Land Rent

11 Key excerpts on "Land Rent"

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  Urban Land Rent

  Singapore as a Property State

  • Anne Haila(Author)
  • 2015(Publication Date)
  • Wiley-Blackwell

    (Publisher)

  3 Economic Arguments Rent Theory and Property Rights Theory Rent is that portion of the produce of the earth which is paid to the landlord for the use of the original and indestructible powers of the soil. (David Ricardo, The Principles of Political Economy and Taxation 1817) In contrast to single-city ethnographies and comparisons between cities – the two typical approaches in urban studies – my approach is to analyse land and landownership, and explain urban development processes. The two theories that anchor my study are property rights theory and rent theory. Property rights theory assumes a world of atomistic individuals in an ahistorical market. The main idea of rent theory is to see rent as a social relation between landlord and tenant. This relation changes with time. Rent is a payment made to the landlord for the right to use land. In recent years, property rights theory has become a popular ideology, and even rent theory has been reformulated to suit this ideology. This chapter focuses on these theories, introduces the main concepts and discusses the dominance of the economic argument. Concepts and Forms of Rent In colloquial language, the term ‘rent’ means payment for use of a house, an apartment, or a piece of land, without distinguishing between payments for improvements to the land and the underlying land itself. The theoretical meaning of rent is different and has changed over the years. Classical economists Adam Smith and David Ricardo connected rent to land. Modern economic theory defines rent as a payment made for factors of production that are in imperfectly elastic supply, 1 with land as the main example (Stonier and Hague 1967: 273). Sometimes the prefix ‘land’ or ‘ground’ is used to distinguish Land Rent. Other concepts of rent have been introduced, such as economic rent (which refers to earnings from any factor of production) and scarcity rent (emphasising the scarcity of land or other resources)

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  The Leasing of Federal Lands for Fossil Fuels Production

  • Stephen Macdonald(Author)
  • 2013(Publication Date)
  • RFF Press

    (Publisher)

  Full knowledge and the absence of any element of monopoly are implied by the condition of perfect competition. Accordingly, for the purposes of this study—which is concerned solely with the leasing of land and hence with Land Rent—we define pure economic rent as the income which tends to accrue in the long run, under conditions of perfect competition and the absence of externalities, to the owners of land, where “land” is raw natural resources. While no one supposes that perfect competition ever did or could exist, Land Rents that would arise under that condition are an objective that the Department of the Interior may more closely approach with suitably designed terms and conditions of land leasing. The task of showing how this can come about begins with the above definition.

  THE THEORY OF ECONOMIC RENT

  The income of a factor of production—land, labor, or capital—per unit engaged is a price determined by the supply of and demand for that factor. The supply of a factor is a schedule of the number of units of it that are offered for hire at different factor prices. Generally, except in the case of land as we have defined it, the quantities offered for hire increase with factor prices, other prices, or the general price level given. This fact reflects increasing disutility at the margin associated with increasing quantity of the factor supplied. The demand for a factor is a schedule of the number of units of it that users are willing to hire at different factor prices, with the quantities demanded varying inversely with factor prices. The inverse relationship reflects declining marginal productivity of the factor as increasing amounts of it are employed relative to other factors. Indeed, under conditions of perfect competition, the schedule of marginal productivity of a factor multiplied by the price of output is the demand schedule for the factor; for by pushing employment to the point where factor price equals the value of the marginal product, competitive employers tend to maximize profits.

  Consider now the market for land. As we stated earlier, land, as defined, is not producible by man; no cost is incurred in its creation. It will not go away if its owner receives no income from it, and no owner can make himself better off by withholding land from productive combination with labor and capital. Its supply, therefore, is perfectly inelastic with respect to its income. Figure 3-1

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  Economics, Real Estate and the Supply of Land

  • Alan W. Evans(Author)
  • 2008(Publication Date)
  • Wiley-Blackwell

    (Publisher)

