weak or sick to work?

Answer: With improving living conditions overall, one or a combination of these possibilities can help such a person: 1. family members of the weak or sick will have increased capacity to care for them; 2. some of the people contributing labor in lieu of cash payments for their land value capture fee could take care of people needing assistance; 3. the stronger basis of public finance can fund social services for people in need; and 4. assistance from private charities can be more readily available for those truly in need of help when those who can help themselves have found opportunities to do so.

8.12 Question: From my experience of living in the slums, it seems a lot of people there really could be productive in some way but there just never seems to be enough money. I still do not understand how land value capture can help people get money when there just are not any jobs.

Answer: There are now a number of examples of communities throughout the world issuing local currencies for local production and exchange. Money is after all not wealth, but rather a symbol of wealth that is useful because it is a great improvement over barter systems. As such, money can be thought of as a public utility. There should be no barriers put in the way of slum dwellers who wish to issue their own local currency. Clear guidelines should be available for “best practices” for slum communities who wish to do so. The acceptance of local currencies for partial or full payment of the land value capture fee also helps to legitimize local currencies.

8.13 Question: Renewing cities in this way seems to decentralize the role of government. What is the role of the national government with this system?

Answer: First of all, the national government can be most helpful by not standing in the way of local public authorities who want to implement land value capture. As the system is put in place locally, national government should be willing to reduce the tax burden on labor and productive activities while shifting its own revenue base to other “domains” of resource rent, such as extractive resources, electromagnetic spectrum for broadcasting and communications, or land rent from carefully managed forest or other public assets.

8.14 Bright minds and caring hearts should be at work on the national government level to curb pollution and provide environmental protection of air and water, encourage renewable energy development, resolve conflicts both within the country and in the surrounding region, and give guidance and support for building an overall balanced and sustainable economy for the entire country.

3.9.1-7: Land Value Capture as a Planning Tool

Module 3, Section 9.1-7

Land Value Capture as a Planning Tool

9.1 Taxation can both create and destroy wealth as well as direct the location of wealth creation. For instance, a tax on windows was used in Great Britain from 1696 until 1851. As a result, the poorer people bricked or boarded up their windows while the very rich built mansions with an excessive number of windows to ostentatiously display their wealth. An unpopular tax on date trees caused Egyptian fellahs to cut down their trees.

9.2 Land value capture harnesses economic incentives in ways that facilitate the goals of urban planning. There are compelling reasons to first develop the highest value land found near population centers. With land value capture a developer or investor desiring these sites will not be penalized with a tax increase as a result of each improvement made. But doing little or nothing on a site of high value is discouraged. Thus with land value capture downtown land is put to its highest and best use.

9.3 Growth then radiates smoothly from more intensive use in the urban centers to rural areas without pockets of vacant or poorly utilized land in between. Urban sprawl is curtailed and rural land is more readily retained in its natural state, available for parks and nature preserves. There is also less pressure to build on agricultural land near urban areas. Rational and balanced development which curbs sprawl thus also makes better use of existing infrastructure of transportation, utilities, fire and police protection and other public services. All of these factors increase social cohesion and form the basis for an interesting, safe, “walkable” city.

9.4 Land for safe parks and green spaces in downtown areas is facilitated in at three least ways with land value capture: (1) land is more affordable for public purchase for public spaces because of the elimination of the land price bubble due to land hoarding, under-utilization, speculation; (2) because parks and green spaces are desirable public goods, living close to them enhances land values in their vicinity, thus bringing more revenue into the public coffer; and (3) capturing full land rent yields a strong base of public revenue to fund upkeep and protective services for parks and green spaces.

Avoiding urban sprawl also reduces public outlays so and reduces the need for a tax base. The only way a city can have a tax base is to generate a taxable surplus. The only way it can generate a surplus is to be efficient. The way to make it most efficient is to develop the ripe, rentable, surplus generating central land and spare the heavy cost of extending infrastructure into the lean, premature, sprawled, submarginal urban fringe. – Mason Gaffney, Adequacy of Land as a Tax Base

 

9.5 walkable street in Madison WI Madison, Wisconsin was named the most walkable city in the US in a recent ranking of the walkability of the largest 100 US cities.

Too often urban planning relies on regulation and grant-funded projects that are not very cost-effective and often more complicated than need be. Conventional property taxes which tax buildings more than land, wage and occupational taxes and special sales taxes all are disincentives for highest-and-best use of land in urban areas. If we want to encourage “green” cities with productive businesses and well-kept apartments buildings with affordable living units it is important to understand how planning and land economics can compliment each other. Land value capture is thus an essential component of good urban planning.

9.6 Other significant changes detected in similar studies of tax reform through land value capture:

  • Taxes on the majority of owner-occupied and rental homes are reduced.
  • Construction and rehabilitation of residential and commercial buildings are stimulated.
  • The serious escalation of housing prices and rent experienced by most United States cities was averted in these Pennsylvania cities because housing stock expanded.
  • Central business districts were revitalized because they attracted greater private investment.

 

9.7 More efficient land use resulted as a city's idle lots and underused buildings were put into productive use; this in turn reduced the pressure for costly and environmentally harmful urban sprawl.

 

A record of land value changes over time would also provide a useful planning tool. When a new mass transit is being planned it would be possible to use the existing record of land value changes to estimate which of a choice of routes would provide the largest land value increase. There may be perfectly valid reasons for choosing an alternative route but at least this decision would be taken in the light of a clear indication of the total value the community puts on each alignment. - Dave Wetzel, Vice-Chair of Transport for London

 

woman pushing baby stroller

Module 3, Assignment 5

Module 3, Assignment 5

1. Learn about these two projects developed by activists concerned about high housing costs and homelessness in cities with vacant land in Australia and New York.

  • I Want to Live Here” campaign. Investigate how young activists in Melbourne, Australia have surveyed areas from the seat of a bike, recording vacancies and then cross referencing them via google earth. The findings show there is over two years worth of auctionable property in the region, disproving the fallacy that ‘land supply’ is the cause of affordability pressures. What trends can you see from the photos?
  • Outrageous housing costs! Sky-high taxes! Deteriorating public services! Poverty... homelessness... urban decay... So why does New York City have 22.2 square miles of vacant land? Learn what land rights and land value capture activists are discovering about a great city with great problems by exploring their website.

2. Call public officials in your city or region and find out who is responsible for planning. Ask if there is a website with planning information. Compose questions about planning. Contact the planners and ask them your questions. Ask if they are aware of the benefits of land value capture (also sometimes called “land value taxation”) and its relevance to planning. If they are, ask them if they are actively working with public finance and budget directors to implement this policy. If they are not aware of this approach, send them information about it by email or post. Call them back in a few days and ask if they have any questions or any interest in more information. If the planners have questions you cannot answer, note these, then get back to your course facilitator who will assist you with answers and possible next steps.

3.10.1-6: Value Capture Can Easily Fund Infrastructure

Module 3, Section 10.1-6

Value Capture Can Easily Fund Infrastructure

10.1 In his book Taken for a Ride Don Riley explores the impact of the building of the Jubilee Line Extension (JLE) Underground line in London. He visited the tunneling site in the mid-1990s and has since commented how these men digging the tunnel were sweating hard, risking their lives, not knowing where their next job was coming from, while at the same time he, himself, was making money while he slept as his local land holdings appreciated in value as the line became a reality.

Riley calculated the total land value increase that arose within a radius of only 1,000 yards of each of the new JLE stations. He found out that land values increased by a staggering £13billion. The construction cost of the line itself was only £3.5billion.

10.2 “Some of this wealth should have been collected by the Government in order to fund the project,” says Riley.

10.3 An independent study carried out for Transport for London estimated that between 1992 and 2002 the JLE caused land values to rise by £2.8bn close to just 2 of the 11 new stations (Southwark and Canary Wharf). This means that the UK Government could have built the JLE at no cost to the public purse if they had just chosen to collect less than one third of the increased land values arising from the scheme.

10.4 “If Governments continue to only tax wages, trade or goods and services to create new transport opportunities then they are choosing to give an unearned bonus to the owners of land,” says London transport consultant Dave Wetzel in his paper on Innovative Ways of Funding Public Transport. “Funding new and improved transport infrastructure from land value gains creates a virtuous economic cycle that provides a win-win situation for all concerned, including the landowners who provide the finance.”

10.5 For those who are interested in further information on this topic here are two articles on Bonding/Funding of Transport through Land Values and Case Studies.
Also see The Nexus of Transportation, Economic Rent, and Land Use.

10.6 Optional Reading: Special Benefit Assessment Districts and Traffic Congestion Pricing

United States To finance public works, this country's states and smaller jurisdictions have at times used benefit assessment districts, with land value capture as the mechanism to pay for new or better public works projects. When a community petitioned for infrastructure benefits, such as paved streets, sidewalks, utilities extensions, or other amenities, a governing jurisdiction then designated a district embracing all benefitting properties. Costs were divided among properties according to each owners's "front footage." The length of lot lines facing a street provided a rough equivalent to the relative land values of the affected properties served by or adjacent to the facility.

A small number of such benefits districts remains, but most depart from the original design. Their taxes fall on total property value rather than on front, or land, value, and fully developed properties pay more. Such districts, therefore, now give a free ride to holders of vacant land or blighted properties. The original land value capture benefit assessments districts had the following advantages:

The approach worked and citizens found it fair. Those receiving benefits bore the costs; others, who did not benefit, were not expected to pay.
Orderly urban growth was fostered. Local government had more control over where infrastructure was to be extended.

Benefit districts tended to be democratic and efficient. Projects went forward only if affected owners approved. Waste was minimized because those who had to pay took pains to confirm that facilities would be worth their cost.

Examples include:

California: Local irrigation districts established in the early 20th century in the great Central Valley provide a lesson in the benefits of infrastructure funding by land value capture. State law enabled formation of local irrigation districts, with the capacity to issue bonds to finance irrigation works. These were paid from increased land values captured as a result of the improved water systems. Large ranch lands, now taxed at much higher values, were sold off in smaller tracts. Small farmers found land more affordable, and were able to farm more intensively because of expanded irrigation. This land value capture system brought prosperity and healthy, thriving communities. Town sites, too, whose values were enhanced by higher productivity of the surrounding farms, yielded higher taxes. Districts became multi-purpose, providing electric power, reclamation, and recreation, as well as water. Some five million acres turned green under this tax reform, which one analyst called “an extraordinarily potent engine for the creation of wealth.”

Ohio: After catastrophic floods in 1913, this state inaugurated a flood control system paid for by land value capture. Assessing the flood damage to each property approximated the land value beneath that would accrue to the owner, as a result of preventing future floods. Approximately 77,000 parcels along 110 miles of river valley were individually assessed within two years. Total calculated benefits to properties exceeded $100 million, more than three times the cost of the flood protection project. Such a cost/benefit ratio lends weight to the proposition that infrastructure can be self-supporting under a land value capture system, because it generates sufficient revenue. Pennsylvania: The Pittsburgh (second largest city) Improvement District, comprising 100 blocks of prime downtown land, is a successful example of a full land-only value capture special benefit district. This capture scheme pays for greater customer safety, better maintenance, and enhanced marketing to attract new businesses, [including many national corporate headquarters??], which both pay for and benefit by the additional assessment.

Traffic Congestion Pricing

Taxation of motor vehicle ownership and usage also involves land values, although this is often unrecognized. To the extent that road usage rights represent rights to use of a land-related resource, taxing that right is completely in line with land value capture policy.

Singapore: Motor vehicle taxation here is a form of regulatory capture related to land use. Road space is a valuable resource in this land-scarce city-State, and is priced accordingly for private motor vehicle owners and users. Road usage pricing has been implemented since 1975; as a result, traffic congestion is infrequent. Because of successful land value capture, revenue from land leasing and motor vehicle related charges are important sources of funding, and the Singapore budget has enjoyed healthy surpluses since 1968. At the same time, tax rates on income and productive enterprise have been steadily reduced.

United Kingdom: To avoid overcrowding and wasting fuel as vehicles idle in traffic jams, London has recently introduced a type of land value capture through traffic congestion pricing, also based on heavy or light use time of day. The City of London receives substantial revenue from vehicles fined for non-compliance, the number of vehicles in central London has been dramatically reduced and traffic flows far better than previously.

3.11.1-17: Land Value Capture and Gender

Module 3, Section 11.1-17

Land Value Capture and Gender

Land value capture is strategically important for the political, economic and social empowerment of women.

11.1 There are enormous historical and present day gender disparities in land tenure worldwide. The largest and most valuable individual and corporate landholdings are predominantly owned and controlled by men. Public funds generated by land value capture would come primarily from these lands.

11.2

We have reached the deplorable circumstance where in large measure a very powerful few are in possession of the earth's resources, the land and all its riches, and all the franchises and other privileges that yield a return. These monopolistic positions are kept by a handful of men who are maintained virtually with- out taxation . . . we are yielding up sovereignty." - Agnes de Mille (1905-1993)

 

11.3 Women are more likely to be wage earners and small landholders. The land value capture approach includes elimination of taxes on wages and production. Those with smaller holdings use their lands intensively and efficiently and they would be encouraged to produce as much as possible without a tax burden on the products of their labor. Freed from taxation on their productive activities, the purchasing capacity of women would increase. When land speculation and hoarding is curbed, land is released for sale. Land and thus housing becomes more affordable as supply meets effective demand. These conditions increase gender equality with respect to land. Adequate, secure, affordable shelter brings economic and social stability to women and their families.

