We hear the phrase "the landed gentry" from time to time, often in the context of first-time homeowners, lyparticularly those who have bought in a neighborhood undergoing "gentrification."
But what does it mean to be the landed gentry? What is it that matters about being landed? And what is "gentry"?
I've not gone out to research this. I'm working off the top of my head, as someone who is interested in the importance of land and also in wealth distribution and poverty issues. But it seems to me to be worth trying to pull together what I think I know.
What comes to mind when I hear the phrase "landed gentry?"
- the Duke of Westminster
- the film "The White Cliffs of Dover"
- the British House of Lords
- owners of large estates, here and abroad, resident and absentee.
- the phrase "not join house to house, nor couple land to land, to the impoverishment of others"
- the game of musical chairs
- that a single tiny lot in Manhattan, with only an obsolete 3-story building on it, can yield its absentee landlord sufficient rent on which to retire very comfortably elsewhere, and then leave a magnificent inheritance for one's children, who will sell it as a teardown.
- the phrase "God's eldest sons"
- the missing verse from "All Things Bright and Beautiful"
- the "Founding Fathers"
- the "First Families"
The "landed gentry" may not even be individuals. It might include
- family trusts (e.g., Goldman) which may continue for centuries after the grantor's death;
- "small businesses" -- partnerships created to hold real estate;
- Real Estate Investment Trusts, made up of shareholders from all over the US and many parts of the world;
- sovereign funds, of other countries' oil or other natural resource money (usually to benefit their leaders, not their average citizens);
- philanthropies (which need spend only 5% of their principle to keep their status);
- endowments (Yale's comes to mind, as does Cooper Union's, on a different scale);
- pension funds, which may sound as if they benefit a wide spectrum of our population, but whose value mostly accrues to fairly wealthy pockets.
The way we've got things set up right now, these entities get to pocket value that the rest of us create. [What's the alternative? See below**]
Need I point out that all land is not created equal?
- An acre of good agricultural land might be worth $2500 to $10,000 (and that includes some improvements put in by the farmer which aren't truly land value -- clearing, grading, fencing, drainage, good care of soil and ecosystem).
- An acre of residential land about 45 minutes from midtown Manhattan might be worth $500,000 (or more, depending on which town is involved -- Greenwich, CT, would be much higher)
- An acre in midtown Manhattan might be worth $250,000,000 -- yes, $250 million -- or more -- plus the cost of removing the obsolete existing buildings from it.
The interests of those who own agricultural land and suburban land other than that near a few coastal cities are very different from those who own even tiny bits of Manhattan land, where 0.05 acres and an obsolete building can provide a nice living without the landholder lifting a finger.
What does it mean to be without land?
It means that in order to live and in order to work, one must pay someone else for a bit of land. The selling price of that land is a function not of anything that the seller individually has done, rather, it is a function of the health of the community as a whole, and its investment in amenities that people value and are willing to pay for. The rental price for a property is also a function of the quality of its location. In many of our urban areas, the rental value of an apartment is 15% for the unit itself, 15% for the services the landlord provides (e.g., doorman, trash removal, clean halls) and 70% for the location. The landlord has not a thing to do with that 70%, but gets to pocket that value nonetheless. So, too, with the seller of a home. Particularly if it is more than about 20 years old, the building itself may have very little value, relative to the land on which it sits. But the seller pockets the value anyway, subject only to a small conveyance tax in a few places. (In Connecticut, it can be as much as 0.5% -- a small amount compared to the 5.0% to 6.0% that the real estate broker pockets for a few months' work.)
For a farmer, it means sharing a significant portion of your crop with the fellow or widow who provided you with the land on which to work. They didn't create the land. (They might have created some of the value, by clearing it, contouring it, improving the drainage, fencing it, etc. But such work, like any other improvement, requires ongoing maintenance and is basically a depreciating asset.)
For a residential tenant, it means that one's landlord gets about 25% to 30% of one's wages (or that one lives further out, and devotes a similar proportion of income to the combination of lower rent and higher transportation costs).
For a homeowner with a mortgage, it means that one borrows just as much as the mortgage lender will permit in order to live as close as possible to the amenities one wants the most: good schools, a short commute to work, cultural amenities, access to an airport, good hospitals, etc. But the bulk of one's monthly payment is going, not to the town which provides the schools and other location-related amenities, but to the mortgage lender who paid off the last owner of that site -- who didn't create most of the value you're paying him for!
For an entrepreneur with a business plan, it means that before one can hire the first employee, one must gain access to the sort of space one needs. Often (at least in most urban areas*), the cost of that property is mostly for the location, not for the building itself or the services the landlord himself provides. Often the lease is a triple-net lease, which means that the tenant bears the expense and risk of any increase in property taxes, insurance costs, utilities, etc. Did the landlord create any of that value? Yes -- the building itself -- either he built it himself, or bought it from someone who did. But the building is a depreciating asset (and often, for income tax purposes has been fully depreciated over, and over, and over again, from higher and higher purchase prices) and what increases in value is the location itself. The tenant pays and pays. If he has something left over, he can hire employees (if he can afford them) or take on inventory or buy machinery.
*Which is perhaps the clearest explanation for the lyrics of the song New York, New York ... "If you can make it here, you'll make it anywhere." If you can thrive in a high-rent district, you're probably a landlord!
So what's the alternative to a society with "landed gentry" and "everybody else?" A society in which the community collects the economic rent from those who hold the land, and uses it to meet the common needs of the community: schools, roads, emergency services, public works, courts, etc. (The provision of these goods tends to increase the rent, and provides a permanent fountain to meet common needs -- without placing taxes on wages, or sales, or buildings, or production. A win-win situation! A virtuous circle!)
Sidelight: We may tend to think that as soon as we become "homeowners" our self-interest changes -- that we are on the track to being one of the winners in this system, instead of one of the payers, and that therefore it behooves us to be kneejerk reactionaries in favor of "property rights" of all kinds. Further examination will reveal that this is not the case -- that our interests as human beings, as parents, as ancestors, as members of the community -- continue to exceed our interests as holders of small plots of relatively low-value land.
In Alaska, some of the revenue that flows from that state's natural resources is used to finance Alaska's spending. And some of it is deposited into the Alaska Permanent Fund, which provides an annual income of $1100 to $1800 per year for every man, woman and child in Alaska. There have been suggestions that the oil in Iraq rightly belongs to the Iraqi people, and that the revenue should be used to support the spending that would make Iraq's cities and towns good places to live.
America's land value, particularly its urban land value, is its #1 "natural" resource. It was created by all of us together -- landowners and tenants equally -- and rightly is our common treasure. The "landed gentry" are welcome to continue to have title to the land. But we must revise our mode of taxation to collect from them the annual value of this resource which is rightly our COMMONWEALTH.
Once again: What's the alternative to a society with "landed gentry" and "everybody else?" A society in which the community collects the economic rent from those who hold the land, and uses it to meet the common needs of the community: schools, roads, emergency services, public works, courts, etc. (The provision of these goods tends to increase the rent, and provides a permanent fountain to meet common needs -- without placing taxes on wages, or sales, or buildings, or production. A win-win situation! A virtuous circle!)
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