  It would be best, I suggest, and would avoid much confusion, if the term ’economic rent’ were replaced by a term such as ‘surplus earnings’. Chapter Two 29 Unfortunately I have little hope that this suggestion will be adopted by the economics profession. First, because changing the names of concepts after they have been in use for a century or more is difficult to achieve. Second, the economics of the land market and of Land Rent is regarded as of little importance by general economists so that the fact that the general usage creates more confusion than clarification in land economics will not be regarded as any reason for change. And, since this is so, it is advisable for those involved in studying and teaching land economics to be very aware of the possibility of confusion and misunderstanding. This is particularly possible since general economists may sometimes use the term ‘rent’ when they mean ’economic rent’, as in the term ’rent seeking activities’. The use of this term in the study of the economics of land use planning can create total confusion in the minds of students of land and property, who can easily fail to realise that the rents being sought are not commercial rents but economic rents. In the next chapter we turn from considering the demand for land to con- sidering the supply of space, the way in which the land market adjusts to increases in the value of land, either by bringing more land into use, or by changing its use, or by increasing the capital investment at the site in order to increase the amount of space by building more. Coping with Changes in Demand ‘The continuing story of Bungalow Bill’ Introduction The basic theory set out in the previous chapter stresses, as we have shown, the demand side. Land values and rents are determined by the demand for land and space. But when demands change then the supply of space must change in response to the shifts in demand.

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  The Quality of the Urban Environment

  Essays on "New Resources" in an Urban Age

  • Harvey S. Perloff(Author)
  • 2015(Publication Date)
  • Routledge

    (Publisher)

  7 The value of urban land Edwin S. Mills Chairman of the Department of Political Economy, The Johns Hopkins University The value of urban land Edwin S. Mills

  Urban land is an important resource in modern production, transportation and transfer, and consumption activities. Therefore, the value of land is a matter of prime importance. In fact, land value has been of interest to economists over a long period of time.

  Classical and Neoclassical Land Rent Doctrine

  Ever since economics was an identifiable subject, Land Rent has provided major analytical difficulties. Early writers, who thought price to be mainly determined by cost of production, found it especially difficult to explain how a product—land—to the production of which no resources has been committed, could command a price. And how should the fact that some land commands a higher price than other land be explained? Do land values help determine commodity prices, or is causation in the opposite direction? What will be the effect of technical progress on the distribution of income between Land Rent and returns to other factors of production?

  But closely related to these analytical problems were many social issues about which economists and others sometimes held very strong views indeed. What, if any, is the moral justification for the payment of a return to a non-produced factor? And how could society expropriate whatever part of the return to land lacked moral justification without impairing the efficiency of resource allocation?

  It is not possible here to survey the interesting history of Land Rent doctrine—the job has been done by others.1 Hence, I shall confine myself to a Cook’s tour through the countryside, pointing out some of the more interesting landmarks to my fellow tourists.

  Ricardo is correctly attributed with the most fundamental insight concerning Land Rents in the history of economic thought. Indeed, progress during the 150 years since the publication of his Principles2

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  Property Valuation

  In an Economic Context

  • Peter Wyatt(Author)
  • 2008(Publication Date)
  • Wiley-Blackwell

    (Publisher)

  It should be noted that this is a very simple model of a complex market that is seldom in a state of equilibrium (Fraser, 1993). In fact Ball et al. (1998) point out that, in practice, the short-run demand curve is unlikely to be very sensitive to rent levels and therefore tends to be inelas-tic. This is why rents tend to be sticky downwards because, faced with an inelastic demand curve, landlords would have to reduce rents significantly to have much impact on the quantity of space demanded. In the long-run the demand curve would become more elastic as businesses change production methods, space utilisation and location. It is now time to turn our attention to the use of land and buildings (prop-erty) as a collective factor of production. The first thing to point out is the dominance of the existing stock of property over new stock. Because prop-erty is so durable it accumulates over time and new additions (say each year) add a tiny amount to the existing stock. Consequently new supply has negligible influence on price. Nowadays we think of rent as a payment for ‘improved’ land – typically land that has been developed in some way so that it now includes buildings too. Economists refer to this concept of rent as commercial rent. If the property is let to a tenant then the rent would include not only a payment for the use of the land but also some payment for the interest and capital in respect of the improvements that have been made to the land. But it is not easy to distinguish the rent attributable to buildings from that attributable to land. Land is, of course, permanent and although buildings do ultimately depreciate, usually due to a combination of deterioration and obsolescence factors which will be discussed in Chapter 6, they do last a long time.

