Rural Land Development Myth

Low-income people can become victims of a number of economic distortions caused by a rural land use planning systems which divides rural land into zones specified for certain kinds of development. As land developers move in, the prices for developed land rise astronomically while the price of land held in agricultural status rises much more slowly. People who traditionally could afford home ownership at the bottom end of the housing market see themselves being squeezed out as land prices rise due to development.

Inevitably the increase in value that takes place when land is transferred from agricultural to development land has to be paid for by somebody. Most frequently this is home buyers or new business owners often in the form of a mortgage. In many cases the value of the development rights may equal or nearly equal the cost of house construction and of the basic agricultural value of the land. The beneficiaries of this transfer of wealth are developers who have bought the land at or near agricultural prices and sold it with planning rights, the banks, and other "ground floor" investors who have lent money on that basis; and other services such as Real Estate Agents whose income is related to the value of property.

In rural areas surrounding large cities, this "better use" of rural land involves a considerable - in fact often enormous - transfer of wealth from rural house buyers to property developers, speculators and urban based financial institutions. To a great degree this involves a flight of capital from the country to the city. It in part accounts for the colonization of villages by second-homers, commuters and other outsiders. Many of these newcomers derive part of their high incomes either directly or indirectly from the very drain of resources caused by agricultural and rural land conversion.

The opportunities for work in the cities that existed in the 1960s are now no longer available. There is a movement away from the inner cities and there is a general recognition that opportunities can be created in the countryside for more jobs through industrial development and diversification.

But for a even a relatively small migration of workers to new "rural development zones" to be successful, people have to be able to find somewhere to live that is commensurate with their income. The planning system as it exists at the moment precludes this because it artificially creates expensive housing in a low income sector. More need for housing in rural areas creates system where developers and investors desire a large and quick pay-back at the expense of low income workers who may barely afford the only housing available, thereby, keeping them poor.

There is admittedly a sense in which the rural land conversion planning will encouraged undesirable development: the profits to be made from increasing the value of land from $10,000 per acre to $100,000 per acre are a very real incentive for unscrupulous speculation which has as its object the realization of a quick profit, rather than the realization of a genuine socially beneficial development. While some rural land development plans may be good on paper, numerous other adjacent factors as well as cause & effect process are too often ignored.  Local Governments should not let themselves become tempted by land and industrial development discussions that leave out the resulting upward spiral of housing costs.  An alternative is to investigate a different type of restraints upon rural development.

As planning law exists at the moment, no fundamental distinction is made between different forms of development. "Change of use" from agricultural to residential / industrial is "change of use", whatever structure the prospective developer wishes to erect.