February/March 1976 RAIN Page 3 o·N 'LAND SPECULATION ' E. F. SCHUMACHER The type of private ownership that may be appropriate for many man-made·goods-the supply of which can be increased. by human work and invention-cannot possibly be appropriate for land. • What, then, are the alternatives if nationalizatiop, as commonly conceived, is not an acceptable answer? Let's look for a middle way, a new type bf arrangement which avoids the . pitfalls of simple private ownership and equally those of simple nationalization. Can we find an ownership model with respect to land (and perhaps even with respect to some of the structures on land) which first of all eliminates private land speculation; which secondlY, eliminates the private windfall gains that inevitably arise and that accrue to. anyone who corners the land; which thirdly does not call for compensation payments to those owning the land now; and which fourthly causes the minimum of disturbance to those who · now manage and utilize the land in any manner wh_atsoever provided it is permitted by law? , Now you may say this'is a tall order; but let's think about it. And I would invite you to consider, the' following train of thought. Every piece of land in the United Kingdom has a certain value or price as of n w. If the owner wanted to sell it he would have some sort of idea, perhaps after taking professional advice, of what it would fetch. Let us say this value would be ascertained for every piece of land in the United Kingdom-no doubt quite a big job but by no means an impossible one. _Of course this value woulq reflect the current zoning arrangements and many other price-deterinin'ing fac-• tors. Now this value or price I shall call the registered value as of July l! 97 3, expressed in pounds sterling of present purchasing power. To take care of inflation the Government could publish an index showing what the'pound sterling of July 1973 will be worth in pounds sterling of any later date. The registered value can thereby be easily adjusted for inflation when occasion for such adjustment arises. I suggest that if an owner wants to sell land he should not obtain more for it than the registered value as up-gra,ded in q:rms of sterling for _inflation. The sale of his land has to be effected·via the local authoritywhich, however, plays a totally passive role unless it, itself, wishes to purchase the land. If it 'does not wish to buy; the private purchaser can pay the private vendor only the registered value, adjusted of course for inflation; and not a penny more. But what if, through re-zo~ing or s·ome other change, the land has become much more valuable?_If this is so, there will be many people wishing to.buy the land•and the highest bidder will get it; but the vendor will receive onl3/ the registered value and the surplus will accrue t<!> what I shall call the local authority land fund. And what becomes of the registered value then? If a higher price has in fact been paid in the manner , • described, then this becomes the new registered value. But what happens if a piece of land is for sale but no buyer can be found to pay the registered value? A transaction between vendor and purchaser may then take place at the lower price, which then becomes the registered value. • In short, the current owner and any subsequent buyer is deprived of the chance of making any windfall profits through land ownership·;,all such profits go automatically into the public hand, what I call the local authority land fund: In those ex- • ~ ceptional cases where a particular piece of land declines in ~ value he may indeed not recover his purchase price; but that 2 is the risk he takes in buying land; or, if you like, 'the price he ·g pays for the immense privilege of land ownership.· <( I commend this scheme to you for further thought. I claim that it would produce a genuine middle-way solution to the problem of land ownership. It would not in any way impair the freedom of existing landowners to continue in their legitimate activities. Their situation remains exactly as at present, without the slightest disturbance. The new dispensation becomes active only as and when the landowner wishes to get rid of his land-in other words, wishes to cease being a landowner . I suggest that such a scheme would greatly increase the ability of local authorities to obtain land for public needs at _fair prices and would certainly siphon into the public hand all windfall gains arising from the growing scarcity of land; but only as and when there is a sale from willing seller to willing buyer. In short, market forces are allowed to operate as regards land transactions between private individuals, seller and buyer; but th_ey do not lead to the acquisition of private fortunes; and the public hand-the local authority-is fully protected against private profiteering. (Courtesy E. F. Schumacher and Satish Kumar, ~ditor, Resurgence. Subscriptions are $7.00 U.s: surface mai\, $10 airmail, from Resurgence, 275 Kings Road, Kingston, Surrey, U.K.) The principles of preventing speculative profits on land developed ·above by E.F. Schumacher;,have met with practical success in at least one recent application. The State of Vermont has faced severe problems in recent years both with speculative ' development and the purchase of land by wealthy New Yorkers and Bostonians, raising the price beyond what could be afforded by local people or paid for by actual productive use of the land. Angry Vermonters succeeded in passing a bill taxing speculative profits from land sales. The tax rate increases the shorter the land has been owned, effectively preventing quick speculative turnover. The law has been credited with'nipping in the bud a major wave of land speculation. Copies of the law can be obtained from the Department of Taxes, State of Vermontj Montpelier, VT 05602. At least two studies have been made on the effects of the tax: "Controlling Land Use and Prices by Using Special Gain Taxation to Intervene in t~e Land Market: The Vermont Experiment" by Prof. R. Lisle Baker, Environmental Affairs, Vol. IV, No. 3 from the Enyironmental Law Center, Boston College Law School, Chestnut Hill, MA 02167. Another study has been made by Prof. Donai'd G. Hagman, University of California, 405 Hilgard Ave., Los Angeles, CA 90024
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