The price of land – and how to tackle it with a Community Land Trust

Who controls access to land in the city, controls (much of) its urban future. This makes that in the urban economy, land plays a crucial role – so important actually, that its value is often far more relevant than all that what is built in stone, steel or concrete on top of it. When we speak about rising prices of real estate, we often forget that it is largely the price of the land underneath that is increasing. Not so strange if you consider that in most cities you evidently cannot ‘simply’ create new construction land, so the supply is limited. “Buy land, they’re not making it anymore,” Mark Twain famously said. Twain was obviously unaware of new land that was made in the Netherlands by impoldering large parts of the sea, but in general, he is right, of course. In times of surging real-estate prices (like today in Rotterdam) there is nothing to balance its demand – hence it gets an ‘unhealthy’ value. There is a substantial segment of economists that argue that land should therefore not be considered a commodity: its price-point cannot, because of its inherent scarcity, balance according to the ‘market’ rulebook of supply-and-demand. And precisely that now makes it such an easy prey in speculative development schemes.

Besides its fixed supply, there are other reasons why land is different than the usual commodities we buy on the market. The basic capitalist idea is that surplus value is created by labour on raw materials. But land value can increase by legislation (when a building permit is given on agricultural land for instance) or by changes in its surroundings (when a nice park is made in front of your house, the value of land and house rises, and this significant increase is hardly compensated by a bit more land tax you need to pay). You can sit back and increase your capital as a landowner by simply waiting (the value will rise anyway) or by leasing it out (which aristocratic families have done for ages). No need for any added labour.

So, to keep the price of living affordable, there is much to say to take the land out of the economic equation. One way to do this is dissociating land from the real-estate on top of it. In some countries, such instruments have deep roots. In the Netherlands, many cities hold the urban land in possession and make it available through ‘erfpacht’ (land lease contracts) with a long runtime, say 99 years. However, under pressure from a withering pool of public assets and the temptation of a quick cash-grab, such constructions are in decline. And in many other countries, they have never existed.

This is why Community Land Trusts (CLT’s) have come into the picture. A CLT does precisely this ‘dissociation’ of land and all the real-estate on top (and thus diminishes the impact of land on the price of access to real-estate). But it does something more: it binds a community. And this last is mostly done in a quite interesting way, by bringing the governance over the land not just to the community of inhabitants that resides on the land, but it also gives – in an equal manner – that governance to the broader neighbourhood and of the public authority. Generally, they share their say in the CLT with each 1/3 vote (1/3 owner of the land or trust, 1/3 owner or user of real estate and 1/3 community – mostly inhabitants of the surrounding area). This means that a CLT is much more than a trust on land – it is a trust on the wellbeing of a community.

CLT’s have developed in the US and the UK, and in recent years have started to become of interest in mainland Europe. The CLT Brussels (CLTB) has had a pioneering role in this, anchoring it in the Belgium legislation. City in the Making has held a keen eye on this, and over the last few years, we have had a frequent exchange with the motivated, inspiring and very welcoming group behind it. And luckily also elsewhere, it is being taken up.

Hence, we have become involved in a North-West Europe-wide network aiming to make CLT constructions a next normal thing throughout Europe. This has brought us to the first meeting of this network (22nd of May 2018, in Lille). An intriguing mix of activists, legal experts and ‘citizens’, taking up part of this challenge for the two years to come. Above all, it has made us even more aware that the issue of urban land and its commodity value is one to be tackled. Time for a co-operative land-bank?

Links:
Book: ‘Rethinking the Economics of Land and Housing‘, Josh Ryan-Collins ea, and the article: ‘How Land Disappeared from Economic Theory
Community Land Trust (Wikipedia)
CLT Brussels (FR / NL)