High and rising land values are a barrier to social enterprises land management. The cost of land, whether urban or rural, is an issue that stops some land-based social entrepreneurs before they can get started. This blog looks at the issue of land value and some possible solutions.
The high cost of both urban and rural land is a large and growing barrier to land-based social enterprise. In England, the average value of farming land per acre recently rose above £10,000 per acre for the first time, after rising more than 50% in the last five years, and trebling in less than a decade. Organisations supporting woodland social enterprises told us that the high cost of land was a big barrier to their development. Social enterprises often have to compete for land with other groups who are prepared to pay more. The price of land is also driven above its productive use value by public subsidy and speculation.
Many social enterprises do not wish to own the land they manage and renting is one way to avoid the upfront capital costs of purchase. However high rents are also an issue, especially given difficulties social enterprises have making profits from land-management.
The scale of this issue differs by type of land and region, however it is a fundamental issue for almost any social enterprise seeking to access land. Small scale social enterprise land management can lead to a wide range of benefits, so how can it be supported to get over the barrier of high land values?
Reducing land values
Several policies might greatly reduce the cost of land, however the first thing to recognise is that there is clearly no easy fix for this issue on a national scale. Regardless of its merits, any legislative change that threatened to reduce land values would come up against widespread and well funded opposition. One such change would be the introduction of a Land Value Tax, which proponents claim would both lower the cost of buying land and encourage productive land use. Another would be reform to the system of subsidy and taxation that elevates land value above its productive value. Subsidies like the Common Agricultural Policy, become capitalised into higher land values. The 2014 interim report on land reform in Scotland highlighted the effects of subsidy and tax relief on land prices as a key issue.
Such changes, though complex and contested, are certainly worth consideration and we support the Social Economy Alliance’s call for a Royal Commission on Land Reform. We also think it is important to raise public awareness of issues associated with land value and land ownership beyond how they impact on the current housing crisis. Scotland has seen some fairly radical land reform in recent years, so it is certainly possible to build support for such action over time. However, many people are already making the case for policies such as Land Value Tax and we think it is also important to focus on what can happen now.
So how can social enterprises be helped to access land when the market value is prohibitively high?
Several models already exist that help encourage social enterprise land management in the face of a prohibitively costly land market:
- In some circumstances it may be appropriate for local authorities to give or lease land to communities at a lower than market rate through asset transfer. This gives community organisations access to land and sometimes also a capital asset which can help them secure finance. However it can be seen as privatising public land, especially if the group in question do not represent the community as a whole. In some cases the receiving organisation may also lack the capacity, skills or resources to manage the land in the long term. Thus asset transfer can be useful but must be used with care.
- Local authorities and other public landowners should also have clear land disposal policies that make it easy for social enterprises to understand what is involved in purchasing or leasing land. At the moment it can be difficult to find out who owns land, who has the power to decide under what circumstances it can be sold, or in what circumstances discounted rates might be available organisations delivering social outcomes
- Social enterprises need to be supported in being creative with they way they approach landowners. If they want access to land for below the market rate, they need to clearly describe the value they will create and how this aligns with the objectives of the landowner. It may also be that they can show they will add value to the land.
- Models such as Community Land Trusts and Garden Cities effectively remove land from the market, allowing land values to be captured and reinvested in communities. David Rudlin recently won the Wolfson Economics Prize suggesting such a model. These models can not only set aside land for community groups, but also support their land management activities in perpetuity through endowments. Milton Keynes Park Trust is one such example.
- The Ecological Land Co-operative was set up to address this very issue for growers. They promote a model of creating small clusters of sustainable homes on land owned by the cooperative.
- The Scottish Land Fund was set up to enable communities to purchase local land. It has helped a number of communities already and the newest set of reforms will increase its budget and scope. However even at £10m per year it will still have a limited impact. Higher land values elsewhere in the UK would mean equivalent funds would be limited to a higher degree.
- Meanwhile leases allow organisations to access land that is temporarily unused, so there is little opportunity cost for the landowner. This can give social enterprises cheap access to land, but obviously limits what they can do in a short lease.
- Land sharing is a great way for social enterprises to get cheaper access to land. There can often be mutual advantage for the landowner and the enterprise. For example the social enterprise might reduce the landowner’s management costs, or help a later-career farmer manage their land.
Addressing the high cost of land is an issue for the whole land-based social enterprise sector. Through this process we hope to identify key targets for policy change that will help address the issue and to help coordinate joint approaches to seeking them.
Please get in touch with any thoughts on this issue or any of the other areas we are looking at. The next blog looks at how a lack of key skills is holding back the land-based social enterprise sector. Previous blogs in the series are available here.