Patricia Mische, Co-Founder, Global Education Associations:

The more we grow in awareness of our own sacred source, the more we discover that our own sacred source is the sacred source of each person and all that is in the universe.

 

11.4 Land value capture is a form of land-based taxation that cannot be passed on to apartment renters. One reason landlords can charge rents at the level they do now is that so much land is held out of the market (neither used nor put up for sale or lease) or is represented in the market far below its potential (underdeveloped). Land value capture creates greater competition among landlords. Owners of vacant or underutilized property would be encouraged to construct housing units or sell their land sites to someone with the capacity and willingness to do so. The addition of these properties to the market decreases the competition for housing and so keep housing rents down.

11.5 For women wanting to buy homes, land would inevitably be cheaper as those holding land for speculation sell. Sprawl and the premature development of rural lands would be diminished and so land prices in these areas would not inflate as is often the case under current economic structures. Lands that could be utilized by women growing produce or joining together in various economically productive ventures would thus be located closer to urban markets.

At the Market Odi, Bayelsa State, Nigeria

11.6 The work of women that is not commodified or measured in cash payments makes a considerable contribution to families, extended families, and society in general. Intact, communal land tenure systems, still existent in some regions of the world, often better support contributions of women who, sharing a common and contiguous land base, can better organize for cooperative endeavors. Extreme land privatization, with individual small lots suitable only for nuclear families, weakens and breaks the bonds of extended family and community.

11.7 Because of their role in child rearing and their important roles in community relationships, women are often more tied to place than men. Secure land tenure, affordable land access, and a fair, transparent, orderly system of finance–all promoted by land value capture policy–strengthen women’s power and voices in deciding political and economic policies.

11.8 Land privatization is not necessary to implement land value capture, which accommodates a variety of forms of land tenure. Tribal, clan, and extended family land bases can remain intact with a land value capture system by constituting such lands as types of land trusts or community leaseholds.

11.9 When economic opportunities are strong elsewhere, as in rapidly developing urban areas, women should always be free to choose to migrate to such areas. But where wages and opportunities for secure livelihood diminish in the urban or wage economy, women and their families should always have access to rural land for subsistence agriculture and shelter.

11.10 If, however, rural land has been enclosed as exclusive private property, the safety valve of secure tenure - the “right of return” - to land is no longer an option. Women and their families then become vulnerable to the entrapment of wage slavery, prostitution and beggary. Poorer women can take a stronger stance against labor exploitation when they have the safety valve of land access in rural areas.

Woman with Beans

11.12 The equitable land rights promoted by land value capture furthers a transparent land tenure system that is not mediated by male roles. The exception would be where traditional male dominant tenure systems might endure even with a land value capture policy in place. In such circumstances it is important to have women included equally with men in deciding how land value capture funds are allocated. Women would then be empowered to choose to direct these funds in ways that would make improvements that would be most helpful to women. For instance, women might choose to fund child care centers and schools rather than sports stadiums. If they did choose to fund sports stadiums they might insist that women’s teams have equal access to the field.

11.13 Women might also decide to allot a portion of the land value capture funds for distribution as direct payments, or “citizen dividends” to women (or men) when they are working in non-waged yet socially important roles, such as being the primary caregiver to young children or elderly parents.

11.14 Women might also decide that a portion of the public fund should be made available for low interest revolving loans to build or improve homes.

11.15 Land value capture directly addresses the underlying dynamics of power that currently ensnares the poor, women, ethnic minorities and other vulnerable groups. It is a significant tool to promote both urban and rural land reform.

11.16

This common right of each human being to benefit from the Earth's natural capital should be protected and respected by legitimate governments at the appropriate level. - Emer Ó Siochrú, Land and Housing Group, FEASTA, Ireland

 

11.17 Women should become knowledgeable about land value capture in order to secure full economic and human rights to land via:

  1. Free access to the specifics of legal documents enabling the implementation of the land value capture system of public finance.
  2. Free access to land maps (cadastres) and land value assessments available in government offices and posted on public websites.
  3. Functional and effective land dispute arbitration in order to determine fair rights of use to specific land parcels as well as equitable land value assessments.
  4. Transparency, accuracy, and efficiency of public authorities entrusted with the implementation of land value capture.
  5. Participatory decision making in the distribution and allocation of public funds.

 

Module 3, Assignment 6

Module 3, Assignment 6

Do a websearch on Women and Land and read at least three of the articles that you found. Then write a list of at least four points about the relevance of what you have learned in this section to the issues you read about in the articles.Please be sure to include references - article names, dates, publications, page numbers - when you post specifics, thank you. Your work in the assignments is contributing to our education and research on land rights around the world.

3.12.1-11: Land Value Capture: Rural Land and Agriculture

Module 3, Section 12.1-11

Land Value Capture: Rural Land and Agriculture

12.1 We learned in Module one that surface ownership and control of land is highly concentrated in most countries of the world. We hear the cries and demands for land rights and land access from the Brazilian landless and so many others. Big dams, river water diversion and other large infrastructure projects are too often instigated by the same few who own so much of the land and will benefit even more when the value of their lands increase. This is why these types of infrastructure placements, touted as “development projects,” so often do little or nothing to improve the lives of poor people.

12.2 Just as the stated intention of land “improvement” was used as the rational for massive land privatization by the few during the Enclosures period (as described in Module 1), so today this form of “development” is falsely presented as a way to improve living conditions even though village lands are flooded and people are evicted to make way for these big projects.

12.3 The problem of inappropriate and too-large scale systems for energy and other infrastructure is both a democracy and an economic justice issue. It is a democracy issue because this type of infrastructure impacts the lives of many people who rightfully should be included in the decision making process. It is an economic justice issue because the ultimate benefactors of this type of infrastructure development are usually those who have already accumulated far more than their fair share of wealth.

12.4 One example of how land value capture has been instrumental in furthering land reform and a fairer distribution of wealth can be found in large rural areas of central California. In the early 1900s most of the land in this region was owned by only a handful of people. Californians knew that irrigation would enable these vast lands to become fertile and productive for farming. A state legislator who understood land value capture wrote a bill that was passed by the state government which enabled local irrigation districts to be formed and empowered to issue bonds to raise funds to finance the irrigation infrastructure. Irrigation would greatly increase the value of these lands, so the districts were also authorized to capture the increase in land values in order to repay the bondholders.

12.5 These are some of the benefits of this approach to financing infrastructure that were well-documented during the following years:

  • The large landholders, upon now being legally required to make payments to the irrigation districts for their now more valuable land, put much of their land up for sale.
  • Those of modest means who wanted land for farming were able to buy land because it was now available at prices they could afford. Land value capture had thus instigated an orderly land reform.
  • These farmers used the irrigated and now fertile land in an efficient and productive manner yielding substantial quantities of food for market and secure livelihoods for farm families.
  • The local economy diversified as other forms of enterprise emerged to supply a variety of goods and services.
  • As the economy in these areas continued to improve and diversify over ensuing years, communities and towns developed which scored high on quality of life indicators as carefully compiled by sociologists and other researchers.

 

12.6 Studies of the impact of land value capture and land value taxation as utilized in rural areas of a number of countries have shown these overall benefits of this land rights public finance approach to equitable economic development:

  1. Undertaxing land favors large farming operations that are not necessarily the most efficient while full land value capture rewards farmers that are more capable and productive.
  2. Land value capture curbs land speculation and hoarding, thus maintaining land affordability for entry-level farmers.
  3. Untaxing the productive labor and activities of farmers increases their savings capacity better enabling them to purchase their own farm equipment and materials for farm buildings.
  4. By promoting an orderly approach to land reform, land value capture encourages owner-occupation rather than absentee ownership of land.
  5. Rural economies are strengthened as the land value capture public fund is utilized for provisioning public goods such as education, clean water and sanitation and other needed public infrastructure.
  6. By harnessing incentives for wealth production in an equitable and efficient way, land value capture encourages the development of a healthy and diversified rural economy.
  7. When people living in rural areas experience significant improvements in their lives and livelihoods many have less interest and incentive to move to cities in the hope of finding jobs.
  8. When fewer people are competing for limited jobs and places to live in the urban areas, wages there can be better maintained at a higher level.
  9. Conversely, when people in urban areas are not able to secure sufficiently high wages, they now have a viable option to find livelihoods in the more rural areas.
  10. Thus a fully implemented land value capture system promotes equitable, efficient, and appropriate development in both urban and rural areas.

(From Land Value Taxation: The Equitable and Efficient Source of Public Finance, an anthology edited by Kenneth C. Wenzer, published by M.E. Sharpe, Inc., New York, 1999)

 

12.7 Land privatization is not necessary to implement land value capture policy, which accommodates a variety of forms of land tenure. Tribal, clan, and extended family land bases can remain intact with a land value capture system, by constituting communal lands as types of leaseholds. People in rural areas and on communal lands can choose whether or not to remit funds to central land value capture authorities, depending on whether or not the community determines itself to be well served by that authority.

12.8 For example, if it is a question of whether to pave a section of road leading to a village, the villagers themselves might decide whether or not to remit funds for the job, after the central authority [in essence] bids to do the job. But they might determine that they could do the job with their own labor and capital, perhaps with a different type of paving material from that chosen by the central authority. They would have that choice, through their own village governance, bolstered by land value capture funding. Villages would, in essence, have decentralized, democratic decision-making power over what to do with their own resources, both labor and capital.

12.9 Similarly, if a village wants electric power, it could decide to buy into a grid system where power is generated from a distance, or find it more advantageous to establish its own utility systems, using wind, solar, or micro-hydro power appropriate to its own needs and local energy generation capacity. If a locality determines it needs improved infrastructure for example, it could freely choose to 1) capture value from its own communities and submit these funds to central authorities; 2) confederate with nearby communities for this purpose; or 3) provide such infrastructure using its own local capacity.

12.10 Overall, decisions on collecting and using land value capture funds can be made in a much more decentralized fashion, by all municipal levels, village, town, or city.

12.11 Worldwide concentration in land ownership has proceeded at an alarming pace for the past several decades. It is essential to now fundamentally reform our systems of land tenure and public finance in such a way that rewards productive labor rather than land speculation, efficiencies of scale and careful stewardship rather than impersonal big farm consolidations. The combination of these ten benefits of land value capture can support the flourishing of ecological villages in rural areas bringing forward an inspiring, hopeful, sustainable new way of living for millions of people around the world.

Module 3, Assignment 7

Module 3, Assignment 7

Learn about Ecovillages here: Global Ecovillage Network.
site for Odi Ecovillage Living and Learning Centreplanning Odi Ecovillage
Gordon Abiama and the Odi, Nigeria Ecovillage Team

3.13.1-17: Tax Bads, Not Goods! - Integrated Green Tax Shift

Module 3, Section 13.1-17

Tax Bads, Not Goods! – Integrated Green Tax Shift

13.1 Although the Global Land Tool Network’s main focus is on land rent recovery from surface land for public benefit, this next section provides an overview of a broad and holistic “integrated green tax shift” approach to public finance policy which recovers resource rent from other common heritage domains as well.

13.2 The slogan “Tax Bads Not Goods” is a useful way to grasp this newly emerging way of harnessing the incentive power of public finance. If we desire to maximize the human potential for the production of wealth it would seem to make sense to take taxes OFF of:

  • Wages and earned income
  • Productive and sustainable capital
  • Sales, especially for basic necessities
  • Homes and other buildings.

 

women washing laundry in Mumbai 13.3 On the other hand, if we want to reduce bad things such as pollution of air, water, and soil, land speculation, land hoarding, or depletion of limited common assets then taxing these activities places a financial burden on them and sends the signal that such activities are harmful. Green tax policy accordingly INCREASES taxes and fees on:

  • Emissions into air, water, or soil
  • Oil and minerals
  • Ocean and fresh water resources
  • Land sites according to land value.

 

13.4 Nearly everyone, except perhaps those who profit from militarization, would agree that wars and destructive conflicts over territorial and natural resources are social “bads.” Charging higher fees and capturing the full rent for the use of common assets, then using these public funds for overall social betterment, is thus a way to share the gifts of nature rather than fighting over them.

13.5 Whenever there is competition for use of common assets there is the potential to capture resource rent for the public good. Capturing rent from the electromagnetic spectrum and satellite orbital zones in addition to the above mentioned natural resource domains is thus a powerful and effective way to ensure peace and resolve territorial conflicts. Funds that currently pour into military industrial activities can instead be directed to the provisioning of public goods and services.

13.6 True Cost Economics via Green Tax Shift policy is a rapidly emerging new perspective on tax reform which emphasizes the incentive capacity inherent in public finance policy.

  • Tax waste, not work.
  • Tax bads, not goods.
  • Pay for what you take, not what you make.
  • Polluter pays.

 

13.7 One practical model of this integrated green tax shift approach to public finance has been developed by researchers with Northwest Environmental Watch. This model was compiled using data from three states in the northwestern United States – Oregon, Washington and Idaho, plus the Canadian province of British Columbia. The researchers presented the results of their analysis of the existing tax structure of the region in this pie diagram:

13.8

13.9 As you can see, the great majority of taxes fall on the “goods” of wealth production via taxes on people’s income and the goods and services provided when people work together in business activities. Property taxes, although they do collect some portion of the land rent, mostly fall on homes and other buildings and personal property. At the time of this study the Pacific Northwest collected far more taxes from environmental “green” taxes then most other parts of the world.