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  Developments and Issues in the Theory of Rent

  • Carl Rollinson Bye(Author)
  • 2019(Publication Date)
  • Columbia University Press

    (Publisher)

  Extension of Rent Concept Again Implied. As a con-sequence of the consideration given to unearned incomes and land costs, the inclination toward a broader con-43 Ely, Adams, Lorenz, and Young, Outlines of Economics, p. 449. H Cf. Dorau and Hinman, op. cit., p. 494. D E V E L O P M E N T S I N T H E T H E O R Y 3 1 cept of rent again is brought into the foreground, but, on this occasion, in two somewhat divergent forms. On the one hand, the similarity of all unearned returns is recognized: a tendency grew up to think of costlessness as the very essence of anything that is to go by the name of rent, and therefore to extend the use of the word to any costless income whatever. 45 On the other hand, the baffling difficulties of abstraction and uncertainty, en-countered in attempts to apply the rent of classical theory to concrete cases, encouraged the advocacy of a more realistic understanding of Land Rent as the productivity of land as it now exists. By this change of definition, Land Rent is made the return from a more tangible and definite, though not entirely homogeneous factor of pro-duction; the question of unearned land income becomes but a part of a more extensive inquiry into the revenues of all economic groups. RENT AS A PRICE The method of analysis employed in the classical rent theory suggests that the broad principles of demand and supply are inadequate for the explanation of Land Rent, and that consequently the return is an irregular, if not unique, form of income. In a number of economic treatises published in modern times, the primary em-phasis given to the law of diminishing returns and to productivity differentials tends to perpetuate this idea and to concede little more than supplemental reference to immediate market influences. Ai Hoag, A Theory of Interest, p. 220. 46 Dorau and Hinman, op. cit., p. 466. 32 D E V E L O P M E N T S I N T H E T H E O R Y Interpretation of Rent as an Economic Anomaly Un-satisfactory.

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  Property, Planning and Protest: The Contentious Politics of Housing Supply

  • Quintin Bradley(Author)
  • 2023(Publication Date)
  • Routledge

    (Publisher)

  Marx (1981: 752) wrote, “Landed property presupposes that certain persons enjoy the monopoly of disposing of particular portions of the globe as exclusive spheres of their private will to the exclusion of all others.” Land values could not exist without the capacity to appropriate rent which private property confers, Marx argued. The social and legal relationship of private property enables landowners to valorise their land, to put a price on it and extract a surplus, because it awards them the power to bar access to an essential resource. Ground rent is the result of realising the economic value of this monopoly. Rent is a tax, a tribute exacted on the labour of others who pay for the privilege of using land monopolised as private property.

  Marxian theory identifies four categories of ground rent that denote the different processes of the economic valorisation of exclusive property ownership. The first, differential rent is the payment extracted from the use of land because of its preferential location or productive qualities. It is a measure of the difference between the most marginal land and land that is more centrally located or more productive. Differential Rent 1 valorises the natural attributes of land, while Differential Rent 2 is a measure of the capital invested in land to generate increased productivity. The third, monopoly rent describes the exclusive advantage enjoyed by landowners who possess land in demand for its unique characteristics or its incomparable location. For example, ownership of urban land in the central business district commands a monopoly rent (Walker, 1981 : 402). The assumption behind these three categories of rent is that landowners extract a tribute from the profits generated by the productivity of land. The fourth category of absolute rent, however, returns us to Marx’s contention that the institution of property ownership entails the power to bar access to land as an essential resource.

