If we're to speak of land wealth then we must get it right

Is a significant portion of the national wealth in land and or housing? Yes, it most certainly is. What's not quite true as this following claim though:

But ignoring land is a mistake. Despite the explosive growth of corporations since the Industrial Revolution, land still represents a huge percent of all the wealth in the economy. What’s more, focusing only on capital gains neglects the extremely important fact that land earns income from rent. If you live in your own house, this income is implicit -- living in your own home means you don’t have to pay rent to someone else. But if you’re a landlord, you get checks every month, just like stockholders receive quarterly dividends. And in the same way that a stockholder can use dividends to buy more shares, a landlord can use rental income to buy more property -- thus, rent needs to be counted in the return to housing.

And that total return is higher than people realize. According to new research, the return on residential real estate has been as high as or higher than the return on equity. As modern economies have grown and developed, owners of the ground on which we live have been steadily enriched.

This simply isn't correct. Land as a portion of national wealth has declined enormously over the past century and a half of capitalism. Quite the most remarkable change in fact has been the destruction of farmland - those grand aristocratic estates - as a factor in the calculation of that national wealth.

For people are getting confused here, It isn't the land upon which our houses stand which is valuable. It is the permission to put a house upon that land which is. This goes back to that point we so often make, agricultural land is perhaps £10,000 a hectare in the SE, land with planning permissions some 100 times that. The same is true of the land which sits under the houses already built.

That is, the rise in "land" as a portion of wealth entirely disguises the reality, that it's gone from being some small number of great estates to being the land under owner occupied housing making up that wealth.

We could also change this quite a lot by having a sensible planning regime of course. But it's still important to understand that it's not some class of landlords, rentiers, controlling that wealth being talked about. It's us. Which does rather change what we do about it, no?

Previous
Previous

Fat Cat Thursday

Next
Next

Give Lord Price a megaphone