The Landownership Cycle

 

By Martin Adams

Many of us know that capitalism creates wealth, but also that it causes inequality and destroys nature at the same time. But we don’t seem to understand how: For example, how does capitalism lead to financial insecurity for many, even for those who, by all accounts, shouldn’t have to worry about money? And how exactly are we destroying our planet in our frantic conversion of nature into digits and little bits of paper we call money?

One of the main reasons capitalism does not provide equal benefits to everyone is because the commons—the gifts of nature—have been privatized. This privatization of nature is one of the root causes of economic recessions, ecological destruction, as well as social and cultural decline—even in a world of plenty.

All of nature is community wealth, including—and especially—land. People give value to land through the goods and services they provide to their communities. For example, because people offer more goods and services in the city than in the countryside, urban land tends to be much more expensive than rural land. As communities become more attractive to live in, some property owners—but mostly the financial institutions that finance them—then extract this value by making money from real estate—money that in truth belongs to everyone—, and this extraction is one of the root causes of wealth inequality, ecological destruction, and even economic recessions.

Land—even undeveloped land—costs a lot of money in our society. Why is that? It’s because land has an intrinsic value to human beings: We all need land. And because we all need land, those that own land can make money by buying and selling land at the expense of other people who have to pay money to live on it. Under our current land ownership model, property owners only pay other property owners for land as well as the banks that finance property ownership.

While land can certainly be privately used, its value is created by the community and therefore belongs to the community. Land has to be owned in common, and whenever people use land, they need to reimburse their local communities for their exclusive use of it. They can do this by making community land contributions for the land they use. A land contribution approximates the market rental value of land, and the rental value of land is a measuring stick that reveals the financial value of the benefits that land users receive from their exclusive use of land.

In most nations around the world, land has already been privatized: If communities were to suddenly impose land contributions upon existing property owners, property owners would end up having to pay twice for their ownership of land—first to the previous landowner (from whom they bought land), and a second time to their local communities.

In order to transition from a land ownership model to a land stewardship model, local governments and community land trusts would either have to financially compensate existing property owners for the land value portion of the properties in question or cancel their existing mortgage debts. Land users would then be required to share the value of land with all members of their community through community land contributions. And finally, these contributions would then have to be redistributed to all community members in the form of a Universal Basic Income to prevent gentrification, reduce wealth inequality, and create a truly fair economy for all participants.

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2 thoughts on “The Landownership Cycle

  1. It seems to me that compensating landowners in order to effect this transition would mean that the *community* would have to bear the land value twice: first by creating the land value in the first place, and then by compensating the existing private owners. That isn’t fair — and, it isn’t necessary either. The land contribution, as you call it, could be implemented gradually. Mortgages would adjust to the resulting shifts in real estate value. People who use land economically would have their tax savings in lieu of their land value losses; people who simply held land for speculation would lose what they never should have had to begin with.

    • Excellent comment, Lindy. I never considered it from that angle. It seems to me that there are three entities that take economic rent from land:
      1) communities (via land-value taxes, property taxes, land contributions, etc.)
      2) property owners
      3) financial institutions that finance property ownership
      It seems to me that many arguments for LVT ignore the plight of the homeowner who bought a property with a steep mortgage with the assumption that taxes on land would remain the same. However, with taxes levied upon land, property devalues (as a result of LVT), but mortgage burden remains the same. Property owners loose their accumulated savings yet continue to have to pay off their associated debt. In other words #1 (communities) gain, #2 (property owners) loose, but #3 (banks) continue to benefit until the mortgage has been paid off. Its seems to me that there should be a way for #3 to share the burden.

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