13.10 Northwest Environmental Watch (now called Sightline Institute) researchers then compiled a pie diagram demonstrating the components of a strong shift to an integrated green tax system of public finance:

13.11 Note that in this model the “bads” are being more heavily taxed while taxes on the “goods” are greatly reduced. Taxes on income, sales and business have been considerably reduced, replaced by pollution and carbon taxes and the capture of resource rent for the use of common assets such as water, minerals, timber on public lands and wild fish.

13.12 The 27% of property taxes that had in the first diagram fallen mostly on peoples homes and personal property has been in this second diagram converted entirely into a land value only property tax. Hence the property tax falls most heavily on those who have the most land and the most valuable land sites rather than on those who own homes and provide housing.

13.13 In other words, those who have privatized or enclosed the common asset of surface land now pay into the common fund a sum amounting to the resource rental or site value of the land that they claim. An “exclusive” private property rights system, meaning that private property owners are permitted to profit from land speculation and land hoarding, is now converted into a “conditional” private property rights system whereby society will acknowledge and protect private land use rights on condition that those who claim land are paying their fair share of land rent into the common fund, thus compensating society for the benefits they receive from the lands they have enclosed and privatized.

13.14 Under such a system, the incentive is for those who own more land than they really need or can well utilize to release some of their land thus making it available for others to use. With land prices stabilized and working people having greater purchasing capacity due to wage tax elimination, more people can obtain the land they need for housing and to establish farms and businesses and this with much less need to borrow money and take out mortgages.

13.15 Taxes structured along the proposed lines would do much to level the economic playing field worldwide, both within and among nations. A coherent and integrated local-to-global pubic finance system based on capturing land and resource rent for the common good would give each and every person a share in the planet as a birthright.

13.16 Case Study: An example of natural resource value capture is that of Alaska's oil, mentioned in Module 2. Under this state's constitution, natural resources are legally owned by the people as a whole. The Alaska Permanent Fund captures value from oil royalties, then places these moneys in an investment fund, which generates dividends paid annually to all individuals, including children, resident in the state for at least one year. More than $25,000 per person has been distributed in this way during the past 25 years. Alaska is the only state in the United States where the wealth gap has decreased during this period.

13.17 While the Alaska Permanent Fund is in many ways a good example of both resource rent capture and the distribution of citizen dividends, in this time of urgent necessity to develop energy sources other than fossil fuels it would be best to distribute rent for citizen dividends from a portion of surface land values. Rent capture from fossil fuels would best be used to fund the development of renewable energy sources.

Module 3, Assignment 8

Module 3, Assignment 8

View the Alaska Permanent Fund Dividend website. Find and then add the amount of the citizen dividend for the past three years. Write down what you would do with that amount of money.

3.14.1-2: Land Value Capture and Climate Change

Module 3, Section 14.1-2

Land Value Capture and Climate Change

The state of the earth now requires that the costs of industrial production and human commercial activity no longer be externalized onto the local to global commons.

Wangari Maathai planting trees Wangari Maathi, Nobel Laureate, plants a tree.

14.1 Here are some ways that land value capture can help address global warming and climate change:

  • Tax pollution - Governments should directly levy carbon and other pollution charges and use these funds to develop renewable energy systems and to launch campaigns to “buy and invest in clean and green” technologies and products.
  • Decrease wage taxes - Because energy taxes can be regressive, combine them with tax decreases on wage incomes or ideally, eliminate wage taxes altogether.
  • Reduce or ideally eliminate taxes on buildings - This along with full land value capture will encourage infill development and more compact cities that make energy efficient use of public transportation and infrastructure while discouraging wasteful sprawl development patterns.
  • Curb profiteering and speculation in land and natural resources – When investment of funds in these non-productive activities is discouraged via land value capture more funds are available for investing in new "green energy" technologies and environmentally sensitive design and production.
  • Encourage more labor intensive, organic agriculture, rather than oil intensive giant agribusiness. - Land value capture will help keep land affordable for small farm agriculture and better reward farmers for their labor when their tax burden is decreased or eliminated. This form of agriculture also encourages healthy communities and decentralized, local based economies, decreasing the necessity for people to drive long distances to work or for food to be transported long distances to markets.

Ecological economics research and data indicate that true cost pricing of natural resource use and capturing that cost via ecotaxes and resource rental charges would be sufficient to eliminate taxes on labour and productive, sustainable capital. Thus full incentives are harnessed to address climate change (tax "bads") and encourage green technology (untax "goods").

 

14.2 In this Module, you have learned about the policy of Land Value Capture and how it addresses the need for improving living conditions in slums, good urban planning, sufficient financing of infrastructure and other public goods, progress towards gender equality, land reform, environmental protection and climate change.

Module 3, Assignment 9

Module 3, Assignment 9

This activity will serve as a review of this Module:

  1. List ten key points that you have learned about Land Value Capture.
  2. Write three or more questions about land value capture, also in the box provided.
  3. Go to the Quotes section at the top of the course webpage. Read some of these quotes.

Module Four

Module Four

Economics of War and Peace

4.1.1-8: Introduction

Module 4, Section 1.1-8

Introduction

 

A goal stated in the UN Millennium Declaration: To make the United Nations more effective in maintaining peace and security by giving it the resources and tools it needs for conflict prevention, peaceful resolution of disputes, peacekeeping, post-conflict peace-building and reconstruction.

 

There are now 20 million refugees predicted to increase to 50 million in the next five years. Warfare over land and resources will destroy us all unless and until we find ways to equitably share the earth.refugees

1.1 Now we will take a step deeper into our land economics analysis and focus on how the private appropriation of land rent leads inexorably towards a warfare state and a highly militarized economic structure. The following diagrams will give you an appreciation of the importance of land value capture in building a world of peace and plenty for all.

1.2 Essentials of Economic Rent and a War Economy

1.3 This first diagram brings our attention to the fundamental person/planet relationship - that of human beings applying their energies to the gifts of nature in order to obtain food, shelter and other basic necessities of life. Some people, even today, are finding deep satisfaction in living simple lives in harmony with the natural world, and that they can meet much of their basic needs for food, shelter and energy with little need for cash. The most essential requirement is access to land that can be made fertile and productive.

1.4 Privilege Fund Grows

1.5 The second diagram shows that structural violence, indicated by the gun images, begins at the point when land is privatized by the few who are then in a position to charge Rent as a condition for others to have access to land. In economies having exclusive private property rights to common assets, as economic growth and development proceeds, land and resource values increase, and the wealth of elites grows as a result of the private appropriation of Rent. This inequitable accumulation of private wealth gives elites a disproportionate capacity to make loans to others. Thus they are able to capture massive amounts of financial interest(debt payments) as well.

1.6 The “Privilege Fund” is the descriptive term in the diagram indicating economic rent (unearned income) captured by economically powerful corporations, banks and individuals. Wages do not keep up with the cost of land for housing, and in many countries taxes fall heavily on wages, so most people must borrow and pay interest for their homes, business capitalization, higher education, etc. The middle class, if there was one, shrinks while multi-millions of people face poverty, homelessness, and food insecurity. At this point the rent-seeking activities of finance capitalism has overpowered the productive economy.

woman begging with 2 children (poverty in the middle east)getawayafrica limo Oil rich countries of Africa (namely Nigeria, Gabon, Sudan, Congo, Equatorial Africa, and Chad) have long histories of coups, military rule and dictatorship. Millions have died of hunger, disease and murder while wars over oil, diamonds, copper, and other mineral resources made life-generating economic activity difficult or impossible to proceed. - Africa under further menace of Resource Wars

1.7 Privilege Fund Enables War System

1.8 Diagram Three indicates that as the wealth and power gap between the very rich and the rest continues to grow the swelling Privilege Fund gives both motivation and capacity to invest in land, resources, and industries abroad and/or to engage in resource wars. The Privilege Fund is used also as a loan fund to indebt poorer countries. For instance, some international financial institutions’ original “portfolios” were secured by profits (resource rent) derived from oil.

Module 4, Assignment 1

Module 4, Assignment 1

Please do a websearch using Images World Energy Picture and also Images for Africa at the Boiling Point. Then write your thoughts, and feelings, in the assignment box below.

4.1.9-4.2.7: Transforming the Privilege Fund

Module 4, Section 1.9-2.7

Transforming the Privilege Fund

1.9 Collectors of the Privilege Fund invest in land and resources in 'underdeveloped' countries. To quell protests, investors call for military intervention.

1.10 The protection of massive privatized assets requires armaments and a clever system of propaganda to convince the general public that they must pay taxes from their wage income and/or incur public debt to pay for these “protective services.” At this stage a war economy is in full swing. The military-industrial-financial complex leads to super-state expansion and resultant covert and overt wars for geo-spatial control of natural resources and prime locations such as ports and other transport nodes.

 

Dr Martin Luther King said that only ‘the radical reconstruction of society itself' and ‘a radical redistribution of economic and political power' could ‘save us from social catastrophe.” He told us that "a nation that will exploit economically will have to have foreign investments and everything else, and will have to use its military might to protect them… the problem of racism, the problem of economic exploitation, and the problem of war are all tied together. They are the triple evils that are interrelated." MLK 1.11 What is the true cost of war?
Newly placed gravestones. Mangled bodies. Broken hearts and homes. Economic instability. Depression and all its attendant miseries. Back-breaking taxation for generations and generations. -Major General Smedley Butler

 

 

Transforming the Privilege Fund

2.1 Diagram Four
Transforming the Privilege Fund

 

2.2 This fourth diagram describes a new role for democratic governance. It shows the Privilege Fund converted to a Resource Rent Fund utilized for the benefit of everyone. A condition for land enclosure for private use would be payment of land rent to the entire community. This is the goal of “land value capture.” “Exclusive” private property rights to land, which includes the right to privately appropriate land rent, is thereby easily converted to “conditional” private use rights to land. Individuals, groups, or businesses can secure use rights to land provided that they pay the full rent of land to society to be utilized for the benefit of all.
the earth belongs to everyone

2.3 Land Value Capture places the economic foundation of society on the principle of equal economic human rights to the value of earth’s resources. We might call this new mandate for governance “earth rights democracy.”

2.4 Another way to grasp this concept is to consider that land belongs to all on an equal basis, each with an “equal share.” In the best forms of tribal land tenure systems there is an agreed upon process or leader making fair decisions about allocations of land use to clans and families. In complex cash economies, public systems of land value capture play this allocative role. Those who privatize or enclose the most and the best land would pay the most land rent to the common fund. Those with little or no land or poorly located land would pay little or nothing. Taxes on their wages or other productive activities would be eliminated.

2.5 Thus, instead of rent being captured by the few leading to wealth inequality, the new role of "earth rights" democratic governance is to capture land rent for the many leading to a much fairer distribution of wealth.

2.6 As the economy develops and becomes more complex and land rent grows, a percentage of the rent from the now public resource rent fund could be distributed as equal cash payments to everyone, a “citizens dividend” similar to the previously described Alaska Permanent Fund dividend system. Surface land rent is one of the best sources of funds for citizen dividend payments, better than oil rent which would best be utilized to finance renewable energy systems.

2.7 Optional Reading: The Law of Rent and the Economics of War and Peace This paper, first presented in New York at the Eastern Economics Association Conference (2007) on the panel organized by Economists for Peace and Security, further develops the themes of each of the four diagrams in this section.

 

Land Conflict Resolution

landscape A similar pattern exists for conflicts around the planet: power-seeking to get the prize of land and natural resource wealth. Land value capture can work to directly address issues of territorial conflict. The key to peace is to equitably distribute the land rent throughout the area in dispute.

 

Those pursuing non-violent solutions to surface land, oil and other natural resource conflicts would initiate information gathering to determine the approximate amount of land and resource rent that could be captured from the territory experiencing land and resource conflicts. They would publicly and transparently post this information in the form of land and resource value maps.

They then would consult with people living in the areas of conflict to solicit their ideas on how the land rent when captured for public use could be utilized. In this way those in the conflict zone would be encouraged to imagine a peaceful settlement to the conflict and a way forward to a future where all can attain their basic human needs.

The peacemakers would next put forth a proposal to establish a Land (and/or Resource)Rent Authority to administer annual land value (resource rent) assessments and the collection and distribution of land rent for the benefit of everyone. In places where there is no functioning land market from which to determine land values, the amount of land rent to be paid in order to secure title to specific disputed land parcels could be determined by land auctions, with those willing and able to pay the highest amount of land rent into the public fund receiving land title or the right to extract the natural resource.

For an example of an oil resource rent fund, recall the aforementioned Alaska Permanent Fund. Also, citizen activists in Bayelsa State, Nigeria, have proposed the establishment of a Bayelsa State Oil Fund Commission to equitably allocate oil rent to the people of the state. To learn about this well-designed resource rent fund proposal GO HERE

The Land Rent Authority once operative would also have the capacity to enforce the land value capture policy, at least until other functional structures of democratic governance are put in place. The Land Rent Authority thus would be a key to an overall peace plan for the area experiencing land conflicts.

Peacemakers would present this plan to establish a Land Rent Authority as a way to secure equitable land rights and fundamental economic justice for every person who wants to reside within the territory under dispute. The next step would be a time period dedicated to broadening the popular basis of support and endorsement for the plan, the goal being legitimization and approval of the proposal by as many people as possible.

After a substantial number of people have endorsed the proposal, the Land Rent Authority would be formally established and begin its work. Those who cooperate with the plan and willingly pay their fairly assessed land rent fee would be considered rightful title holders and the Land Rent Authority would protect and enforce their title rights.

