I wrote the following email to a Transition Town member, who mistakenly believed I was proposing that the government own all the land, and was questioning whether the land issue ought to even be a concern to Transition Towns, whose mission is to build resilient communities. Because that initial email provided such a stimulus for me to write a lengthy response, I chose to make my email public (slightly edited) and offer it as an open letter to all Transition Towns. Hopefully this information can benefit all of us as we work together to co-create a world that truly works for everyone. For more information about how land reform can create meaningful work, restore our ecology, and bring more wealth into our local communities, I invite you to read my book Land: A New Paradigm for a Thriving World.

I’m not proposing that “the government should own the land”. People instantly think of communism when such a thing is proposed, and that somehow we should all have to “huddle together”, have no individual rights, and give up all forms of private land use. I’m proposing no such thing.

Yet in truth, our current community models are not working, either. Beset by gentrification (as I’ve witnessed first-hand in San Francisco), homelessness (for a time in my life, I lived at homeless shelters), and widening inequality (witnessed growing up), communities struggle with finding appropriate solutions. For example, rent-control is a stopgap measure that, over time, actually creates more poverty for a community: With rent-control, tenants are prevented from relocating and landlords don’t have the money to beautify their properties; houses fall into disrepair and neighborhoods deteriorate. Furthermore, rent-control incentivizes abuse: Once, a friend of mine moved out of state for a year while keeping her rent-controlled apartment empty until her return. Another friend of mine was recently offered—and accepted—a sizable buy-out payment, which allowed the landlord to substantially raise the rent for the next tenant.

‍‍‍It’s easy to blame Wall Street, but few people stop to think about where Wall Street gets all its money from: Wall Street banks get most of their money from land, via mortgages. Now if communities could get that money instead of Wall Street, how much better off would we be?

Other solutions have also failed: People tend to blame the Federal Reserve or Wall Street for the current state of affairs (easy targets, I must admit). But I tell you that the long-term decline of the U.S. dollar—or Wall Street’s shenanigans—are not the root causes of gentrification, homelessness, and widening inequality. Instead, land is far more powerful than money: If you had all the money in the world, and if I owned all the land, how much money would I charge you for your first night’s rent? The answer to that is surely obvious.

Land is far more powerful than money: If you had all the money in the world, and if I owned all the land, how much money would I charge you for your first night’s rent?

The short summary is, most people don’t grasp the underlying economic causes of our failing communities, and are thus unable to propose effective solutions.

The Law of Rent

In economics, there exists a principle that’s as important as the law of gravity. Few people (not even some economists) are aware of it, just as few people are consciously aware of gravity; yet it continues to operate whether we pay attention to it or not. That principle is called the “Law of Rent”. The Law of Rent states that the value of a piece of land is created by the community.[1] The problem, however, is this:

Every time we make a community more livable—such as through charity, better social services, technological innovation, or business enterprise—a community becomes more desirable to live in; as a result, the value of its land increases. This, however, only benefits those who own land, as well as the Wall Street banks that finance property ownership.

Every time we make a community more livable—such as through charity, better social services, technological innovation, or business enterprise—a community becomes more desirable to live in; as a result, the value of its land increases. This, however, only benefits those who own land, as well as the Wall Street banks that finance property ownership. And unlike capital goods such as cars or computers, you can’t produce more land, so when a person makes money from land, another person loses money (same amount of land as before, but higher cost). It is our current system of landownership that actually causes gentrificationhomelessness (that is, landlessness), as well as wealth inequality.

I’ll now address the broad economic principles that are necessary to solve gentrification, homelessness, and wealth inequality.

Gentrification

The problem isn’t that a community becomes more expensive to live in, for example due to population increases; it’s only natural for the value of land to increase as more people move into a community. The problem is that the resulting wealth increase is not equitably shared with existing community members; as a result, existing community members can no longer afford the higher rents and are thus exiled from their community.

The problem isn’t that a community becomes more expensive to live in. The problem is that the resulting wealth increase is not equitably shared with existing community members; as a result, existing community members can no longer afford the higher rents and are thus exiled from their community.

The only way to prevent gentrification is by sharing that resulting increase in wealth with all community members. This increase in wealth has to first be captured on behalf of the community, and then equitably shared with the community.

When a community becomes wealthier (for example, due to an increase in population), its land values increase. But as long as a select few homeowners capture that increase, the community as a whole doesn’t benefit: rents increase for tenants while properties become more expensive for new homebuyers—and higher real estate prices create the need for larger mortgages, which means more profits for Wall Street.

Our current landownership paradigm doesn’t serve everyone, and therefore, I propose, doesn’t truly serve anyone at all.

