Surprisingly, people do not pay much attention to ‘land’, ‘real estates’ or ‘property’ to argue about growing inequality, but mainly an aspect of incomes such as wage stagnation, executive pay and bonus. Land is, however, responsible for the widening inequality between the rich and the poor as well. Lack of housing and increasing homeless issues should be understood and discussed not only in a very narrow sense of housing shortage but a systematic money flow from the poor to the rich through land and property-related business and investment. The current form of the real estate market in selling and buying is suitable for the oligarchic society, not democracy.
Historically, land has been always the source of wealth, power and inequality in Europe as well as other countries as Henry George’s Progress and Poverty (1879) revealed. It was an inherited, income-generating asset by parcelling out to tenants in feudal societies. The landless, unfortunates had risks to end up with slavery. The land was the basis of the class society. Land ownership was, therefore, related to emancipation and freedom during the period of Enlightenment. The natural right of property was one of the issues that Enlightenment thinkers highlighted. Coming up to the modern age, land was a necessary qualification for suffrage in many countries until the late 19th Century, linking it to the idea of democracy. Land in the neoliberal regime (around the late 1970s and up to present) is commodified and tightly linked to the stock market in respect of mortgage and recently derivatives. Land has become a financial instrument for financiers, developers and investors. The housing crisis, therefore, needs to be understood in the contexts of housing as a commodity and financialization of housing. If we want to have a less unequal society, we have to do something with land and land-based financial instruments.
Let me explain further why land is a matter in relation to social justice. For home buyers, this is a chief area which people borrow money most, followed by higher education, vehicles and credit cards. It often makes themselves lifelong debtors with a 30-year mortgage to mortgage lenders. An underlying problem is there is a hefty gap between home prices and average salaries in particular, Anglo-Saxon countries, which many people, now a day, take for granted. Substantial portions of incomes go to the wealthy in the form of a mortgage as well as rents in the high-price housing market, which makes the gap between the haves and the have-nots wider. Over-valued home prices push people to own tiny spaces in over-crowed or less valued areas or become homeless. Younger generations are set up in the socially excluded group by having fewer opportunities to access to the market of real estates to become mortgaged owners or debtors. Even rents for them have reached to the unaffordable level in over-crowded capitals such as London.
Land is – for investors, financiers, developers and real estate brokers – considered as an asset for investment, in which traditional aspects of land for housing and farming are, no longer, primary concern. Productive urban land, in particular, is the source of massive profits. Landed elites who own valued land also receive benefits for inflated land values when they lent. Over-pricing of the housing assets creates the concentration of the wealth (or capital accumulation), inequality and the social division. Neoliberal, deregulation policy sharpens the division. The land is now controlled in the hands of smaller elites, making the economy dysfunctional and oligarchic in nature.
Real estates or properties have become financial instruments of the ‘derivatives’ market for the last fifteen years, which has sharpened the division further. Property and real estate derivatives now involve lots of speculation and risks, being transferred them to other parties (redistribution of risks). These derivatives have weakened the residential aspect of land for the many, but an investment for investors and financiers or a financial instrument for wealth creation. The financialised land not only widen inequality but also harm productivity, innovation and the real economy.
Overall, the profit-driven land distribution, which utterly ignores the social implication of land, is suitable for oligarchy, but not for the democratic society. It empowers the few hands with the concentration of wealth, while it excludes the many, placing them into the desperate living standard. The current situation of mortgage lenders and borrowers is similar to the notorious relationship between landed elites and tenants in the European Medieval period. The problem is over-valued property and over-fuelled investment at the expense of landless or mortgaged people’s living standard. The inequality narrative has to add the aspects of land ownership and the financialisation of land.
English housing crisis has another aspect, which is the continuity of feudal-like large land holdings. The aristocrats and landed gentries, according to 2010 Country Life Magazine, have more than a third of English and Wales freehold (estate on land, not ‘land’ per se strictly speaking). Although the liberal movement of the land, including the registration of the land to dismantle the privileges of the aristocracy and make it marketable, has been taken place since the 19th century (e.g., the Land Registry Act 1862, the Land Transfer Act 1875), it has not yet completed even in the 21st Century. The completion of land registration will be the first step for the fairer and more equitable distribution of land in England.
Land redistribution sounds radical, but pre-requisite for a democratic society because it frees the people from financial suppression and because constant financial pressure may have negative impacts on people’s psychological state and change their voting behaviours, as interval period between World Wars I and II and the current anti-establishment movements suggest. People in the extreme unequal society with land concentration for a few may use voting power to overthrow the government or call the populist movement. It can be assumed that basic economic needs such as housing security (preferably, housing ownership) and decent employment are necessary for democracy. The Enlightenment movement shaped the political system for democracy. We now have to build the economic system which supports democracy. The fair land allocation will rebuild the voters’ trust, which has been absent in the neoliberal economy. A resident-first and justice-focused form by allocating land to lower-middle and working-class people will probably narrow the gap between the rich and the poor. The justice-focused land-allocation form will be also a key to regain consumer power, strength the real economy and bring about the sustainable economy. This will lead equity-based finance at least at the individual level.
