Absentee Ownership -- biggest worry about land
The Flow of Money From Rented Land in Iowa
Fertility translates into annual income. So counties with most fertile land have a higher percentage rented. This 2010 article was posted at Wallaces Farmer in the late winter.
by Wallaces FarmerJ. Gordon Arbuckle, Jr., Iowa State University Extension sociologist, authored "Rented Land in Iowa: Social and Environmental Dimensions". Itís based on information in the Iowa Farm and Rural Life Poll, the Census of Agriculture, and also on recent studies by ISU economists.
What were some of the findings that surprised Arbuckle in this study?
One is the amount of money farmers pay to rent cropland in Iowa each year. It currently totals around $2.5 billion. Arbuckle multiplied the average cash rental rates for each county by the number of cropland acres rented in those counties. With 13 million rented cropland acres and a statewide average cash rental rate of $185 per acre in 2009, it adds up to a huge sum.
The results are striking. County totals range from a low of $1.8 million for Lucas County to a high of $63.6 million for Kossuth County. These estimates are for cropland and do not include rent paid for pasture or hay land.
The counties with the most fertile land also have higher percentages of rented land. That fertility translates into annual income potential, so people hold onto it and rent it out rather than sell it.
"I was particularly interested in the flow of land rents," says Arbuckle. "A lot of money is paid in land rent, and I wanted to know where it all goes." The study estimates how much land rent stays in local counties and how much flows to other counties or out of state.
In Iowa, 54% of the landlords live in the county where the land is located and an additional 12% live in an adjacent county. The remaining 34% live either out of state or "elsewhere in Iowa." That proportion translates into roughly $850 million of rent money that left the immediate area in 2009.
"If we focus only on the 21% of landlords who live out of state, we estimate that $523 million of land rents left the state in 2009," says Arbuckle.
Because rented land isn't distributed evenly across the state, the proportion of the money leaving counties will vary by amount of land rented (and quality of land for crops). Assuming the 21% out-of-state landownership ratio holds at the county level, the study found that the amount of money leaving the state from individual counties ranged from $376,000 for Lucas County to $13.4 million for Kossuth County.
The distribution of dollars leaving Iowa is very similar to figures for percentage of rented land. Counties in north-central and northwest Iowa have much higher levels of money flowing out than do counties in the less fertile areas of Iowa. Since these calculations were done only for cropland, the counties with less cropland and more pasture would naturally have less outflow of cropland rents.
One reason Arbuckle did this study was because of so much concern voiced about absentee landowners and the potential impact of absentee ownership in rural Iowa. He wanted to take a look to see if the evidence is really there.
"We found that tenants feel less secure about their leases when landlords live further away from their land, and landlords who live away tend to be less involved. So there is some potential for concern, but in general farmers believe that their relationships with their landlords are pretty stable," he says.
Arbuckle points out that "One thing Iowa will have to deal with going forward is that the percentage of land owned by people who live far away from it is going to increase. We found that 70% of landlords who were heirs of farm estates live outside the county where their land is located."
He adds, "We're going to have to work to help foster communication between tenants and absentee landlords. In particular, we need to make sure tenants and landlords are on the same page regarding soil and water conservation."
Arbuckle emphasizes that more than half of Iowa farmland is rented by farmers from landowners.
To read the entire study, go to the ISU Web site and find Extension publication PMR 1006, January 2010, titled "Rented Land in Iowa: Social and Environmental Dimensions."
JJS: But why have absentee ownership of land, something all of us need and none of us made? Instead, we could adopt geonomics. That is, we could recover and share the rental value of all land (not just agricultural), in lieu of taxing our actual output and subsidizing special interests. When landowners pay, not receive, ground rent, then they lose interest in being a middle man and sell off their excess, usually to former tenants at prices the tenant farmers could afford. That way, we win back family farms, and theyíre the kind of owners who conserve soil and water, since they want to leave the land to their children.
Jeffery J. Smith runs the Forum on Geonomics.
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