Those refusing to pay their fairly assessed land rent fee, who in essence want to continue with their private land enclosure without fairly paying to the community their fair share for the rights to this privilege, would risk losing their land.(Note that this is no different than how property taxation is enforced in many countries at the present time.) In other words, there would be no basis for the Land Rent Authority to pay for and enforce title protection to lands unless the land rent has been paid into the common fund. In this way fairness in land rights would become a force of law.

It is important to understand that this approach to land conflict resolution is contained within a framework of “just law and order” as compared to simply “law and order.”

Defining the parameters of sovereignty is a key component of the world order dialogue as it struggles to reach consensus regarding the boundaries and prerogatives of power. Sovereignty is the status of a person or group of persons having supreme and independent political authority. In dealing with the concept of sovereignty, we are dealing with the reality of power. It is a power over territory, over land and water, oil and minerals, as well as those life forms which have miraculously emerged out of the mud of the earth.

The kings and queens of Europe, Asia, and Africa were sovereigns. They reigned supreme and were thought to be divine. They descended from those having the strongest might and force to prevail over territory. The larger and richer the territory they could hold under their power and authority, the higher their status. They were both feared and courted by other humans.

These were the dominators who ruled the land and made the rules. Their rules became law. Their territorial law was most often a form of "dominium" -- the legalization or formalization of control over lands originally obtained by conquest and plunder. All real estate was in essence the royal estate. Might made right, as the rules of power became the laws of the land.

Land value capture policy, however, stems from a moral and ethical framework of “just law” based on equal rights to land and natural resources as a birthright. As such it leaves “might makes right” in the dust of neanderthals and neocons.

The use of legitimate force under just laws and institutions constituted to secure the equal human right to land and natural resources is no different than law enforcement currently established to protect citizens against crimes. The payment of the land rent fee legitimizes and enforces the right to private, exclusive land title. Non-payment of the land rent fee forfeits the right to enforcement of title protection and therefore private and exclusive land use rights.

It is evident that democracy as presently constituted is insufficient to provide peace and economic human rights. It is also necessary to assure economic justice, and the foundation of economic justice is the compensation of land rent paid to all the members of the community for the private use of the land which rightfully belongs to everyone.

This form of land tenure - private use rights secured on condition of payment of full land rent to the community with no taxation on labor and productive activities - furthers both individual initiatives for wealth production AND a fair distribution of wealth. There is no trade-off of one or the other. There is instead a full social synergy.

International covenants on economic human rights to food, shelter, health care, and education have been widely endorsed. Unfortunately there has been a great lack of clarity regarding precise mechanisms for implementing economic human rights for all. By preventing land, a gift of nature, from being hoarded or used as a basis for land speculation and profiteering, land value capture sets the stage for securing all other economic human rights.

The exercise of both common and individual rights in land is essential to a society based on justice. But the rights of individuals in natural resources are limited by the just rights of the community. Denying the existence of common rights in land creates a condition of society wherein the exercise of individual rights becomes impossible for the great mass of the people.

Land value capture is a practical approach for securing common rights to land rent while retaining individual rights to the products of labor. Land value capture is thus an important key to the implementation of economic human rights within demo-cratic societies whether they currently lean towards capitalism or socialism. Its potential for land conflict resolution is considerable in either case.

This Land Rights and Land Value Capture course is primarily focused on public capture of rent from surface land. For information on resource rent capture institutions that can help resolve conflicts over oil and other natural resources go to Alaska Permanent Fund, Bayelsa State Oil Fund Commission Bill, How to Tax Mineral Rents and Experiences with Oil Funds: Institutional and Financial Aspects.

Module 4, Assignment 2

Module 4, Assignment 2

Do three websearches, each one by keying in the name of a country of your choice plus the words: "Land Conflict". Read an article from each country. Give your ideas, in three short essays, of how land value capture could help resolve these conflicts.

4: The New Greatest Game on Earth

Module 4

The New Greatest Game on Earth

labor upon mother earth produces wages The object of the 4000 year old oriental game of GO is to gain control of territory by capturing enemy stones on a board. You win by forming walls with your stones that surround more territory than do your opponent's stone walls. One of the oldest games known, GO is based on the concept that if you possess land or territory, you have an area to base life on. You then have liberty and freedom. Without land or territory, you do not have anything to base life on and are considered without life, or dead.

Chess, probably invented in India in ancient times, was widespread in Europe in the 16th century when the rules were definitively stabilized. A more directly confrontational and combative game than GO, chess exhibits the same theme of territorial conquest and control as a life or death affair. Both are games of metaphor which mirror real life militarized territorial goals.

Consider for a moment that for thousands of years and millions of hours multi-trillions of brain cells have been focused on taking, expanding or holding territory in the face of the "enemy." We now live in an age when defining the "other" as "enemy" can lead to the annihilation of both. "Winning" by capturing the land and resources of the "other" now has a boomerang effect, as numerous intractable wars attest. Time, attention, energy and money devoted to securing or maintaining exclusive claim to particular territory now needs to be redirected to save the earth, all of humanity and other life forms from the current threat of overall ecosystem collapse. It’s time for a New Great Game – Saving the People and the Planet!

 

The Landlord's Game The board game commonly now known as Monopoly was invented by Elizabeth Maggie Phillips in about 1903. She called her game The Landlords Game. Features on the game board include railroads, timber, coal, oil and farmlands, the “go to jail” space, and street names. In one corner it pictures the earth and says “Labor Upon Mother Earth Produces Wages.”

 

In 1931, this game was transformed into Monopoly as we know it. Charles Darrow copyrighted some art work and began to sell Monopoly in 1933, dishonestly claiming invention rights to this game which by then had become a public domain folk game.

The game was played in two ways – first with the usual Monopoly game rules where it ends with one person owning everything. Once you got the gist of the real world economic game from playing Monopoly, then you played by a new set of rules based on everyone having Rights to the Earth – to the land rent.

Played in this way the game teaches people how to claim the earth as their birthright via land value capture. For information on the fascinating history of how Monopoly was monopolized go here

4.3.1-5: Land Value Capture and Conflict Resolution

Module 4, Section 3.1-5

Land Value Capture and Conflict Resolution

3.1 This section discusses the potential of land value capture as a tool for conflict resolution and introduces the concept of “geo-confederation” as developed by Dr. Fred Foldvary in his paper Peace through Confederal Democracy and Economic Justice.

3.2 Social justice, based on individual empowerment and equal rights, is the key to peace. Social justice includes political rights such as voting, legal rights to equal treatment by law, and economic rights, the right to one's own labor and to an equal benefit of natural opportunities.

3.4 Attempts to create unitary democratic governments often fail because of ethnic conflicts. Despite their variety of cultural and historical issues, these conflicts are most often rooted in social injustice with economic and political dimensions. In a unitary state, groups seek dominant positions of power and control. In ethno-territorial struggles the underlying economic conflict, usually related to land and natural resources, is too often left untouched.

3.5 The Israeli-Palestinian conflict is an archetype of ethnic conflict. Its roots go back thousands of years. It is a struggle that has resisted solution because an understanding of the land economic and ethical foundations has been lacking. These foundations will now be our focus in order to understand the remedies that are required for a lasting peace.

4.4.1-19: Israel and Palestine

Module 4, Section 4.1-19

Israel and Palestine

4.1 The heart of the conflict is the question of who has the proper claim to the land known throughout history as Canaan, Israel, Judea, Palestine, and the Holy Land. Going deeper, there is an economic and ethical question of what we mean by "the land."

4.2 The ownership of land has two basic components: 1) the right of possession, including the use of land, the products of labor on land, and right to transfer the land to others; 2) the right to the yield or return on the land as a result of nature and society created land value, which for the land alone, excluding buildings and improvements, is land rent. Rights of possession are separable from rights to the rent.

4.3 The natural-law philosopher John Locke in his Two Treatises of Government stated that "The things of nature are given in common," whereas each person has ownership of himself. He then stated that one could claim possession of land so long as there was land of equal value freely available to others.

4.4 If such land is no longer available, our common right to the natural heritage can be obtained by sharing the benefit of the land, which is economically manifested as its economic rent, the rent that should be paid to society by a tenant that puts the land to its best economic use.

4.5 With respect to the possession of Israel-Palestine, there is an ancient as well as historical basis for the possessory claims of both the Israeli Jews and the Palestinian Arabs. The reconciliation of these claims has thus far not been resolved by either the establishment of a unitary state nor by a two-state partition.

4.6 The third method of coexistence, as states within a confederation, could offer the benefits of unity without the danger of domination. As the American social philosopher and economist Henry George wrote, "warfare is the negation of association." Perhaps the reverse is true as well: association is the negation of warfare.

4.7 The challenge in formulating a proposal is, to put it in economic terms, to maximize the opportunity to fulfill individual and ethnic interests subject to the constraint of justice. A confederate association of separate but equal states would not interfere in the internal activities of the states. Each of the states, Israel and Palestine, would govern its domestic affairs as it saw fit.

4.8 The Confederation would have three main functions:

  1. Courts and enforceable laws.
  2. Defense and foreign affairs.
  3. Annual land value assessments and collection of rent which would be equitably distributed for the benefit of everyone in the Confederation.

 

4.9 Specific details of the proposed Confederation legislature and governance structure plus the first two points above have been described elsewhere (see Peace Through Confederal Democracy and Economic Justice by Fred Foldvary). We will herein focus on the third function as this is the land value capture proposal applied to areas of ethno-territorial conflict.

4.10 This third function of the Confederation would be to assess all the land annually and collect the land rent from the owners, including governmental titleholders. Mechanically, it would be the same as a property tax, except that it would exempt all personal property, buildings, and improvements to land, and collect (value capture) what the land would rent for in a market rental auction.

4.11 As previously stated, the right of possession of land in terms of occupation and use is separable from the right to receive the land rent. Those who wish to possess and directly use land would have the responsibility to pay rent into the common resource rent fund. All residents of the Confederation thus would have an “equal right to rent.”

4.12 Any purely geographical redivision of land sites would be practically impossible and leave each person with less than their full share. But the collection and distribution of land rent in a practical, efficient and equitable way is the best way to share the nature and society created benefits of land. In this way the claims of Jews and Palestinian Arabs (and Bedouins) to the entire territory can be met by an equitable distribution of land rent to all residents of the Confederation. Each resident would be entitled to an equal share of land rent, either as provided by government provided services or as direct citizen dividends or a combination of the two to be decided upon by discussion and vote of all residents of the Confederation.

4.13 The Confederation would retain a portion of remaining land rent for its administration, for the retirement of any debts or for other agreed-upon purposes.

4.14 The land would be viewed as jointly owned in common by both Israelis and Palestinian Arabs, and members of both groups would share the rent that would be paid by those desiring exclusive private use of particular land parcels. Those who could best utilize land would be able to pay the most land rent back to all residents of the Confederation. The dynamics of this social synergy creates a “win-win” land tenure system.

4.15 The Confederation would also establish rent collection authorities for water use and for all other natural resources, further building a fair economy based on equal rights to the gifts of nature.

4.16 The concept of commonly-shared rent in conjunction with a confederation will be referred to here as a "geo-confederacy," encompassing commonly-owned land ("geo") in conjunction with confederated states and citizenship.

4.17 For the Israelis to accept such a settlement, they need to regard it not as yielding territory, not as a withdrawal, but as an agreement to share sovereignty; not as the establishment of a hostile neighboring state, but as the preservation of Jewish autonomy within a common government over which they will have significant control.

4.18 The Palestinians too will resist a settlement unless they see it as a just plan. Obtaining their share of the rent from all the land in Israel and Palestine as compensation for not directly possessing it would go a long way towards establishing both security and economic justice.

4.19 The ultimate source of resentment and hatred is the feeling that another is enjoying a privilege, an unfair advantage, or a position of dominance. When all are politically equal, such feelings would subside and then and only then would cooperation and friendship be possible. A geo-confederation can elegantly resolve ethno-territorial conflicts.

4.5.1-2: Jammu and Kashmir

Module 4, Section 5.1-2

Jammu and Kashmir

5.1 Kashmir is the disputed area in northern India and Pakistan, which is currently partitioned between them. There, too, the national conflict has a religious dimension, the Muslims claiming all of Kashmir, which is 80 percent Islamic. In 1947, the princely states of India were to choose whether to become part of India or Pakistan. The majority of the people wished to belong to Pakistan, but the maharajah, under pressure, chose India during an interim period, subject to a plebiscite that did not take place. Since then there have been several wars and continuing conflict over the status of the territory.

5.2 Here, India and Pakistan could both have joint sovereignty over the territory, as Spain and France do in Andorra, with a confederation that would provide one government for the Muslims and one for the Hindus, each person choosing his affiliation. The confederate government would collect and distribute the land rent, provide courts, and have administrative functions for the whole territory. Joint territorial sovereignty with a confederate government over the whole area would avoid the perception for each side that it had given up territory, and the payment of rent to the confederation would be a compensation for the loss of full possession.

4.6.1-3: Northern Ireland

Module 4, Section 6.1-3

Northern Ireland

6.1 In 1920, Ireland was granted home rule, but the six counties of Ulster, with a Protestant, pro-British majority, remained in the United Kingdom. There has been continuing conflict in Northern Ireland since the 1950s.

6.2 Similar to the case of Kashmir, rather than one or the other side having exclusive rule, Ireland and the United Kingdom could have joint sovereignty over Northern Ireland, with domestic self-government by a confederation of the Irish and the British Unionists. The payment of rent by all holders of land would implement a land reform that would compensate the whole population for the use of the land by the titleholders.