An attempt for justice-focused land distribution is not new. State or local authorities usually involve the redistribution of land in order to transfer ownership from government-owned or elite-owned land to a certain socio-economic group in need. They may provide financial assistance for land acquirement and for the break-up of large estates into smaller pieces to devote to those in need. The redistributed land can be private, community or public ownership. Anglo-Saxon countries and Japan usually prefer private ownership.
The European experience of land reforms as opposed to Enclosure was related to the emancipation of tenant farmers from landlords. The land reform took place in farmland, which differs from a current problem of lack of affordable residential properties in urban areas. The case of Ireland land reform was the transfer of land ownership from landlords to their former tenant farmers by the UK government’s financial assistance in the late 19th Century. It was the outcomes of conflicts between landlords and tenants and between Irish Parliamentary representatives and England. In Finland, the government allowed tenant farmers to become smallholding landowners during the inter-war years, which led to the end of manorial culture (The Crofter Liberation).
While European land reform took place the transfer of ownership or holdings to landless farmers, the US experience was the provision of new land (or more precisely, Native Americans’ land) to immigrants and those from the other US States. The American government distributed 160 acres of public land to a Western settler in accordance with the Homestead Acts 1862 by President Abraham Lincoln. It required five-year continuous residence before ownership transfer, aiming to promote the settlement in the West. This free land distribution gave opportunities to disadvantaged people such as African-Americans to become landowners.
The latest example for land reform in advanced capitalist countries can be found in Scotland (since 2003), where 432 landowners own half of all the privately-owned rural land. The reform is probably one of the most comprehensive and well-adapted reforms to changing socio-cultural and economic needs (e.g., 2003 Land Reform Act, 2016 Land Reform Act). It looks at land ownership, management (e.g., tax, inheritance) and use in both urban and rural lands, seeking a greater diversity of land ownership and land for housing and development.
Those historical lessons, including contemporary history, indicate that the land redistribution methods and costs, the balance between public and private land and between commercial and residential land, the incorporation of environmental conservation issues differ by different political and socio-cultural settings. One of the commonalities is populational fluctuation in the future is often not incorporated in land reforms. Another commonality point is that land reforms tend to be taken place in the socio-political dynamism such as war, independence, revolution and in the case of Scotland, power devolution.
With lack of such political dynamism, governments prefer moderate policies such as land value tax, which Henry George advocated, rather than land redistribution. Land value tax alone, however, would not be sufficient enough in current situations because those who have problems to become homeowners are mainly lower-income families and younger generations in Anglo-Saxon countries and Japan, where homeownership rates are currently between 60 and 70 percent, far below from Norway (82.6% in 2017). It is difficult to access the housing market in such high housing prices and in the case of Japan low wages in the spread of fixed-term contract and casual employment despite declining housing prices in local areas. Public land ownership like Singapore and rental cultures like Germany and Switzerland would not fit Anglo-Saxon countries and Japan. Hence, a resolution is to build the system which low-income families can purchase homes with their saving, hopefully, 5 to 10-year saving, not mortgages, which would be too much of a burden. This probably means that only the buildings can be based on the market principle, but not land, whose price increase is a cause for housing babbles in the Anglo-Saxon markets. Some may argue that this strategy to give chance for homeownership to disadvantaged groups and younger generations may be only feasible to release public lands such as greenbelt sites in England and federal land in the West of the US. Such a decision would require discreet planning from the points of natural conservation and populational change in the future.
Another land-reform area is already privately owned land, which will, therefore, expect strong resistance from landowners. Governments probably do not need to negotiate the entire larger landholding population, but only top 100 to 500 landowners, which would certainly be the case in Australia, the UK and some states in the US.
For the protection of residents’ right for housing, foreign investment in land, which has been partially responsible for land price hikes, is another aspect to be considered for regulation, preferably prohibition. The total land size which individuals can own may need to be regulated in the future.
Thomas Piketty, as a solution for increasing inequality, refers to redistributive taxes, which is a good idea, but again not sufficient to tackle the current levels of inequality and private debts. Tackling with aforementioned land issues as well as decent employment is indispensable. Equity-based personal finance, not the debt-based, may boost consumers’ power, and bring about the sustainable economy. To do so in beginning, the housing system has to be away from mortgage and investment, ending financialisation of housing.