The Feoffees may sell Little Neck to the tenants ... for ever and ever

For background on this story, you might look at two previous posts (below):

• The Feoffees, their tenants, and the Ipswich public schools  February 20, 2008

• Update on the Feoffees' tenants in Ipswich, Massachusetts  July 8, 2008
  

I was surprised to learn that the Feoffees of Ipswich had decided to sell the property for which they have been trustees for over 300 years.  They have an agreement to sell the 36 acre property to the 167 tenants, who individually own cottages which sit on lots totaling a bit more than half the of the 36 acres; the rest of the land is apparently common property, shared by all the cottage owners (and their tenants) -- and assessed by the town at 10% of what a comparable sized lot with a home on it is assessed for.

Since Chicago has sold off on-street parking to a private entity (a financial services company), and Indiana has sold some toll roads to a foreign corporation, I suppose I should not be surprised that the Feoffees of Ipswich have followed suit.  But I am disappointed.  (I know nothing more of the story than what I read online and I've read everything I can find.)  It seems to me that the fellow who owned the land in the 1600s and chose to donate it to his community, for the ongoing benefit of the town's public schools, did a good thing.  He knew the land was choice (oh -- what a sweet place it appears to be, from all the photos!)   He might not have anticipated that a railroad would make it possible for daily commuters to work in Boston and live in Ipswich, but clearly the sheltered almost-island not far from the Atlantic ocean was a fine site. 

So the articles raise some interesting questions. I'll be curious to see how they get resolved.

1. The agreed-upon purchase price is $26.5 million.  What is the entity that will purchase it?  The tenants' association? 

2. How will the individual lots be valued, when it comes to the shares of ownership in the property?

3. Need one be a tenant to buy either a lot or a share in the Little Neck association?

4. If an individual cottage owner can't afford to purchase his lot, or his share of the $26.5 million, what provisions will be made?

5. Will the 24-year-round and 143-seasonal rule continue?  Will owners of "Seasonal" houses be permitted to buy rights to use their property year-round?  At what price?

6. Will there be tears shed over the folks who can no longer afford their cottages?

I'd like to suggest a model that the Little Neck tenants might want to consider.  Instead of owning the individual lots outright and sharing ownership of the other ~50% of the land through some association, they ought to consider continuing to rent the land out. Arden, Delaware, does this -- has since about 1903 -- and it is a fine place to live.  Like Little Neck, Arden has smallish lots and lots of common spaces, which make a very fine place to live.  Arden collects land rent from every homeowner, sufficient to cover local taxes on the land and buildings, and to provide other services within the community.  Taxes are not placed on buildings.  Land is valued according to its size and its proximity to positive and negative amenities.  In Little Neck, this would mean that lots with better views would pay more than comparably sized lots with more modest views, and, likely, that lots with the rights for year-round occupancy would pay significantly more than those with only seasonal access.  

And the Ipswich assessor ought to watch property values carefully.  When 80-year-old 900-square-foot cottages sell for $300,000 or $400,000 -- just for the cottage, not for the cottage and its land -- the full economic rent is not being collected.  (See http://lvtfan.typepad.com/lvtfans_blog/2008/07/update-on-the-f.html.)

$26,500,000 divided by 167 cottages works out to a mere $159,000 each. What a deal!

I'm amazed that the Feoffees would accept such an offer.

Looking at current real estate listings,

• there is a property asking $625,000. The assessor values the land at $294,300 and the 1910 building at $90,300, for a total of $384,600. That's one of the larger lots. Across the road is a vacant lot half the size, valued by the assessor at $27,600.
• Another property, listed at $339,900 consists of a 1935 cottage, valued at $81,800 and a lot valued at $185,500, for a total assessed value of $267,300.
• A third is listed at $465,000; the 1930 cottage is valued at $109,500, and the lot at $185,500, for a total assessed value of $295,000.
• A fourth is listed at $495,000; the assessor values the cottage at $102,900, and the land at $228,700, for a total of $331,600. (A nearby lot, the same size, is valued at $18,500.)

How on earth can the Feoffees justify accepting only $26.5 million for this fabulous land? $159,000 each, on average. Incredible. What a deal for the tenants. What a lousy deal for the beneficiary, Ipswich's schools, forever.

Land rent is a powerful thing.  Good things happen when it is collected and used for the benefit of the community.  Using it for common purposes -- schools, infrastructure, public health, emergency services, transportation systems, to name a few -- leads to healthy communities which are both fine places to live and fine places to visit, and fine places to run a business.  Letting it sit in private pockets generally leads to expensive housing, land speculation both in the residential and commercial neighborhoods, sprawl, old buildings, -- and, worst of all, reliance on sales taxes and taxes on wages, neither of which should be taxed at all.

I'll probably be revising this post a bit, but thought I'd publish it sooner rather than later.

This blog has more observations and history on this story.  See them collected at  http://lvtfan.typepad.com/lvtfans_blog/feoffees-land/.

Comments

[Lifetime Little Necker]

http://www.wickedlocal.com/ipswich/news/education/x2133276729/Sale-of-Little-Neck-will-not-go-through