6.3 This would be an extension of the "Good Friday" peace settlement of 1998, which was approved by the voters and honored by a Nobel Peace Prize for the party leaders. But instead of one assembly, there would be three: one for the Irish, one for the British, and one for the confederation. Having their own government for domestic policy should satisfy the desire of both sides to avoid domination by the British or Irish, and joint sovereignty would let the Irish in Northern Ireland be citizens of Ireland while the Protestants could be citizens of the U.K.

4.7.1-5: Rwanda

Module 4, Section 7.1-5

Rwanda

7.1 A small republic in eastern Central Africa, Rwanda was the site of massive slaughtering in the 1990s. Its three ethnic groups are the Hutus, with 90 percent, the Tutsi, with 9 percent, and the Twa pygmies with 1 percent of the population. The Twa were the original inhabitants, followed by the Hutu and then the Tutsi conquerors. The conflict between the Hutus and Tutsis exists despite their sharing a common language and culture.

7.2 Rwanda, along with neighboring Burundi, became part of German East Africa, mandated to Belgium as Ruanda-Urundi after World War I, both colonies bordering on the Belgian Congo. The Belgians perpetuated the rule by the Tutsis, and introduced identity cards showing ethnic affiliation. The Hutus rebelled in 1959, and Rwanda became an independent republic in 1962 dominated this time by the Hutus.

7.3 There followed political instability and conflict between the Hutu and the Tutsi. In 1993, a Tutsi rebellion was stopped with the help of French troops. In a meeting in Arusha, Tanzania, the two sides agreed to share power, and the United Nations set up UNAMIR, the UN Assistance Mission to Rwanda. It received little funding or support, and UN headquarters failed to act on early warnings of the impending catastrophe. Attempts at democracy and peace ended in 1994 after the presidents of Rwanda and Burundi were killed when the plane carrying them was shot down.

7.4 Massive violence against the Tutsis and moderate Hutus broke out and turned into genocide as a million Rwandans, mostly Tutsis, were killed, with thousands more dying of disease. As William Shawcross points out, while ancient ethnic hatreds are blamed, the violence "also had political drivers." The leaders exploited the conflict, transforming feelings into crises and violence. Violence is chosen; it does not just happen. Institutional structures are needed that would better enable people to address their concerns and legitimate needs for conflict resolution.

7.5 A geo-confederation where the Hutus and the Tutsis each have their own government would reduce the incentive to dominate the other side. The payment of rent would reduce the incentive to grab land; those who have it must pay, and those who don't have it receive more rent. The shared land rent would also provide needed funds for developing the country. As the country develops, land values increase yielding land rent which is then captured by constituted resource rent authorities to be utilized for the benefit of everyone.

4.8.1-2: Chiapas, Mexico

Module 4, Section 8.1-2

Chiapas, Mexico

8.1 The State of Chiapas in southern Mexico is home to the Mayan Indian nation, a civilization that flourished in southern Mexico, Guatemala, Belize, and Honduras prior to the Spanish conquest. The troubles in Chiapas are a legacy of this conquest as the Mayans remain in effect a conquered people. As with the other ethnic conflicts, land and self-governance are the key issues. Mayan autonomy within Chiapas and Mexico would protect their culture while finally liberating the indigenous people from the rule of the heirs of the conquerors.

8.2 The payment of rent by the landholders would bring the genuine land reform that has otherwise escaped the Mexican attempts at reform by redistribution of land holdings. So long as the big landowners retain the rent, there is political pressure to preserve large estates and serf-like tenancy. When the privilege of retaining rent is taken out of the latifundia and rent is captured for the common good, then the people would obtain land on an equal footing. The best anti-poverty device would then be to abolish the taxation of labor and production, letting the rent revenue serve for the public finances.

4.9.1-5: Appalachian Region, United States

Module 4, Section 9.1-5

Appalachian Region, United States

9.1 The Appalachian region in the eastern part of the United States is composed of portions of ten states. The area is sometimes regarded as “America’s internal third world” because it exhibits socio-economic patterns similar to that of a number of developing countries. This mountainous region is very rich in coal and other natural resources, yet many of the people have lived in chronic poverty for generations. They are also experiencing significant land degradation and water and other environmental pollution.

9.2 NGOs formed a coalition and began their research on these problems with the question: “Why if our land is so rich are our people so poor?” What they discovered was a pattern of highly concentrated ownership of the land and natural resources of the region. Most of those holding title to the most valuable land were corporations with headquarters elsewhere. Interestingly, many of these land title-holding corporations were not the same companies that actually ran the businesses of organizing labour and capital to mine the lands. As a condition of access to the resources, these companies were paying land rent to the absentee corporate title-holders.

9.3 The land rent, along with the coal, was leaving Appalachia. Meanwhile, the taxes throughout the region were falling almost entirely on wages and production and little or no land rent was being collected. The NGO coalition had found the answer to their question and along with it the solution. They decided to work for tax reform that would collect resource rent for the people.

9.4 This populist struggle for economic justice in Appalachia is underway. Thus far they are taking a state by state approach as most states need legislation that would enable this new form of “rent capture” taxation policy. The movement has been slow because most of the state legislatures are also controlled by those with vested interest in land profits. Because the economic power is in the hands of so few, so is the political power.

9.5 A Confederation approach might be to unify these state NGO and grassroots movements into a force to establish a new Appalachian regional authority to assess, collect and equitably distribute resource rent from coal and other extractive resources. The Confederation would also have the power to enforce environmental regulations and/or charge pollution taxes. The struggle for surface land rent could take place on the local level where, by popular vote, a shift to land value capture could be democratically and directly instituted.

4.10.1-6: Decentralization and Geo-Confederation

Module 4, Section 10.1-6

Decentralization and Geo-Confederation

10.1 Geo-Confederation can work harmoniously with decentralized, local governance. Sound governance, especially for a country having little or no parliamentary experience, might best be rooted in cities, towns and villages and their justly constituted authorities. Power would then be delegated up from below rather than being centrally imposed from above. In conjunction, the land rent must be shared to prevent land value from becoming a glittering prize, loot ripe for conquest.

10.2 Where there is treasure such as oil or diamonds, the people will not benefit unless there are both sound governing structures and a constitutionaally mandated sharing of the natural wealth.

10.3 Mass elections often just invite trouble. More locally embedded governance would prevent the fraud and violence associated with countrywide elections in countries lacking historical voting experience and a deeply ingrained democratic culture. Voting would instead take place on the local level, and local councils would in turn elect higher-level governments.

10.4 As noted by Jack Snyder in his book From Voting to Violence: Democratization and Nationalist Conflict:
"The centerpiece of foreign policy in the 1990s was the claim that promoting the spread of democracy would also promote peace. We have seen that these attempts fail unless there are also federal structures to provide self-governance for ethnic parties and to prevent an excessive centralization of power. Naively pressuring ethnically divided authoritarian states to hold instant elections can lead to disastrous results."

10.5 It is also evident that democracy as presently constituted is insufficient to provide peace. It is also necessary to assure economic justice, and the foundation of economic justice is the compensation of land rent paid to all the members of the community for the private use of the land which rightfully belongs to everyone.

10.6 This form of land tenure – private use rights secured on condition of payment of full land rent to the community – furthers both individual initiatives for wealth production AND a fair distribution of wealth. There is no trade-off of one or the other. There is instead a full social synergy.

4.11: Policy Conclusions

Module 4, Section 11

Policy Conclusions

11.1 This is our summary statement for Module Four. You have learned that a similar pattern exists for conflicts around the planet: the economic prize of land and resource wealth and power-seeking to get that prize. There is a common antidote: (1) a governance structure that provides both self-determination and unity; and (2) a sharing of the benefits of the natural resources by having a constituted authority that captures the land and resource rent and equitably distributes these funds to everyone.

Module 4, Assignment 3

Module 4, Assignment 3

Would you be willing to explore the possibility of working with Earth Rights Institute to develop peace and conflict resolution plans based on what you have learned in Module Four? If yes, what country or region of the world would you want to be your focus?

Module Five

Module Five

Land Value Capture Implementation

5: Part 1

Module Five, Part One

To those who, seeing the vice and misery that spring from the unequal distribution of wealth and privilege,

 feel the possibility of a higher social state and would strive for its attainment.

- Henry George, author of Progress and Poverty

This last section of the Land Rights and Land Value Capture course empowers you with the information you need in order to implement this enlightened public finance policy. The impetus for implementation can begin with just a small core of mobilized citizens in alliance with politicians who are true representatives of the people. With the assistance of  powerful tools of information technology, coordinated educational campaigns can build a critical mass of support for implementation.

5.1.1 Mobilizing Citizen Campaigns, Asking the Right Questions

 

The constitutions of several countries and commonwealth governments already claim the land and natural resources on behalf of the people as a whole. Various methods of land value capture for public benefit could be effected by insisting on securing these common ownership rights, already in their existing constitutions. Thus citizens can mobilize to enforce their constitutional rights via land value capture policy. In some places, substantial increases in the amount of land value captured can be gained simply by complying with existing land assessment laws.

Questions to ask when building a movement for land value capture:

  • Is there presently any local taxation at all?
  • If so, is it on land only or also on improvements?
  • What percentage of revenue at the state/local levels is provided by the national level?
  • What percentage of the tax base comes from each of these categories: wages, capital, sales, land, natural resources.
  • Are there stable local governing institutions that could administer local revenue if there was any to administer?

Land Titles

  • Are they registered centrally, at the local, state or national level?
  • Is this information easily accessible and if so, how?
  • Is there a black market in land titles?
  • Can the courts be trusted to adjudicate disputes fairly?
  • Are there competing jurisdictions for public funds?
  • Is there a "real estate industry"? A mortgage market?
  • In areas where these markets exist, how do land registries and jurisdictions compare to areas where they don't?

Types of Land titles:

  • In your area are there traditional, tribal land-tenure systems?
  • Are there points of intersection between competing land tenure systems? Where are they?
  • Is land tenure different in rural and urban areas? How so?

Land Titles in Action:

The margin between urban/rural and formal/informal areas is important. That is where market-based land value is being created where none existed before.

  • Where are land sales taking place?
  • Where, and how, is the transition from informal/traditional to asset/collateral taking place?
  • Who is educating the sellers about emerging markets?
  • What information are they collecting?

Answers to these questions will be useful in order to determine how to proceed to establish a land value capture system.

While the answers are being compiled, citizen activists can move forward with general information campaigns via a website established for this purpose, media press releases and public presentations and discussions. Brochures and other material can be downloaded from this website and printed for distribution. Use can be made of the Land Value Capture Endorsement Form to build initial and ongoing public support.

5.1.2 Using Information Technology

Cities and towns are putting property values, tax information and answers to some of the above questions into computer databases and onto the web where this information is transparently and easily accessible. If your city has not yet done so, citizens should insist that it be done. Geographic information systems (GIS) are computer maps containing detailed data. The use of GIS for land value capture is greatly enhancing the ease of implementation.

Here is a map of New York state showing the progress being made by the counties in their conversion to digital mapping of information important for land value capture as of 2005:

 

The website Google Earth, with free sotware that can be downloaded, can be an invaluable aid to land value capture implementation projects. Google Earth contains satellite imagery, maps, terrain, and the ability to import spreadsheets. To get an idea of the capabilities of Google Earth, go to:  http://earth.google.com/

An information and database system for land value capture should include who owns what land, the current assessed land valuation, land use, zoning, current and alternative proposed uses, and what type and amount of property and other taxes are already being collected. Often government departments involved in land management and administration compile such data. If this information is not yet accessible, it needs to be compiled.

5.1.3 Components of a Land Value Capture System

Every improvement in the circumstances of society tends either directly or indirectly to raise the real rent of land,... - Adam Smith,Wealth of Nations, Book I, p. 275

The components of a good land value capture system are:

  1. Registration of land title so that ownership and/or use rights to land are transparently clear. It would be unjust to implement land value capture without land registration because the rights of the government over the governed would be arbitrary. Land privatization is not necessary to implement land value capture. Constituting tribal, clan or extended family land as types of leaseholds can suffice. What is necessary is to determine who has claims to particular areas of land. The process of land registration can also reveal where land claims are disputed and where a land rights arbitration process is needed to prevent outbreak of violent conflicts.
  2. Spatial definition of legal land parcel units - knowing exactly what land is claimed by whom.
  3. Clearly defined legal restraints on land use - the rules of land utilization such as zoning laws defining "highest and best use."
  4. Trained and certified assessors to conduct valuation of land authorized by an agency independent of the tax setting and judicial review authorities.
  5. Geographic information systems (GIS) for use by all agencies involved with land value capture administration with a public access (website) portal for all citizens. Information technology is greatly increasing the efficiency and simplicity of administering a land value capture system of public finance.
  6. A designated public authority responsible for determining the precise method of land value capture to be utilized, collection of funds, monitoring results and impact, and public education concerning the specifics of land value capture policy. Decisions need to be made regarding issuance and frequency of billing statements.
  7. A land value assessment appeals process and compliance system for ensuring that the land value fee is paid and up to date and/or debts are registered against title. Compliance can be encouraged through a small reduction if the fee is paid by a certain date, a penalty for late payment. Compliance can further be encouraged via elimination of public services including protective services to the site or land confiscation. Non-compliance would be noted on the web so if there is a failure to pay that information would be public. It could also be publicized in the local newspaper under the statuatory listings section or posted in the main city square. An appeals process should be clear and easily available.
  8. A recommended compliment to a land value capture system is a "Participatory Peoples Budget" process charged with educating the citizenry about this method of public finance and with the power to make informed and enforceable decisions regarding allocation of a portion (recommended at least two thirds) of public funds received via land value capture. For example, citizens might decide that rather than building an expensive sports stadium it would be best that basic services such as clean water, sanitation, and needs for food and shelter were first secured for all residents. This chart shows some of the information citizens would need for a Participatory Peoples Budget process:

     

     

    5.1.4 Gradual Shift and Revenue Neutral Initially

    The increase in the value of land, arising as it does from the efforts of an entire community, should belong to the community and not the individual who might hold title. - John Stuart Mill, English philosopher, economist, and social reformer (1806-1873)

    In areas not yet having a well-established system of taxation, a decentralized approach to land value capture recommends starting at the local level with land registration and land value assessment. In countries such as Australia when local governments levy land value only revenue fees this is called a "site rating" system. A 2% land value capture fee would be put in place the first year followed by a 2% increase each year thereafter until arriving at 10% land value capture by year five. There should be annual reassessments during this period. A percentage of land rent can be passed up to higher levels of governance for services better accomplished by more centralized government.