  Absolute rent is defined as the minimum amount that landowners will accept as payment for developable land. It signalled for Marx the potential for landowners to withhold their land from use until their required price was met. Landowners can demand rent for all undeveloped land, no matter how marginal and unproductive it is, because they have the ability to erect an absolute barrier to the use of that land. The landowner has the power “to withdraw his land from cultivation until economic conditions permit a valorisation of it that yields him a surplus,” Marx (1981: 891) noted in Capital volume three. Absolute rent is the only category in Marxian theory in which the demand for rent directly affects the price of goods (Fine, 2016 ). If landowners have the ability to erect an absolute barrier to the use of land and hold it back until they receive the rent they require, then they exercise control over production and prices. The landowner’s demand for absolute rent can only be met if goods are sold at above-average prices, with the landowner seizing the surplus and the producer still returning a profit. “The market price must rise to a point at which the land can pay a surplus over the price of production, i.e., a rent. … This rent forms the excess of the value above the price of production” (Marx 1981 : 896). Applied to contemporary housing markets, the category of absolute rent directs attention to the relationship between the value of land and the cost of housing. An increase in the supply of developable land will not bring down the cost of housing if the payment of absolute rent remains a condition for production. On the contrary, land will be withheld from production until the price of housing reaches the level required to pay the demand for rent (Fratini, 2018

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  Indian Agriculture after the Green Revolution

  • Binoy Goswami, Madhurjya Prasad Bezbaruah, Raju Mandal(Authors)
  • 2017(Publication Date)
  • Routledge

    (Publisher)

  1 Introduction As discussed in chapter 1, one of the important changes that Indian agriculture has witnessed is the loss of land shares by higher size classes and gain by lower size classes over time. This change is discernible in terms of both areas owned and operated. Such a development suggests that there may not be enough land now to redistribute and to bring all units to a minimum threshold size. Redistri-bution may result in pulling down all rather than pulling up the marginal ones. Therefore, rather than redistribution, what assumes more significance in today’s context is improving the access of the needy farmers to land to operate on. It is in this context that the Land Rental market may play an important role. The important function of the Land Rental market is to bring about a better matching of land and labour endowments across rural households. Rural house-holds rarely own land and labour, which are the two important factors of agri-cultural production, in right proportion. While some households may own more land relative to labour, some others may have more labour compared to land owned. The Land Rental or lease market, in the form of tenancy contracts, facili-tates transfer of land for use from land-abundant households to labour-abundant households. The functioning of the land lease market has important implications for better and equitable utilization of land. Leasing arrangements ensure better utilization of land resources by bringing in such land under cultivation which otherwise would have remained unutilized by labour-scarce households. Such arrangement also results in more egalitarian use of land by improving the access of land-scarce households to cultivable land. Thus, by ensuring better utilization of land and labour resources of households, the lease market can potentially increase agricul-tural output.

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  The Limits to Capital

  • David Harvey(Author)
  • 2018(Publication Date)
  • Verso

    (Publisher)

  Capital, vol. 3, pp. 617–18, 636). It follows that, although ‘the income of the landlord may be called rent, even under other forms of society’, the meaning of that payment ‘differs essentially from rent as it appears in [the capitalist] mode of production’ (p. 883). The appropriation of rent can then simply be defined as ‘that economic form in which landed property is realised under capitalism’ (p. 634).

  The actual history of the transformation of feudal rent into capitalist ground-rent, of the subjection of feudal property to the capitalist mode of production, is strewn with complexities generated to a large degree out of the cross-currents of class struggle and social conflict.8 Difficulties also arise because ‘capitalist production starts its career on the presupposition of landed property, which is not its own creation, but which was already there before it’ (Theories of Surplus Value, pt 2, p. 243). The original conditions of landownership varied greatly, and some, such as those in England, appeared easier to transform than others.9 Since the separation of labour from the land as a means of production was (and still is) an essential precondition for the formation of wage labour, the form of pre-capitalist landownership played just as important a role in primitive accumulation as capital played in the creation of the modern form of landed property. Private property in land, like merchant’s capital and usury, is as much a prerequisite as a product of the capitalist mode of production:

