Georgist Occupancy with Rent
Community Rent Results in Fair and Optimal Use
If a person has title to land, and pays its economic rent to the relevant community, then that person is, in effect, occupying the land. The economic rent is what a competitive tenant bids for the best use of the land.
Suppose a person owns land that is wilderness, and pays rent for that land. If wilderness is the optimal use of that site, then that satisfies occupancy. Occupancy would not require developing the land and reducing its value to society by ruining its wildlife.
If the title holder is keeping the land vacant awaiting a best time for development, and is paying the community rent, then he too is occupying the land. Requiring him to build immediately could impose a social cost of inefficient use. People other than the owner do not have any better wisdom about the timing of development than the title holder who is paying the carrying cost of the land and expects to profit later from the development.
If the title holder is paying community rent, then the tenant does not have to be the title holder. The site also has capital goods — the improvements — and the best use of the land may well be tenancy by someone other than the owner of the capital goods.
The initial appropriation of unclaimed land is indeed occupation and use, but human equality requires the application of the Lockean proviso that if land of equal quality is not available for free, then occupancy is not sufficient. Locke did not elaborate on what would be sufficient, but the missing link was filled in by Henry George, who, in both his moral and economic treatment of land, stated that the payment of rent to the relevant community would be sufficient for justice.
Illegitimate appropriation should be handled either by returning title to the previous holder, when feasible; or by compensation; or by recognizing the current title holder as legitimate so long as he pays the community rent. Compensation should exclude the value of the improvements made by subsequent owners, and the increased value of the site due to the growth of population, commerce, and civic goods.
Communal neighborhood property is morally subject to the same rules as individually held titles. The neighborhood organization should pay the community rent to the greater community. The owner of park land, such as a municipality, would also pay community rent, but the community may well rebate that rent back to the park authority. The payment of the rent puts the social cost in the budget, and then the members may decide whether it is worth the cost to pay that rent back to have the park or preserve wilderness.
Kevin Carson writes, “under a Lockean system, a tenant who cultivates land on a rental property must abandon whatever improvements they make to the soil during their time of tenancy.” The status of improvements depends on the contract between tenant and landlord. The contract could specify that the market value of the improvements be paid to the departing tenant.
Carson also critiques the Georgist payment of community rent as putting land users in a “precarious position,” lacking security of possession. Georgists have three responses. First, a guaranteed title to the current user, without the payment of community rent, endows those with better lands a superior status. They get richer by capturing the greater implicit rent due to the growth and development of the economy. Georgism puts everyone in an equal status with respect to natural opportunities. Moreover, if the current occupant is not putting the land to its highest and best use, he is wasting a scarce resource and making others poorer.
Secondly, for special cases such as retired folks who have little income and face an increase in the land rent, a humane application of Georgism would allow for a postponement of the extra rent payment until the property is transferred. Third, after the community rent is established, rent insurance markets would arise, so that a tenant could purchase insurance against an unanticipated large rise in the rent.
Carson advocates “funding freeways and public transit entirely with cost-based user fees.” If a transit services charges users the average per-person cost, the price of transit becomes greater than the marginal cost, the cost of the extra energy needed to carry one more person. Average-cost may reduce ridership so much that the transit would have a large loss. The efficient price for transit, as well as road use and parking, is the marginal cost, which is so close to zero that the optimal price for these services is to make them free when they are not crowded, and to otherwise charge just enough to eliminate congestion. The other costs are then efficiently financed from the land rent generated by the transit, streets, and parking. It is not clear why Carson believes that “the use of land value taxation to eliminate this residual amount of rent, in my opinion, would be a cure worse than the disease.”
If we broaden the concept of “occupation and use” to include the payment of community rent rather than physical occupancy by the title holder, then the Georgist collection of rent, and its distribution in equal shares to the members of the community, is compatible with that criterion.
One last item needs to be analyzed — easements by prescription. In today’s land system, if someone occupies land held by another without the title holder’s permission, but also without any attempt by the holder to prevent such use, then after a number of years (typically five years), the occupier obtains a prescriptive easement on that property, a legal right to use that property as though he had title. Since such easements prevent the waste of land by a land holder who leaves the site idle, Georgists should not object to such occupancy. But then the easement holder owes a community rent as the effective possessor of the legal rights to that site.