So you can see that our current landownership paradigm doesn’t equally serve everyone, and therefore, I propose, doesn’t truly serve anyone.

Imagine, now, if the land was owned by the community. Not by the government, but by the community. This, for example, could happen through a community land trust, in which every community member owns a single, non-transferable share. With all community land being owned by this community land trust, real estate developers and homeowners alike would be paying rent into the community land trust for the land that they own. Mortgages would be significantly lower, as people would mostly only pay for homes, and not for land. The community land trust then redistributes one part of its rental income back to the community via a basic income, and the other part to the city government for community services. When tenants, for example, receive a basic income, they’re able to afford the higher rents, which they pay to their landlords, who in turn have to pay more money to their local community (due to the higher rents) and provide better services to their tenants. The community, in turn, then again shares that added revenue with all community members—and everyone wins.

Imagine, now, if the land was owned by the community. This, for example, could happen through a community land trust, in which every community member owns a single, non-transferable share. The community land trust then redistributes one part of its rental income back to the community via a basic income, and the other part to the city government for community services.

Homelessness

At one point in my life I stayed with the homeless at homeless shelters and heard their stories. Homelessness is surprisingly common: The homeless are more often than not regular people who, during hard times, had no support system like a family to fall back on. In truth, the homeless are landless, for they have no place to build shelter.

Land has to be shared with all human beings—regardless of whether a person contributes to society or not. This is because no human being has made land; therefore no human being has a justifiable right to marginalize another person from land. All of us need land, just like we need air to breathe.

Having one’s own home can tremendously ease one’s mind in a way that few other things in life can; the homeless are often painfully aware of this reality because they lack that psychological security. While some people tend to believe that the homeless are either lazy or mentally incapable of earning enough money to afford a place to live, few people consider the principle that land has to be shared with all human beings—regardless of whether a person contributes to society or not. This is because no human being has made land; therefore no human being has a justifiable right to marginalize another person from land. All of us need land, just like we need air to breathe.

Since everyone has a basic right to land, it’s a community’s duty to provide a minimum standard of free land access to all its members. It can do this for property owners and tenants by providing them with a basic income; the homeless, however, should also be given the option of free public housing (the cost of which can be deducted from their basic income share) so that they can have accommodations without living in fear of being evicted. To provide the homeless with free housing also makes sense on a financial basis, since the cost of providing housing for the homeless often tends to be significantly less than the actual welfare costs and societal burdens that are created by homelessness.[2]

Wealth Inequality

Population density is directly correlated to wealth inequality (see graph below) in our current economic system: More people squeezed together over the same area means more of the land value is hoarded through the institution of private property ownership.

‍‍Image Credit: Martin Adams Population: “Annual Estimates of the Population for the United States, Regions, States, and Puerto Rico: April 1, 2010 to July 1, 2011,” U.S. Census Bureau, 2011. Area: “Land and Water Area of States and Other Entities: 2008,” U.S. Census Bureau, 2012. Gini coefficient: “Household Income for States: 2009 and 2010,” U.S. Census Bureau, 2011.

In places where the value of land is shared, however, there is less correlation between wealth inequality and population density. Taiwan, for example, which collects some land value on behalf of the community (via land-value taxation), has a population density of 1,658 people per square mile, but a much lower gini coefficient of only 0.35. When you share the value of land such as through the community land trust model I propose above, you tackle the economic cause of wealth inequality at the root.

I hope my above essay has given you an insight into some of the economic principles every community inevitably wrestles with. My sense is that Transition Towns can more easily fulfill their mission of building resilient communities by understanding these specific economic principles and by implementing corresponding solutions on a local level. Let me know if or how I can be of further assistance.

Warm regards,

Martin Adams
http://www.unitism.com

For more information about how land reform can create meaningful work, restore our ecology, and bring more wealth into our local communities, I invite you to read my book Land: A New Paradigm for a Thriving World.

Footnotes

[1] Admittedly, this is not a very technical definition of the Law of Rent. The technical definition is this: The rent (or value) of a piece of land is equal to the amount gained by putting it to its most productive use over that gained by using land that could be had for free for the same purpose, given the same inputs of labor and capital goods.

[2] For example, the annual cost of emergency room visits and jail stays for the homeless in San Francisco was estimated in 2004 to be approximately $61,000 per person, whereas the cost of providing a homeless person with permanent housing, treatment, and care was estimated at only $16,000. See Angela Alioto, et al. “The San Francisco Plan to Abolish Chronic Homelessness,” June 30, 2004, San Francisco Mayor’s Office of Housing and Community Development.

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