    In cities or countries with well-established existent systems of taxation, land value capture is best administered gradually and at least initially as a "revenue neutral" - revenue remaining constant - tax shift, not an increase in taxes. The benefits of this approach is that economic incentives will immediately start moving in the right direction and then proceed at a strong steady pace.

    In jurisdictions with an existing property tax falling on both building and land value, to implement land value capture it is necessary to separate these two values. Many places already legally require land and improvements to be separately assessed. The Assessment Registry has records of each property's land and building values, which many municipalities currently tax at the same rate.

    With the values of buildings and land recorded separately, the next step is to adjust the tax rates. Because we want to begin shifting the tax off of buildings and onto land, the tax rate on buildings must be decreased and the tax rate on land must be increased. It is important to gradually phase in the change so that taxpayers who will see an increase can make adjustments as to how they manage their property.

    So a common rule-of-thumb is to decrease the building tax rate by 20% and increase the tax rate on land enough to ensure that the shift remains revenue neutral at least in the beginning of the transition. This shift – reducing the rate on buildings while increasing the rate on land value – would occur annually until ideally there are no taxes remaining on buildings. Thereafter the rate applied to land value can be increased until the desired rate is reached, which ideally would be capture of full land rent.

     

    A similar step-by-step phase-in process should then proceed (or have already begun) in the reduction and elimination of other forms of taxes. Reductions on income taxes would begin with those falling on the lowest income workers. Sales tax reductions would begin with sales from basic, necessary goods and services. Throughout the stages of implementation the land value of parcels should be frequently reassessed, ideally at least on an annual basis.

    Since most taxation levied by central government falls on wage income, value-added, or sales, land value capture should be coordinated with movements to reduce these taxes and further decentralize and enhance government capacity at the local level. State/regional and central government public funding can be procured via capturing rent of other natural resources exclusive of surface lands and/or a percentage of surface land rent can be passed up to central government for its services which can include the distribution of funds to other areas of the country to assure overall country-wide balanced development.

    Land rent is roughly estimated to be 10% of current land value. Thus if you calculate 2% land value capture for year one, 4% for year two, 6% for year three, 8% for year four, and 10% for year five, you will arrive at substantial land rent capture with greatly reduced or ideally, no taxes on wages and production. With each increase in the land value capture percentage other taxes should be eliminated by the same amount. Thereafter, with close monitoring of assessed land values, the land value capture fee can be increased to the point of full land value capture.

    An online calculator is available to give those interested in implementing land value capture the percentage of land value necessary in order to collect a specific amount of public revenue. This calculator is most useful if land value records are kept by city administrators who have accurately assessed and recorded the current value of all land parcels. As data improves, results improve. The calculator along with further descriptive information is at: http://gltn.lvtproject.org/

    A best practices model for a land valuation and record system developed by the Center for the Study of Economics can be found online at: http://www.marylandlandtax.org/calculator and http://www.lvtproject.org

    5.1.5 Monitoring and Evaluation

    Regarding monitoring and evaluation, a number of studies which evaluated the impact of land value capture have relied on analysis of the number of building permits issued in a city both before and after the shift and at intervals thereafter. This has served as a general indicator of overall improvements underway. Decrease in crime and arson and increase in employment have also been used as indicators of positive results. It is now recommended that analysis of gini coefficients - a measure of wealth distribution – should also be included in the monitoring of the impact of the shift to land value capture. In cities with stable populations (for example, not having a rapid influx of refugees) another useful indicator would be to chart the number of homeless people at regular intervals.

    Various quality of life indicators are now recommended in lieu of GDP for monitoring and measuring progress of social and economic well-being. For links to many of these go to Beyond GDP.

    After the full shift to land value capture, public finance administration is simplified with no fiscal expense for assessing houses and other buildings or to track wage income or sales taxes. Tax administration’s primary job would be to assess, monitor, and post land values for transparent, free and easy public access (on the web) and to collect the land rent at regular intervals.

    Regarding implementation of land value capture on leasehold land, here is a model land lease agreement that determines lease fees based on land values: Community Land Trust Lease Agreement Based on Land Rent

    Hong Kong and Singapore were established and grew under a land lease system. For more information go to: SWOT Hong Kong and SWOT Singapore

    Information on estimating land values to be found in the next section can also be useful in implementing land value capture on leasehold land.

    Most well-maintained properties would pay less under land value capture than under systems which tax both land and building values. Under land value capture only, properties like the ones above would pay more and thus the owners’ incentives would be to make improvements or to sell to someone willing and able to do so.

    Owners of underutilized and vacant lands like this pictured above in urban areas with easily accessible nearby infrastructure would be encouraged to put these lands to good use, perhaps for housing or light industry, under a land value capture system. Alternatively, this land could be developed as a public park, thus increasing land value in the surround area that then can be captured for additional public benefits.

Module 5, Assignment 1

 

  1. Explore Google Earth at http://earth.google.com/. Enter your own street address and watch what happens. Write your comments below.
  2. Do a websearch to find out what information your locality has on the internet that could answer some of the questions asked in the beginning of this section. If no information is available online, make a phone call or better yet visit your local public authorities to ask how you can obtain this information. Write a short report below.

 

5: Part 2

5.2.1 Land Value Assessment

 

It is important that rent of land be retained as a source of government revenue. Some persons who could make excellent use of land would be unable to raise money for the purchase price. Collecting rent annually provides access to land for persons with limited access to credit. - Franco Modigliani, Nobel Memorial Prize in Economics

 

Both experience and common sense confirm that the less city properties are assessed, the less government revenue will be available from true land values. Undervalued land assessment will weaken the ability to collect higher amounts from vacant or poorly utilized properties. This in turn will reduce the ability to shift taxation off of well-utilized properties (and taxes on labor and enterprise) and limit the push for land to be utilized for housing and other productive uses. In addition to increasing blight, when valuable land in developed areas such as cities remains idle due to speculation and negligence it also forces the outward expansion onto previously undeveloped land, putting more farms and open space at risk for sprawl.

Without up-to-date and accurate land value assessments, the amount of value that can be captured from land will not correctly present the amount of public revenue that can be collected via land value capture. Land values fluctuate, going up or down based on the real activity of the overall economy and the ever-changing conditions of a particular city or community so reassessments should be made regularly, ideally on an annual basis.

The task of property assessment is much simpler, easier, and cheaper when public revenue is raised from land value only. The value of land can be estimated with an acceptable accuracy, at a cost which is very small compared to the revenue to be obtained. Information technology and new software programs developed for purposes of land value assessment are making an enormous contribution to enhancing the capacity of public authorities to implement this fair and efficient approach to public finance.

 

The value of land can be estimated with an acceptable accuracy, at a cost which is very small compared to the revenue to be obtained. A proper system of assessment and taxation of land can provide for the proper economic use of the land.- Sanjeeb Mishra, a member of the Indian Administrative Service, District Magistrate and Collector, Ganjam (Orissa, India).

 

An appraisal is essentially an expert opinion of the value of a land site; the assessor must present one that is supportable and comprehensible. The assessor must develop and use specific terminology suitable and pertinent to land appraisal.

The land value assessment or appraisal process is an organized procedural analysis of data. The assessment process is essentially the valuation of rights to use or possess surface land sites. Other kinds of resource rights include subsurface mineral rights, riparian (water) rights, grazing rights, timber rights, fishing rights, hunting rights, access rights and air rights.

The assessor bases his estimate of land value upon basic economic principles which serve as the foundation of the valuation process. There are many economic principles which people and assessors must understand and use when implementing judgment to estimate land values. It is necessary to discuss a few of the more important principles.

Principles of Valuation

 

I think in principle it's a good idea to tax unimproved land, and particularly capital gains (windfalls) on it. Theory says we should try to tax items with zero or low elasticity, and those include sites. - James Tobin,, Nobel Memorial Prize in Economics, 1981

 

Here are the classic principles of land valuation:

  • The principle of substitution maintains that the value of a property tends to be set by the price that a person would have to pay to acquire an equally desirable substitute property, assuming that no expensive delay is encountered in making the substitution. A person would pay no more for a site than would have to be paid for an equally desirable site.
  • The principle of supply and demand holds that the value of a site will increase if the demand increases and the supply remains the same. The value of the site would decrease if the demand decreased. Land is unique, since the supply is fixed; its value varies directly with demand.
  • The principle of anticipation contends that land value can go up or down in anticipation of a future event occurring, or a future benefit or detriment.
  • The principle of conformity contends that land will achieve its maximum value when it is used in a way that conforms to the existing economic and social standards within a neighborhood.

Land value can be thought of as the relationship between a desired location and a potential user. The ingredients that constitute land value are utility, scarcity and desirability. These factors must all be present for land to have value.

Land that lacks utility and scarcity also lacks value, since utility arouses desire for use and has the power to give satisfaction. The air we breathe has utility and is generally considered important, since it sustains and nourishes life. However, in the economic sense, air is not valuable because it hasn’t been appropriated and there is enough for everyone. Thus there is no scarcity – at least at the moment. This may not be true in the future, however, as knowledge of air pollution and its effect on human health make people aware that clean and breathable air may become scarce and subsequently valuable.

By themselves, utility and scarcity confer no value on land. User desire backed up by the ability to pay value must also exist in order to constitute effective demand. The potential user must be able to participate in the market to satisfy their desire.

While land is the gift of nature, certain legal, political and social constraints have been imposed in most societies throughout the years. Every nation imposes certain public limitations on land ownership and use for the common good of all citizens. Four forms of governmental control include:

  1. Taxation -- Power to tax the land to provide public revenue and to return to the community the costs incurred to pay for the various public benefits, services and environmental protection provided by the government;
  2. Eminent Domain -- Right to use, hold or take land for common public uses and benefits;
  3. Police Power -- Right to regulate land use for the welfare of the public, in the areas of safety, health, morals, general welfare, zoning, building codes, traffic regulations and sanitary regulations;
  4. Escheat -- Right to have land revert to the public's agent, the government, when taxes are not paid or when there are no legal heirs.

 

Factors Contributing to Land Value

Many factors contribute to land value, including:

The physical attributes of land:

  • Size of site
  • Shape of site
  • Ease of access to site
  • Topography of site quality of location, fertility and climate
  • Convenience to shopping, schools and parks
  • Availability of water, sewers, utilities and public transportation
  • Absence of bad smells, smoke and noise and
  • Patterns of land use, frontage, depth, topography, streets and lot sizes.

Legal or governmental forces:

  • Type and amount of taxation
  • Zoning and building law
  • Planning and restrictions.

Social and demographic factors:

  • Population growth or decline
  • Changes in family sizes
  • Typical ages
  • Attitudes toward law and order
  • Prestige and education levels.

Economic forces:

  • Value and income levels
  • Sustainability of small business
  • Growth and new construction
  • Vacancy and
  • Availability of land.

The influence of these factors expressed independently and in relationship to one another, helps the people and the assessor measure land value. Land valuation involves determining the highest and best use of the site given a combination of these elements, estimating the value by current appraisal theory, and reconciling to a final estimate of value.

An assessment (or an appraisal) is essentially an opinion of value made by an experienced knowledgeable person. Specialists are known as assessors who base their estimate of land value upon basic economic principles which serve as the foundation of the valuation process. Almost everyone can learn how to do this and learn to do it better.

Procedures for Analysis of Data

 

Our ideal society finds it essential to put a rent on land as a way of maximizing the total consumption available to the society. ...Pure land rent is in the nature of a 'surplus' which can be taxed heavily without distorting production incentives or efficiency. A land value tax can be called 'the useful tax on measured land surplus'. - Paul Samuelson, Nobel Memorial Prize in Economics

 

The assessment or appraisal process is an organized procedural analysis of data. This procedure involves seven specific phases, each of which contains numerous procedures.

1. Defining the Assignment

The goal is to estimate the supply/demand value of all land sites within a given district. This will include manufacturing enterprises, apartments, commercial enterprises, single family home sites, government land, farms and all other land and natural resources of various descriptions.

The assessor should be able to support his estimate of land value, both in discussion and in writing. The assessor must define and use specific terminology suitable and pertinent to land appraisal. Economic Land Rent is defined as the value paid or imputed for the exclusive right to use a land site’s location or natural resources over and above that paid for the most marginal (or unproductive) land in the region.

2. Determining the Data Required and Its Source

A land market assessment system is based upon data related to land attributes. These data generally include maps; aerial photographs; descriptions of physical characteristics like size, shape, view and topography; permitted uses; economic usefulness; present uses; available utilities; proximity to town centers or employment; and site improvements like streets, curbs, gutters, sidewalks and street lights. Governments have much of this data available in their different agencies.

