Why The “Market Value” of Land Doesn’t Go Far Enough
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We saw this TikTok from @crys_smilez21 (check our her content) and felt inspired to deep-dive into the market value of land and home ownership.
This article explores the disparity between the market value of land and its intrinsic worth. It examines the historical and economic factors influencing land valuation, highlights racial disparities in land ownership, and argues for recognizing land's cultural, environmental, and social significance to foster more equitable and sustainable land management practices.
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Buying property or land is often touted as the beginning of adulthood according to the traditional American dream. However, as a millennial, buying a house seems like more of a pipe dream than anything else. The market value of land and property is increasingly out of touch with that of my generation’s economic reality.
According to the US Census Bureau’s Current Population Survey, homeownership rates for millennials sat at 51.5% in 2022, compared to 56.5% for baby boomers in 1990 and 58.2% for Gen X in 2006. Although millennials have bounced back from a significant portion of the employment and income setbacks experienced during the 2008 recession, the combination of elevated interest rates and pricey stocks in today's housing market poses a greater challenge in bridging the homeownership disparity between generations.
When focusing on land ownership in particular, the situation only becomes more dire. It’s important to note that the majority of Americans don’t actually just buy homes, contractually speaking. Instead, they are purchasing a piece of land and its attachments. Many are unaware that the term “real estate” refers specifically to physical land and the structures and resources attached to it. Said “structures” typically include a home, but might include things such as natural resources like trees, water, crops, minerals, etc.
So, when we’re talking about home ownership, what we’re usually discussing is land ownership. More specifically, we’re addressing land and natural resource ownership and the rights, entitlements, and responsibilities associated with it. When we look at home and land ownership through this lens, we’re then able to better conceptualize the magnitude of its importance.
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How the Market Value of Land Is Determined
To understand how the market determines the value of land, it's crucial to grasp the fundamental principles underlying the concept of the free market. At its core, the free market is an economic system characterized by voluntary exchange, competition, and minimal government intervention. The origins of the free market can be traced back to the Enlightenment era, with philosophers like Adam Smith advocating for the virtues of free trade and individual liberty.
This philosophy found fertile ground in the nascent United States, where it shaped the country's economic policies and land distribution practices. The Homestead Act of 1862, for instance, offered 160 acres of public land to settlers willing to cultivate it, promoting westward expansion and agricultural development. Additionally, the concept of Manifest Destiny fueled the belief in the inherent right to expand and exploit land for economic gain, further ingraining market-driven ideologies into American society.
In the context of land valuation, the free market operates on the principles of supply and demand. However, this simplistic framework belies the complexity of factors influencing land value. Location remains a paramount consideration, with proximity to urban centers, transportation hubs, and desirable amenities driving up prices. Accessibility, determined by factors such as road infrastructure and zoning regulations, also plays a crucial role in land valuation.
Natural resources confer additional value to land, with fertile soil, water access, and mineral deposits enhancing its desirability. Furthermore, the potential for development encompasses both short-term profitability and long-term sustainability considerations. While land in prime urban areas may command higher prices due to immediate commercial or residential demand, parcels with untapped potential for renewable energy projects or conservation efforts hold intrinsic value beyond mere market dynamics.
Understanding the Discrepancy: The Market Value of Land Doesn’t Capture it All
Environmental researchers have long connected land ownership with greater water, food, and overall economic security. Foundational economists such as Adam Smith and David Ricardo, for instance, emphasized the contribution of land to economic growth. In their seminal works, David Ricardo, in Principles of Political Economy and Taxation,and Adam Smith, in The Wealth of Nations, both emphasized the vital role of land in economic growth.
Ricardo argued that land, as a factor of production, plays a crucial role in determining long-term economic development through its influence on productivity. Smith similarly highlighted the significance of land as a fundamental resource, underscoring its role in fostering agricultural productivity and contributing to overall wealth accumulation in a nation's economy. Recent data has further emphasized this relationship between land ownership and economic security, finding that Americans who owned land were more likely to have access to “convenient” neighborhoods.
Owning a home also comes with financial perks like being able to borrow money easily, protection against rent hikes, tax breaks for mortgage and property taxes, and lower taxes on profits when you sell compared to other investments. Most importantly, however, it's also a way to grow wealth. For most people, the money they make from their home is a bigger part of their wealth than what they have in savings or other investments.
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Beyond economic security, land ownership might also be connected to increased health, safety, and well-being. For instance, there is evidence that suggests land ownership is an indicator of increased life expectancy, with homeowners living on average 4 years longer than their renter counterparts. While this correlation does not prove causation, it does at the very least highlight land ownership’s interconnectedness with people’s well-being and health.
Data connecting land ownership to food security in the US also reinforces this, showing that it’s associated with increased food security in the US. For clarification, food security is defined by having reliable access to sufficient, safe, and nutritious food to meet their dietary needs and food preferences for an active and healthy life. Land owners are the most likely to be food secure in the US, with renters reporting higher indicators of food insecurity such as “could not afford balanced meal”, “worried food would run out”, etc. Therefore, land tenure, food security, and health exist within an undeniable nexus impacting overall human-well-being.
Land ownership also ensures owners and their direct beneficiaries and dependents rights to determine how their land and associated natural resources get to be used. Land ownership in the United States carries significant weight, extending far beyond mere property rights. The implications reach into social and political realms, shaping the very fabric of society.
