Archive for the ‘Georgist’ Category

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Farmers still don’t own their land

May 17, 2009

The Census Bureau has issued the 2007 Census of Agriculture reports for Illinois, and, no surprise, most farmland is not owned by the farmer who works it.  62% of farmland in the state is tenant-farmed, up from 58% in 2002.  (table 9, pdf) . Owner-operators are the majority of farmers, but have much smaller farms, 107 acres and $47,726 gross revenue, compared to part-tenants (784 acres and $407,013) and farmers who rent all their land (439 acres and $254,814) (table 65, pdf)

Nationally, however, more than half of farmland is operator-owned.  And these owners paid more than $7 billion in interest on loans secured by real estate.

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The Secret Life of Real Estate

May 17, 2009

is subtitled “How it Moves and Why,” but this isn’t about the Kinetic Condos. It’s a response to a questions Georgists often hear: “If you’re so smart, why aren’t you rich?”  Different Georgists give different answers, including “I am rich.”

We know that the major cause of the business cycle is the capitalization and trading of government-protected privilege.  This privilege can be any kind of income obtained without producing, and may flow from spectrum licenses, drilling rights, patents, copyrights, or a hundred other sources.  But the main one is land ownership, since land is not a product of human labour.

When demand increases for a product or service, production can increase, but that isn’t true of privilege. The only limit on the price of privilege is what the market will bear without breaking.   So can’t we measure that price, use the information to forecast economic meltdowns, and thus become wealthy?

Our massive government statistics operations, which know how much more Asian-American households spend on rice than the rest of us do (4 times as much, as of 2003), and that people spend an average of 2.43 hours each weekday watching television, know just about nothing about the price of land.  Only a few countries maintain any such information (Korea, Japan, Denmark, and Australia come to mind).  Many local authorities compile land assessments, but the relationship to actual market prices is, at best, elastic, and the information is not systematically reported.  So indirect and ephemeral indicators must be relied upon.

Moreover, they land price cycle tends to run about 18 years, and may be disrupted by war (not by much else, it appears). This means that taking advantage of it requires a great deal of patience and, one can only say, a certain amount of faith.  And starting at a young enough age, by the way. Of course the cycle might be entirely abolished, but that would require the elites, and some of the non-elites, to surrender significant privilege.

The book is well-written, well-edited, and well-documented. (A subject index would be nice.) Economist Mason Gaffney’s  review is far more informed than anything I could have produced.  He points out a number of imperfections, but on the whole this is a very useful book for anybody who wants to know why many of us aren’t rich, or who would like to be.

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Does CPI show land price declines?

April 15, 2009

Of course the consumer price index, out this morning, doesn’t show land prices or land rents.  That is, cost of getting access to land is buried in all the other figures.

Much is being made of the year-to-year decline, which is largely due to the drop in petroleum (and gasoline) prices.  Of course this is reflected in housing costs, which include an energy component.  But the main piece of housing costs is “shelter cost.”  Under this, “rent” and “owner equivalent rent” increased 3.2% and 2.1%, respectively.  Because most Americans are “homeowners,”  the latter figure has a large impact on the total CPI.  The actual cost of purchasing a house and lot may have declined, but the CPI’s housing cost is based on what you might have to pay to rent a unit like the one you are buying.

The price of used cars also dropped, probably because fewer people are interested in buying one.  But the cost of what BLS calls “education” increased 5.6%.

For some reason BLS seems not to have yet posted the sub-national data.

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Land Value vs. Land Rent

February 17, 2009

Altho Henry George’s proposal is “to abolish all taxation save that upon land values,” his objective really is to collect land rent for the community.  Of course land value is, ultimately, determined by anticipated land rent, but rent is more stable.

This is illustrated by a recent article in the Wall Street Journal (“Tax Break Divides Large, Small Builders,” Feb 11 ’09).   In an example cited as typical, Pulte Homes is reported to have sold, for $2 million, land they had “originally paid $28 million for.”  So if land value declined by over 92%, how much did land rent decline?

Probably quite a bit less than 92%, because the $28 million was based on Pulte’s guess as to what the future land rent would be.  The actual rent, the amount that someone would have paid to use the land at the time Pulte bought it,  was doubtless much less than their expectation of its future amount.

Some opponents of land value taxation cite cases of great declines in land prices to claim that LVT wouldn’t be a stable source of revenue.  But LVT moderates speculation, and land prices would be more stable if more of the land rent was collected for public use.

One illustration of this is that states where real estate tax is relatively high have experienced more stable prices for homes and lots.

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You needn’t mention Henry George…

February 15, 2009

…to be a Georgist. Michael Hudson’s analysis and forecast of bailout developments is helpful in understanding who benefits, and how it will be packaged to appear as homeowner aid.  One of his recommendations is clearly Georgist:

It is easy enough for fiscal policy to prevent a new real estate bubble. Simply shift the tax system back to where it originally was, on the land’s site-rental value. The “free lunch” (what John Stuart Mill called the “unearned increment” of rising land prices, a gain that landlords made “in their sleep”) would serve as the tax base instead of burdening labor and industry with income taxes and sales taxes. This would achieve the kind of free market that Adam Smith, John Stuart Mill and Alfred Marshall described, and which the Progressive Era aimed to achieve with America’s first income tax in 1913.

Hudson, like Kinsley and a few others, disdains the modern Georgist movement tho he seems to accept the validity and applicability of George’s (and modern Georgists’) analysis.

Thanks to Alanna Hartzok for the tip.

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Another Chicago classic now available

February 15, 2009

Homer Hoyt’s 1933 book “100 Years of Land value in Chicago” is now posted at the Internet Archive. Only a few land value nerds will read it all the way thru, but all should be impressed by the quantity of work Hoyt put into it, describing and analyzing Chicago’s land market for its first century.

Summary graph of land values

Summary graph of land values

This was all done before cheap photocopiers, faxes, and of course computers. I wish someone would update it.

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Olcott’s Land Values Blue Book

February 10, 2009

One of the challenges for many beginning Henry George School students is to understand that land has value, and that the value of land is really not very difficult to determine.  One example that we used to use was Olcott’s Land Values Blue Book, an annual publication that, until the early ’90s, reported the estimated land value for every block in Chicago and much of suburban Cook County.  I don’t know exactly why the series was discontinued, but I assume it was because professionals now find the Internet a more convenient source of information.

The 1939 edition of Olcott’s has been scanned and posted to the Internet Archive.  Below is an example page.

Sample page from Olcott's

Sample page from Olcott's

The numbers in most areas are value per front foot for a standard-sized lot.  The book includes adjustment factors for use where lots are other than standard.  For unsubdivided parcels, a value per acre is shown.