For young people wanting to start family farms, land is hugely expensive to buy, as much as $10,000 per acre or more in some states. This creates a sizable barrier to literally entering the field. People are searching for a way to address this issue without tipping the scales even further in favor of corporate agriculture. “Rent-sharing farm trusts” could be an incremental way of increasing more family access to farms while raising awareness of earth-sharing strategies for addressing the issues of land access and growing inequality.
Conceptually similar to Garden Cities and Community Land Trusts (CLTs), these farm trusts could have non-contiguous properties in them and wealth/income eligibility requirements for beneficiaries. However, whereas CLTs only charge nominal land rent while maintaining re-sale restrictions, a rent-sharing farm trust would charge full market rent while paying equal dividends to each farmer in the trust. Tax forfeited farm land could be used to start the trust but more land could be added to it in other ways, such as through tax deductions, bequests and purchase.
Currently, new farmers essentially only have two options for accessing land – renting or buying. A rent-sharing farm trust, however, would offer some of the advantages of each of those options. As in a traditional rental situation, the farmer would not have to be credit-worthy, would not have to take on mortgage debt and thus would run no risk of having “negative equity” if the land’s value drops below a mortgage amount. As in a traditional ownership situation, the farmer would decide what to do with the land and would accrue a gain from any increase in land value, but over time through the dividend instead of an increased price at time of sale.
The chart below provides a hypothetical example of how these trusts would work. For ease of calculation, the example assumes that each farmer in the trust holds 500 acres. The trust would set the annual rent that each farmer would pay into the trust based on what comparable nearby farm land rents for, with more fertile land renting at a higher rate. Thus, these ten hypothetical farms would pay $937,000 in total rent to the trust and when this amount is divided ten ways, each farmer would receive a $93,700 dividend. The dividend has the effect of reducing the net rent of the more fertile farms and would have farmers of the less fertile land receiving more back from the trust than they pay in.
In addition to the dividend that lowers net rent and/or helps fund farm operations/living expenses, another unique feature of this approach is that the equal sharing of the rental proceeds reflects an “earth sharing” mind set. This last point is the key to the whole scheme. If people don’t view land as being different from capital, they’ll likely think they deserve to get more back if they pay more in. But some may realize it makes more sense to share the proceeds of these payments equally rather than see them go to a landlord or banker who, like the farmers, also did not create the land or its value. By being an earth-sharing society in microcosm, these trusts may help more people see the earth as our common heritage while at the same time moving us incrementally away from corporate agriculture and toward more family farms.
Hypothetical Rent-sharing Trust — Assuming for ease of calculation that each farm is 500 acres:
|Ten Farms||Rent/acre||Annual Rent||Dividend||Net|
|(Total rent/10 farms)||(Annual rent – Dividend)|
|$937,000 Total rent|