Land ownership and land trading are crucial aspects in the spatial planning of town and country, but also of decisive importance in terms of affordability of land – whether that is for living, working or farming. A number of economists argue that land should actually be withdrawn from the market, because it does not work according to the market mechanism: after all, you cannot make more of it “for a while” if supply and demand are not in equilibrium. Reason for City in the Making to highlight the usefulness and necessity of land – and land politics.
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
“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. (more…)