How are values currently being determined and paid by land owners or occupiers? Are records being maintained for the values or fees that are currently being paid by land owners or occupiers? If land values have been estimated in the past, attempts should be made to build upon the existing systems while making constant improvements to data collection.

3. Collecting and Recording the Data

Most governments do not have all of this information available in a single data base capable of analysis. Assessors must determine:

  1. what land data and valuation systems currently exist,
  2. how effectively they operate,
  3. how to build upon and improve these systems and
  4. how to implementprocedures for collecting additional data to improve the estimates of land values.

     

    If no effective land revenue systems are in place they can be created in a manner similar to the following. Assessors should ascertain what land data presently exists and how it could be assembled for use in a land valuation system. They should collect and maintain the data needed from any existing records even though it is not currently stored in a single source. They should determine what additional data would be valuable and from what sources it can be obtained. They should develop ongoing procedures for collecting any additional data required to determine land values and the data should be collected for the differences in characteristics for each site. Land and property sales is a key factor.

     

    The assessor may train a small team to find and record the additional desired data. The data should be displayed in a useful manner such as on a land value map or a computer printout. In an area with no systems or data in place, simple relationships could be drawn for permitted use (zone), distance to amenities (location), physical characteristics (size, topography, view, and so on) and other significant factors. Data could be collected and analyzed on a neighborhood and type of potential use basis. This could be printed out in large format and displayed in the town square.

    In economics, von Thünen rent is an economic rent created by spatial variation or location of a resource. It is 'that which can be earned above that which can be earned at the margin of production'.

    Conversations with residents and businessmen could help to define the parameters which people in the local community use to determine favorable land location. An interview might reveal that the distance to transportation, such as a river, roadway or public transportation, weighs greatly in people's minds. Or, other factors may predominate, such as homogeneity of a neighborhood or distance to shopping and schools. Planners, government officials, real estate agents, appraisers and others involved in real estate may also provide useful data.

    Even if no land sales or market evidence exists, the specific factors which influence land value are well understood by most people in any area of the world. The assessor's job is one of skillfully determining the relative priorities identified by local people.

    Profit at the central market depends not only on the market value of the product  but also on the transportation costs to get the product to the market.

    A sample of typical and varied land sites within a city could be selected to demonstrate a land valuation system. Based upon a study, land market values could be assigned by a competent assessor. The assessor could train a few people to collect and analyze existing data, then analyze the sample survey data and set standards for the base market values in the area. The difference in market value of the attributes that enhance or detract from a typical site could be added or subtracted to the base land value for the other sites in the study. These features should be recorded on the land value map, which would show the primary sites with values declining as desirability decreases or increasing as desirability increases.

    Several examples of land assessment systems will be considered, from a simple example with no significant land data, to a more complex example with plentiful land data. The methods employed will depend upon the land market data that currently exists and how that data can be assembled for use in a land assessment system.

    Above is a simple graph showing changes in real estate prices for five major Australian states during a twenty year period.

    Verifying the Data

    Since the appraisal process is an opinion of land value that is not based upon the personal experience of the assessor, the data collected should be verified with two different sources. Sales data should be verified with a person directly involved in the transaction. For example, one party could be the selling agent responsible for the sale. Another party could be the site owner who agreed to the sale amount. Additional sources might be government land agents or officials who have firsthand knowledge of the sale. Inaccuracies can also be brought to light by concerned citizens if the data is made available to the public.

    5. Analyzing and Interpreting the Data

    Further on in this section there is detailed information on several methods of analyzing and interpreting land data that can be used to secure the goal of estimating the value of all land sites.

    6. Estimating the True Land Value

    Once the analysis has been concluded, it will be possible for the assessor to make a rational estimate of the land value of every land site. This estimate will serve as the basis for the value that will be paid by a site owner or user for the exclusive use of a location (site). The assessor would assign preliminary land value estimates based upon the comparative estimated usefulness and desirability of the sites. Initially, they could accomplish this task in a general manner, with the understanding that refinements would be made to reflect new information and public opinion.

    Public Examination and Analysis of the Land Values

    The preliminary land value assessment, estimated for each site, could then be displayed on a land value map. Public examination and analysis of the land values for land sites would help to clarify any errors in making assessments. People who occupy land acquire skills in noticing slight differences in land characteristics. They can explain to the assessor why and how differences should be reflected in the conclusions about land values.

    Once an adequate sample survey has been completed and had favorable public review, the result can be used throughout the total area. These sample data results could be used to estimate the comparative value of each land site. Thereafter land value should be reassessed on an annual basis adjusting for changes in value.

    Methods Used to Analyze and Assess Land Value

     

    The landowner who withdraws land from productive use to a purely private use should be required to pay higher, not lower, taxes. - James Buchanan Jr., Nobel Memorial Prize in Economics, 1986

     

    Valuation of the land involves first determining the highest and best use of the site, estimating the value by current appraisal theory, and reconciling to a final estimate of value.

    The four criteria for determining highest and best use are; what is:

    1. physically possible;
    2. legally permissible;
    3. financially feasible; and
    4. maximally productive.

     

    Current appraisal theory uses three standard approaches in estimating land value:

    1. the cost approach;
    2. the sales comparison approach; and
    3. the income capitalization approach.

     

    The most reliable way to estimate land value is by sales comparison. This appraisal technique is dependent upon utilizing truly comparable market or sales data which have occurred near enough in time to reflect market conditions relative to the time period of the appraisal. When few sales are available or when the value indications produced through sales comparison require substantiation, other procedures may be used to value land. There are seven procedures that can be used to obtain land value indications:

     

  5. Sales comparison - Sales of similar, vacant parcels are analyzed, compared, and adjusted to provide a value indication for the land being appraised.

     

     

  6. Proportional Relationship - Relating a site to a known standard site. The difference can be expressed as a percentage. This procedure can be used when there is little value evidence in existence.

     

     

  7. Land Residual Technique - It is assumed that the land is improved to its highest and best use. All operating expenses and the return attributable to other agents of production are deducted, and the net income imputed to the land is capitalized to derive an estimate of land value.

     

     

  8. Allocation - Sales of improved properties are analyzed, and the prices paid are allocated between the land and the improvement portions.

     

     

  9. Extraction - Land value is estimated by subtracting the estimated value of the depreciated improvements from the known sale price of the property.

     

     

  10. Ground Rent Capitalization - This procedure is used when land rental and capitalization rates are readily available, as in well-developed areas. Net ground rent, the net amount paid for the right to use and occupy the land, is estimated and divided by a land capitalization rate.

     

     

  11. Subdivision Development – With this approach land value is estimated as if the land were serviced with infrastructure and available for sale in smaller parcels. All costs including infrastructure and carrying charges are subtracted from the estimated proceeds of sale, and the net income projection is discounted over the estimated period required for market absorption of the sites.

     

With the appraisal process and these several possible approaches to value understood, it is appropriate to consider which methods and procedures should be used to analyze and interpret the land data. The choice is based upon what data is available, its reliability and usefulness in making a value estimate.

Standard Units of Measure

Land markets can be estimated on the basis of a certain value per unit and the unit is often one of the following:

 

  1. Per Dwelling Unit Site
  2. Per Square-Foot
  3. Per Acre
  4. Per Front-Foot

 

The selection of the most appropriate unit, or combination of units, is important. It is a decision which can only be made after a careful analysis of the market and the available data.

The standard residential site may respond well to a value Per Dwelling Unit Site. A commercial use may be better estimated by using a value Per Square-Foot or Per Front-Foot. A farm or rural site may be better estimated by using a value Per Acre. Once the market value per unit of measure has been established for the standard site representative of the area, the value will become a base to which all other sites can be compared.

Per Dwelling Unit Site -- Sale evidence will frequently indicate that minor variations in sites, whether frontage or size, have little effect on markets. The assessor could select the standard Dwelling Unit Site, both as to location and market. They would proceed to make judgment decisions in relating the other sites to the site that was selected as the standard site--rating them as standard, superior or inferior. An individual site could have some characteristics that are superior and others that are inferior. The Per Dwelling Unit Site method is useful in the valuation of apartments and homes. It may also be combined with the use of another method such as the per square-foot method.

Per Square-Foot -- The value per square-foot unit of measure has application in estimating value for commercial, industrial and residential lands where the applied rate will be more constant over the entire site. The size of the site limits or enhances the use and market value of a site.

Per Acre -- Beyond the limits of the urban area, there will be those parcels that are so much larger that they will not respond well or at all to dwelling unit site value, a square-foot or front-foot unit measure. Where these larger parcels are the norm, the unit of measure can best be expressed as a value per acre. The adjustment factors might relate to agricultural benefits, such as soil fertility, distance to markets or water supply.

Per Front-Foot -- This method has been useful in the downtown portion of intensely developed cities where people pay a premium for exposure to customers. For those sites that are not identical to the standard site, it will be necessary to make appropriate adjustments for variations in width, depth and other attributes that differ from the standard site. The total departures from standard front-foot market can be expressed as an adjusted frontage. It is against this adjusted frontage that the adopted front-foot value will be applied.

There is a principle of commerce that commodities are cheaper by the dozen. By the same token it could be that frontage feet are cheaper per unit when the total exceeds the average, or standard width. A width table is a series of percentage adjustments greater or less than 1.0 needed to adjust the actual Market per Front-Foot of any site and equate it to the Front-Foot value of the adopted Standard Site.

 

Standardized Adjustments

A standardized method is the application of the comparative method to land markets under review. Adjustments are made for divergences from the standard site by the use of a specific set of rules. The most common examples are those used for distance and size. The methods were born out of the necessity to produce sound and impartial market estimates in a limited amount of time recognizing the accepted principles of valuation.

It is essential to use discretion and judgment and only treat standardized methods as guides. The use of formulas should be the result of local market analysis and testing. Sales are sought that are similar except for the one difference that is being analyzed. A value for this difference will result. The main virtue of the method is its administrative adaptability, permitting land values to be estimated on the basis of strict comparability. Mistakes become more easily detectable, particularly in cases of errors of judgment and mathematics.

Adjustments for Unique Features

After the base value has been estimated, the differences in individual sites must be considered. Some sites have unique advantages or disadvantages compared to other sites. Actual real estate values vary for each site and are dependent upon numerous individual features, qualities, characteristics and restrictions.

Adjustments will have to be made for differences between the standard site and every other site. The assessor will want to study the typical differences and make individual refinements. There may be reasons for an increase in value for characteristics which are better than the standard site. They would make a positive adjustment for desirable characteristics, such as superior location, view, topography, services or access.

There can also be reasons for loss of value for characteristics which are inferior to the standard site. They would make a negative adjustment for undesirable characteristics, such as poor location, longer distance to transportation, longer distance to the civic center, wet ground in the winter, over-abundance of rock or poor access.

Student assignment: Please go here: http://www.meritax.co.za/presentation.html and click on Mr. Merry Tax for an animated presentation covering several of the topics of this module, use rights courtesy of professional valuer Peter Meakin and his team of property assessors and land value experts.

Land Value Maps

The land values which have been calculated should be displayed on a land value map. This will allow the assessor to review his data and value conclusions. A field review will allow him or her to make further necessary adjustments for other variables observed in the review and finish the project. The assessor will find that when the results of the land value analysis are presented, and the major adjustment criteria utilized, the public can understand the logic of the assessments.

Transparency is of considerable importance when implementing land value capture. All information including how information is obtained should be posted on a website and the information can be presented in a number of ways, for example, graphs, charts, land value maps, topographical and aerial maps. A "Google Earth" approach would enable citizens to easily view each land parcel and then click to find out pertinent information such as zoning and other regulations, ownership, and assessed land value.

Johannesburg, RSA

Land Value Scape

Computer Estimated Land Values

There are many jurisdictions that have both prior market value estimates and some site data available on a computer. They may be capable of using this data as a basis for updating market estimates.

Many government agencies have already collected limited data about land on a computer system. By analyzing market trends, new land market estimates could be made with a single updating factor for each permitted land use within a neighborhood.

An entire country would be capable of annual reassessments, updated by computer data entries. A simple model used for computer calculation of land values for 1,000,000 land sites could be based upon a careful analysis of the sales of a sample of 12,000 sites. A local valuation committee of land experts could define the land use classes, neighborhood areas and market values for each standard site in the area. A Geographic Information System can be used to display land values, characteristics and statistical data. All of this can be posted on websites.

The advantages to using a computer assisted market update include the abilities to:

1. Facilitate frequent update of assessments ensuring equitable treatment of all property owners.
2. Eliminate arithmetic errors in land value calculations.
3. Improve the assessor's productivity in land value assessment.
4. Employ standardized assessment techniques that have proven to be effective.

The information in this section on Land Value Assessment was extracted from Estimating Land Values, by Ted Gwartney, MAI, Assessor, Greenwich, Connecticut, USA. The complete document can be found at:  Estimating Land Values

The spirit of our age, with the image of the earth as seen from space emblazoned in our mindscape, insists that the circle now be drawn to include all, each and every one of us, as equal claimants to the whole earth itself. This quantum leap worldview can and surely will be the basis for profound changes in institutions of governance, economics and law. The right to the earth itself as a right by birth is the most fundamental human right of all. Land Value Capture is nothing less than a vital key to effectively securing earth rights for each and every one. We hope you have enjoyed the Land Rights and Land Value Capture course and that the insight, knowledge and information you have acquired will be of assistance in your efforts to make the world a better place for everyone.

