Do we need a land reform?

We posed this question on Bkult in November 2012. Bkult is an online discussion platform run by the Bundesstiftung Baukultur, Germany's national foundation for the built environment.

Potenzialwertermittlung: Reinhardtstrasse 31 A study of 25 German cities during the last five years by the Deutsches Institut für Wirtschaft (DIW) revealed the following:

  • on average the rents in German cities have gone up by 1.8% per year
  • in the more attractive metropolises the rent has increased by 5% to 10% per year
  • the cost of buying an apartment has risen by 6.5% on average, and in Munich by 12%
The DIW cites short supply as the primary cause, noting that rents increased most in cities where dramatic population increases were met with only minor investment in apartment construction.

This trend continues steadily, and many experts have begun to warn of the next real estate bubble. Spain and the USA are still struggling to recover four years after the last bubble burst.

Potenzialwertermittlung: Kastanienallee 63/64 Free market mechanisms begin to fail when resources become so scarce that societies' basic needs cannot be met. Land is our primary resource, we depend on it for food and shelter. The speculative market that has developed around property is not sustainable, because it sacrifices long term social stability for short term economic gain.

None-the-less, property ownership is an effective urban development tool. Ownership motivates people and companies to invest in their environment by providing them with the long term security that tenants lack. People tend to be more careful with the things that they own than with things they rent. In the face of shrinking state pensions, property ownership can form the basis of a stable and secure retirement. Unfortunately this form of pension is too expensive for many people.

Potenzialwertermittlung: Chausseestrasse 30 It is time to rethink our principles of land ownership. By insulating the use of land from the speculative property market, we could encourage sustainable urban development. One possibility is a land reform that would transform ownership rights into long term leaseholds. This would give the government control over our primary resource, and remove the pressure for short term monetization of land assets. It would allow government to allocate spatial resources to meet on society's broader needs in ways that are currently not possible.

In Amsterdam for example, the city owns 80% of the land. The property rights are leased out to private companies to build buildings that meet the city's requirements. Because the city maintains ownership, they can make sure the land is used in society's best interest, and not simply those of a handful of private developers and land owners.

Potenzialwertermittlung: Brunnenstrasse 32 The current global crisis was in part triggered by a land speculation, to prevent further such crises, we would do well to reconsider our land ownership systems. Several countries have begun to change their land ownership laws. A plebiscite in Switzerland (zweitwohnungsinitiative) has forced the government to limit sales of houses to non residents, and slow the urbanization of their limited mountain landscape. In the U.K. the Liberal Democrats have proposed a similar law for certain boroughs of London. In Germany it is therefore time to ask “Do we need land reform?”

Follow and contribute to the debate on Bkult (in German).

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