  The history of landed property, which would demonstrate the gradual transformation of the feudal landlord into the landowner, of the hereditary, semi-tributary and often unfree tenant for life into the modern farmer, and of the resident serfs, bondsmen and villeins who belonged to the property into agricultural day labourers, would indeed be the history of the formation of modern capital. (Grundrisse, p. 252)

  Marx’s general version of this history can be divided into two phases. In the first, feudal labour rents are transformed into rent in kind and finally into money rents. This transformation presupposes ‘a considerable development of commerce, of urban industry, of commodity production in general, and thereby of money circulation’ (Capital

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  Resources, Production and Structural Dynamics

  • Mauro L. Baranzini, Claudia Rotondi, Roberto Scazzieri(Authors)
  • 2015(Publication Date)
  • Cambridge University Press

    (Publisher)

  Apparently, the scarcity of a natural resource is not something that can be assumed at the outset: it rather ought to emerge as a result of the analysis, given the data of the problem under consideration. The assumption of a zero reservation price for the use of land in combination with that of free competition amongst landlords imply that no quality of land can yield its proprietor a positive rent unless that land is scarce. 6 The only relative prices dealt with are the wage rate and the rents per acre, or rent rates, in terms of corn. Alternatively, we can consider the price of corn and the rent rates in terms of the wage per unit of labour. In the former case corn serves as the standard of value or numéraire, in the latter the wage. Taking corn as the numéraire involves setting the price of corn, p, equal to unity: p = 1. Similarly in the case in which all value magnitudes are expressed in ‘wage units’ (J. M. Keynes), here the wage rate, w, is set equal to unity: w = 1. The analysis will be carried out in terms of the following three premises. We take as given 1. the total amount of corn to be produced in the economy; 2. the quantity (quantities) of land of given quality (qualities) available in the economy that can at most be employed in the production of corn; and 6 Hence, only rent due to scarcity will be dealt with, whereas no form of ‘absolute rent’ will be considered. In the Principles Ricardo develops his argument in terms of the assumption of ‘free competition’, i.e. he sets aside the problem of absolute rent or rent conceived, as it was by Adam Smith, as a monopoly price. This becomes clear in his discussion of the cause(s) of rent: ‘If all land had the same properties, if it were unlimited in quantity, and uniform in quality, no charge would be made for its use, unless where it possessed peculiar advantages of situation.

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  The Progressive Assault on Laissez Faire

  Robert Hale and the First Law and Economics Movement

  • Barbara H. Fried, Barbara FRIED(Authors)
  • 2009(Publication Date)
  • Harvard University Press

    (Publisher)

  The surplus, they concluded, will be paid as rent to the landlord holding inframarginal (that is, superior) land. Two things followed from that argument, both of which were critically important for the future development of value and distribution theory. First, rent does not enter into the value (that is, price) of final products, because such price will be determined by the costs of production on marginal (no-rent) land. As Marshall averred, Ricardo thereby discovered ‘‘the deepest and most important line of cleavage in economic theory: . . . the distinction between the [rents] which do not, and the profits which do, directly enter into the normal supply prices of produce for periods of moderate length.’’ 75 Second, the amount of rent paid to any individual landlord bore no neces-sary relation to the landlord’s costs. Rather, the amount was purely price-determined—that is, it was determined by the price at which wheat sold, which was in turn determined solely by the quantity of labor and capital required to produce the wheat at the no-rent margin. 76 In Ricardo’s terms, ‘‘[c]orn is not high because a rent is paid, but rent is paid because corn is high.’’ 77 Or as Sir Edward West declared, at somewhat greater length, A R E N T -T H E O R Y W O R L D 122 [O]n any increased demand for corn, the capital [meaning wage advances and any additional capital] . . . which is laid out to meet this increased demand is laid out to less advantage. The growing price, therefore, of the additional quantity wanted is increased, and the actual price of that quantity must also be increased. But the corn that is raised at the least expense will, of course, sell for the same price as that raised at the greatest, and consequently the price of all corn is raised by the increased demand.

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