5: Appendix

Module Five

Appendix

(City
Name) Land Value Capture Endorsement Form


I/We support shifting taxes OFF of
wages, business, homes and other buildings and ONTO the accurately
assessed value of land sites in order to discourage land speculation
and property deterioration and to encourage quality affordable
housing and the renewal and revitalization of the City of (City
Name).

Circle One: Yes / No / Undecided


I/We recommend that the members of our organization
study possible effects of a shift to land value capture in (City
Name). Circle One: Yes / No / Undecided

I/We urge the
Mayor and City Council to fully study land value capture’s
potential impact on the economy of (City Name). Circle One: Yes
/ No / Undecided

Individual Endorsement


Name (print)
____________________________________________________________

Signature
_______________________________________________________________

Address
_____________________________________________ Zip
_______

Phone_____________________ Fax _________________ Email
__________________

City Council District Number or City
Council Member Name: _____________________

Organization /
Affiliation (for identification only)
________________________________

Organizational Endorsement


Authorizing Individual Name (print)
__________________________________________

Authorizing
Individual Signature
______________________________________

Authorizing Individual
Title ________________________________________________

Organization
___________________________________________________

Address_______________________________________________________
street
_____________________________________________________________
city
state
zip

Phone
__________________Fax ______________ E-mail ________________

City
Council District Number or City Council Member Name:
_____________________

Optional Contribution


Enclosed is $ ___________ to assist
in educational activities associated with this effort. Please
make checks payable to _________ and send to ___________. For any
questions call _____or _______ at

Phone:

www.
Thank you for your support!

Community
Land Trust (CLT) Lease Agreement Based on Land Rent

School of Living (SoL) has been leasing
land as a Community Land Trust for about 30 years. SoL has been
leasing land primarily but not exclusively to intentional
communities. The leases usually provided a discount to younger
intentional communities by a formula that increases the fee as more
members join with the goal of the CLT collecting 100% of the full
lease fee when the community has grown to its full complement of
members. The lessees own the improvements they make on
the land and the rent to the CLT does not increase when the lessees
make improvements. Lease fees do change as land values in the
surrounding area change.

A SoL CLT lease includes requirements
that the land be used for some public educational purposes as well as
ecological use restrictions. The educational use requirements
are not inherent to CLT philosophy in general but is included because
SOL is an educational organization. The ecological restrictions
are in recognition that future generations have a right to land that
has not been damaged by present generation and is common to most
CLTs. Another restriction commonly found in a SOL CLT lease is
that the land may not be used as collateral; philosophically we don’t
want to relate to the land as a commodity and practically it puts the
land in jeopardy.

In determining a proper lease fee
we take into account the restrictions in the lease and discount what
would be a fair market value for a long term lease without these
restrictions. We determined that 5% of market value is an
appropriate annual lease fee for a standard SoL lease. We
applied the principal that as land market value changed the lease fee
would also change.

Here is an example of such a lease fee
formula:

The annual rent for this land shall be
calculated according to the following formula and paid quarterly . .
. to the Lessor by the Lessee:

ANNUAL LAND RENT = T + (X)I or T + (V - Z)(5%)
whichever is greater

hereinafter known as the Rent Formula.

T equals the taxes assessed against The Land by any government or
government agency.

X is the annual Administrative Fee due to School of Living.
The beginning Administrative Fee is four hundred fifty dollars
($450.00). This amount shall be adjusted at the end of each
calendar year for inflation or deflation according to the current
Consumer Price Index for All Urban Areas "I" published by
the United States Department of Labor, using the calendar year 1999
as the base year.

"V" is the value of the land and shall be adjusted annually
to reflect changing land values as stated below. The parties
agree that the initial value of the land is $55,200.00. "V"
shall be composed of the initial cost of the Land multiplied by the
change (either + or -) in the Farm Real Estate Values (FREV) for
Amherst, Virginia. To calculate the average annual change in
the land value, the FREV increment shall be calculated by using the
FREV from the most recent 5-Year Census Reports that are ten years
apart, as compiled by the United States Department of Commerce,
Bureau of Census, Census of Agriculture, Geographic Area Series
Reports. This annual change in "V" is then used each
year until a new 5-Year Census Report is published. At no time
will "V" be less than zero.

Z is Land Principal Payments. Lessee may make payments to
Lessor over and above the minimum lease payments which lessee may
designate as Land Principal Payments, [Z]. "Z" shall
be the accumulated total of all such payments. Should such
payments be made, Lessee shall retain equity in the land in the
amount of Z and the right to transfer this lease for the value of Z
adjusted for inflation in the event this lease is terminated.

First note: The inclusion of the
"Z" factor was at the request of the lessee. There are
variations in each of the SoL leases because each lease is
negotiated. In this lease fee the lessee pays taxes plus 5% of
the current value of the land, no modifications for fewer residents
or more residents.

In each of the leases there is an
administrative fee component so that SoL will always have funds
generated from lease fees with which to fulfill its minimum
administrative requirements as lessor. The lease fee formula
just cited has the administrative fee increasing by the CPIU so the
"x factor" will be in constant dollars. The leases are
intended to continue in perpetuity and who knows what the purchasing
power of $500 this year will be worth in 100 or 200 years thus the
inflation index. But in this formula we do not use the CPI
inflation index to determine the change in the land value component
of the lease fee: rather it is based just on 5% of whatever the
current fair market value of the land is, regardless of changes in
the CPI. That’s why I suggest this formula is better
reflection of our principals.

Also this formula allows for the lessee
to reduce the annual lease fee by making voluntary "principal
payments". So if the land had a fair market value of
$60,000.00 this year and the lessee had paid SOL $60,000.00 in
"principal payments" there would be no annual lease fee due
except the "x-factor" adjusted for inflation, until the land
value rose above $60,000.00 at which point the lessee pays 5% of that
additional value per year once that amount exceeds the x-factor.
SOL then has $60,000 with which to buy additional land and lease that
out.

Here is our latest update on the basic
lease fee formula where SoL owns all the equity in the land. This
lease fee formulas assigns each individual member of the intentional
community his or her own "y-factor" which is based on a fixed
percentage of the value of the land at the time that person becomes a
resident and that component of the lease fee will not change during
that persons residency. And like a 30-year fixed mortgage it
gets eliminated from the lease fee after that person has been a
resident for 30 years. Taking a long view look at this lease
formula SOL still receives 100% of the increased land value over a
period of time since there will be successive 100% turnover of
residents.

Here is an example of this new formula
used at Heathcote Center:

The annual rent shall be calculated
according to the following formula and shall be paid quarterly by the
Lessee to the Lessor:

[(X)(K)+Yт] (U)

is hereinafter referred to and known as
"the Rent Formula." In the above formula:

X equals Six Hundred Seventy-Five
Dollars ($675.00).

Yт equals the sum total of the Y
factors.

(2) Definition
of Y factor: Each person of majority age living on the Land during
the preceding year for a period of ninety (90) days or longer shall
be assigned an individual Y factor, the amount of which shall be
fixed for that individual’s term of residency and shall be one
six-hundredths (1/600) of the Value of the Land for the year in which
he or she first became a resident.

The Value of the Land … shall be the
tax assessment value determined by the State Department of
Assessments and Taxation of Maryland for the year in which the
individual first became a resident of the Land…

(3) It is
agreed that the Y amount for each of the 12 residents of the Land at
the signing of this Lease shall be Two Hundred Seventy-Five Dollars
($275.00). It is further agreed that, if any individual resides
on the Land for 30 years, then that individual’s Y factor shall be
reduced to zero dollars ($0.00). … The 30 years of residency need
not be continuous, but only years of actual residency shall be
counted, not years of absence. If an individual returns after
being absent from the Land for 5 years or more, that individual’s Y
amount shall be recalculated for the value of a Y as if the
individual were new to the Land, for the remaining portion of the 30
years.

The parties agree that the sole purpose
of assigning individuals a specific Y factor is for the purpose of
determining the total amount of annual rent that the Lessee,
Heathcote Center, Inc., shall pay to the Lessor, School of Living,
and does not in any way create a contract between that individual and
either School of Living or Heathcote Center, Inc.

(4) U equals
the use factor applied to the Land for alternative uses of the Land.
It is agreed that the use factor for this Land with the uses as
enumerated in paragraph 6 below, shall be one (1). If the
Lessee ever desires to use the Land for purposes other than those
enumerated in paragraph 6 below, a new use factor shall be negotiated
between the Lessee and the Lessor.

(5) K equals the
inflationary or deflationary factor and shall be the change (either +
or -) in the Consumer Price Index for All Urban Areas (CPI-U),
non-seasonally adjusted, 12 month percent change December to December
published by the United States Department of Labor. The
percentage is used to increase or decrease the previous year’s K
factor by multiplying the previous year’s K factor by 1 + the
percentage change. The K factor until April 1, 2005 shall
be 1.000.

In the above model, the y-factor of
1/600ths was determined by the anticipated number of adult residents
being 20. Essentially, SoL would be collecting 3 1/3% of the value of
the land each year plus the administrative fee. Also, in the
above lease fee formula we use the County tax assessment to determine
land value. Maryland bases its tax assessments on 100% of FMV
and has periodic re-assessments every 3 years. We looked very
closely at their re-assessment process and believe its adequate for
our lease fee purposes. BTW, Heathcote benefits from a
preferential tax assessment for land enrolled in an agricultural use
program, and that lower value is passed through the lease.

EQUITY LEASES

In these lease models what usually
happens is that the intentional community (or individual or family)
already owns land and wants to put it in the SoL CLT and get a lease
back for the land. Since there are individuals
living on the land that have already paid for the land once (or in
some circumstances paying a mortgage that pre-existed the title
transfer to the CLT) the SoL philosophy is that those individuals
should not have to pay a second time by also paying a lease fee to
SOL, but as new people come onto the land then a lease fee would be
due SoL. In a full equity lease the lessee retains the value of
the land when it was put into the CLT and if that lessee wishes to
transfer their leasehold interest to another person they would be
entitled to get only their equity adjusted for inflation and SoL
would get any increase in land value. As in all leases the
improvements are owned by the lessee and is entitled to whatever
price they negotiate with the new lessee. SoL has had equity
leases both with individual families and intentional communities.
With intentional communities the same principals apply even though a
lease is not transferred by a pro-rata lease fee being due SoL when a
new member joins the group.

Here’s an example:

The rent for this land for the
period beginning with the signing of this lease shall be calculated
according to the following formula, and paid to the Lessor by the
Lessee:

ANNUAL RENT = T + X(K) + M

hereinafter known as the rent formula.
In the above formula:

T equals the taxes assessed against The
Land by any government or government agency. Such taxes may be
paid directly to the assessing agency by the Lessee and receipt
therefor promptly forwarded to the Lessor.

If the Lessee
does not make any tax payment when due, the Lessor may do so and add
that amount to future rent, including any penalties not the fault of
the Lessor.

M equals the mortgages currently
outstanding against The Land or any future mortgage on The Land
entered into under the provisions of section 9 ENCUMBRANCE.
Mortgage payments will be made by the Lessee directly to the
Mortgagee on a timely basis.

If the Lessee
does not make any mortgage payment when due, the Lessor may do so and
add that amount to future rent, including any penalties not the fault
of the Lessor.

X equals six hundred seventy-five
hundred dollars ($675.00) per annum and shall be paid quarterly on
the 1st day of November, February, May and August. The first
payment due on November 1, 2006 shall be one hundred sixty eight
dollars and seventy-five cents ($168.75).

K equals the inflationary or
deflationary factor and shall be calculated the first day of November
of each year. K shall be composed of the change (either + or -)
in the Consumer Price Index for All Urban Areas (CPII-U), Not
Seasonally Adjusted, 12 month percent change December to December,
published by the United States Department of Labor using 2006 as the
base year. The percentage is used to increase or decrease the
previous year’s K factor by multiplying the previous year’s K
factor by 1 + the percentage change. The K factor until
November 01, 2008 shall be 1.000.

EQUITY.

A. The Lessee shall have an equity in The Land of
Ninety-Seven Thousand Five Hundred dollars ($97,500.00) adjusted for
inflation or deflation by the Consumer Price Index (CPI-U), Not
Seasonally Adjusted, using November, 2006, as the base, minus any
amounts outstanding on taxes, mortgage(s), or delinquent payments to
Lessor.

The Lessee shall have the exclusive right to transfer equity and/or
use rights, subject to the terms of this Lease and more specifically
the following conditions:

Any transfer of The Land shall be done at a price as near as possible
to Fair Market Value as agreed to at the time by Lessee and Lessor.
Any sums obtained from the granting of the rights under this lease by
any manner whatsoever, in excess of the equity as above defined,
shall belong to the Lessor. In the event that Lessee should
decide to transfer equity at a price less than Fair Market Value the
difference between Fair Market Value and the price obtained shall be
deducted from Lessees equity and not from Lessor.

The Lessor shall be under no obligation to pay equity to the Lessee
from its own funds. Equity of the Lessee may be recovered by
the Lessee only through the assignment, transfer or sublease of this
lease.

B. When a new person becomes a member of the Lessee
[Community] … the Lessor shall be entitled to any increase value of
The Land above the equity value held by the Lessee, in proportion [to
the ownership percentage acquired]. ….

C. Should this lease cease to exist as a result of termination,
the Lessor shall use best efforts to re-lease The Land. In such
event, the new Lessee(s) shall pay to the Lessor the Fair Market
Value of The Land and the Lessor shall pay to the previous Lessee(s)
or their assigns, their equity value as defined in the first
paragraph of this section, minus any costs incurred.