One notable aspect is the differential impact of property taxes on homeowners compared to renters. Homeowners, by virtue of their ownership status, contribute more significantly to local tax revenues through property taxes. These taxes, allocated to various public services, notably education, wield considerable influence on the quality of resources available in their communities.
A prime example is the funding of public schools. Property taxes play a pivotal role in financing education, with homeowners shouldering a substantial portion of this burden. Consequently, areas with higher concentrations of homeowners tend to have better-funded public schools, offering enhanced educational opportunities for children residing in those neighborhoods. This dynamic perpetuates socio-economic disparities, as children in communities with lower property ownership rates often lack access to the same quality of education, perpetuating cycles of inequality.
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Beyond economic security, land ownership might also be connected to increased health, safety, and well-being.
Moreover, the power dynamics inherent in land ownership extend beyond education funding. In states like Texas, landowners wield significant authority over natural resources within their property boundaries. This authority encompasses crucial environmental decisions, particularly regarding water management. Landowners maintain control over access to and usage of water resources on their land, shaping regional water policies and allocation strategies. This concentration of power in the hands of a select few landowners underscores the importance of land ownership in shaping environmental governance and resource management practices.
These examples underscore the pivotal role of land ownership in influencing social and political decision-making in the United States. The disparities in educational funding and environmental stewardship highlight the unequal distribution of power and resources inherent in land ownership structures. Understanding these dynamics is essential for comprehending the broader landscape of power and influence within American society.
The Market Value of Land: Instrumental vs Intrinsic Value
While the market value of land may serve as a metric for economic transactions, it often fails to capture the true value and significance of land ownership within society. The market value of land primarily reflects its potential for commercial development or agricultural productivity, neglecting the broader social and environmental implications of ownership.
For instance, a piece of land may command high market value due to its proximity to urban centers or fertile soil, yet its other essential value in its role as a catalyst for educational equity or as a critical habitat for local ecosystems remain unacknowledged within market rationality.
By solely gauging land's value through market forces, we overlook its profound impact on social welfare, environmental sustainability, and equitable resource distribution. Recognizing the inherent limitations of market valuation is crucial for fostering a more holistic understanding of land ownership's importance and advocating for policies that prioritize societal well-being over purely economic considerations.
Many Native and Indigenous Americans have highlighted how the historical act of land grabbing from their ancestors has not only disturbed their traditional way of life, but simultaneously leaves them vulnerable economically and politically.
Most Native American-owned land on reservations is owned communally, meaning they’re unable to use land as collateral for capital accumulation because they don’t receive clear title on where their land sits. This fact explains why many mobile homes exist on reservations. In this way, Native Americans are exceptionally less likely to establish credit and and borrow money, creating more barriers for class mobility and generational wealth.
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What’s more, Native Americans are not the only racial minority whose lack of accessibility to land ownership is impacting their security. African-Americans and Latinos fall greatly behind White-Americans in home ownership. Only 43 percent of African-Americans and 46 percent of Latinos report owning the home they live in, compared to the 73 percent reported by their White counterparts.
Again, racial disparities in home ownership directly translate to racial disparities in rights and entitlements that come with land ownership. It would be different if racial minorities simply did not want to own a home, however this is not the case. They in fact do want to own property, but face unreasonable barriers from making this their reality.
Many argue that the market value of land is not a holistic measure of what land does and means for a community. As such, there is a prevailing notion that the market value of land cannot account for the value of land as a sense of belonging and place. For instance, research published in Rangelands studying landowners in the US Southern Great Plains assessed how land ownership directly correlated to local community member’s sense of place.
As such, people were more likely to contribute to environmentally sustainable land management practices. Similar studies in the US have identified this nexus between land ownership and sense of place, and how such connections are vital to creating strong, lasting communities. Therefore, the value of land is also in its ability to bring people together and build connections, a key aspect that cannot be captured in pure economic terms.
This fact brings us back to the original issue that land has value outside of its market value. Specifically, it has value that is intrinsic; this cannot be taken away or for granted within the market-fixated structures of which land is often appraised.
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Intrinsic value refers to the inherent worth of something, independent of its utility or market price. When applied to land, intrinsic value encompasses the cultural, spiritual, environmental, and social significance that land holds for individuals and communities. It is the recognition that land provides more than just economic benefits—it offers a sense of identity, heritage, and continuity. For many Indigenous communities, land is sacred and integral to their cultural practices and way of life. For environmentalists, untouched natural landscapes hold intrinsic value for their biodiversity and ecological balance. For local communities, land can represent a shared history and a foundation for future generations.
Understanding and acknowledging the intrinsic value of land is crucial for fostering a more equitable and sustainable approach to land management. Policies and practices that prioritize intrinsic values can lead to more responsible stewardship of natural resources, greater respect for cultural heritage, and enhanced social cohesion. As we move forward, it is imperative to balance market considerations with an appreciation for the intrinsic worth of land, ensuring that its true value is recognized and preserved.
Teyah Nichole
Nichole is an American (she/her), animal-loving, coffee-obsessed, small-talk hating, ENFJ-T , vegetarian based in London. She founded W&S almost two years ago before starting her PhD, with a desire to learn in community with like-minded women. [Get in touch]
