Balancing Public and Private Rights to The Commons: New Thoughts on Land Management
By Ronald Eglin
Access to land is a birthright – it’s needed for survival. There is, however, only a fixed amount of land on this planet. More land cannot and is not being made.
The preamble to the South African constitution states that “(w)e, the people of South Africa, ... (b)elieve that South Africa belongs to all who live in it, united in our diversity.” This can be interpreted to mean that we all ‘own’ South Africa’s land collectively.
The constitution goes on to say in the property clause of the Bill of Rights (section 25) that:
“No one may be deprived of property except in terms of law of general application, and no law may permit arbitrary deprivation of property”; and
“The state must take reasonable legislative and other measures, within its available resources, to foster conditions which enable citizens to gain access to land on an equitable basis.”
Achieving these multiple rights requires a balancing act between protecting the property rights of those that already have land; helping those who don’t have land to get land; and managing the land for the benefit of all who live in the country.
Almost all land in the country has been claimed by someone or some group. Those without land find it difficult to access land as they have to buy it from those with land. In economics, when you have a limited supply of a good with a rising demand, this increases the price of that good - land in this instance.
What this leads to is that those with land get richer; and those without get poorer. The rich make money from increases in land prices; and the landless—who are not on this landed property economic growth ladder—fall further behind, increasing land and economic inequality. As a country, we seriously need to confront our landed inequality if we are to address our economic and other inequalities.
One way to address this challenge of securing land for those without land is to view land as a commons. A commons is something that belongs to everyone to use and enjoy. It is a ‘shared gift’ we have received from nature (like natural resources, the electromagnetic spectrum, etc.), or we have received from the past (like languages, culture, the market, etc.). We have not created or earned this gift ourselves, only built on what we have received from nature or previous generations. We also ‘share’ this gift with others in the community now and in the future. (1)
Water is a good example of how taking a commons approach affects the management and use of this common resource. According to the Water Act of 1998, no one in South Africa can own any water. Water is effectively owned in common by everyone, with the state acting as custodian of this water. Farmers, for example, are no longer guaranteed the right to use water flowing over their land, like they were prior to 1998. To use water a person must get a licence from government. These licences are not transferable with the transfer of land, meaning that new land owners must reapply for a licence. (2)
When it comes to treating land as a commons, it may be a bit difficult to make all land a commons like water now, given our long history of private (and communal) land ownership in South Africa. However, if we start thinking of land as a commons—owned by everyone—then some interesting options open up for us in terms of making land accessible and affordable for all.
This article will touches on three concepts that can be considered if we start to view land as a commons: a) Land Value Capture, b) Land Tax, and c) Community Land Trusts.
Land Value Capture
The challenge for us as South Africans is to find a way to balance the principle that ‘land belongs to all of us’ with the principle that ‘land belongs to those individuals (or companies, or groups) who own it’. The concept of land value capture can help us address this challenge.
The broad logic behind land value capture is that if someone wants to benefit from the exclusive use of a piece of land, they are in effect barring others (the public/ society) from benefiting from the use of this land. In order to justify this private use of land, it is argued that these users or owners should compensate society as a whole by paying a ‘fee’ of some sort to ‘society’ for their exclusive use of this land. This fee is then used for developmental purposes . or
to replace other taxes like income tax and value added tax.
Land values increase for a number of reasons. The first is when population numbers increase and there is an increased demand for the land with a limited supply of land thereby increasing land prices. Another way that land values increase is when the governmentstate invests in new infrastructure (e.g. a new road) that makes the area around that infrastructural investment more desirable, thereby increasing the value of this land. Changes in zoning of land from say residential to business can also result in land value increases as new more productive land uses are permitted on the land.
At the moment all increases in the value of land accrue to the owner of this land. If land is understood as a commons, that balances private and public land rights, then this land value increase can be seen as an ‘unearned’ increment for the private land holder. The land value increase was created not as a result of the land owner’s actions, but rather as a result of the actions of society and/or government.
Land value capture is the process of capturing this ‘unearned’ value so that it can be used for public purposes such as, for example, building more schools and roads, and/or supporting the poor in their land and housing needs, that benefit the public and society as a whole and not just a few private individuals. It recognises the public right to land.
The following are a few examples of how this land value can be captured:
• Taxing property owners on an on-going basis based on the value of the land they own. (See the next section on land taxes.)
• Charging a once-off levy that is payable on the sale of the land (based on the value the land when sold) or on the rezoning of the land (based on the effective increase in value due to the change in land use).
• Introducing Inclusionary Housing mechanisms where, for example, developers are required to develop a certain percentage of houses (or community halls, etc.) on or off their property as a condition of their development approvals; or they contribute towards a development fund that is used by municipalities for development purposes.
• Allowing developers to develop at a higher density to what is allowed in the town planning scheme for that particular area on condition that they contribute to a municipal development fund or include low income housing as part of the development.
• Supporting land swops or land consolidation and readjustment. Land swops are where the state acquires more appropriate land for low income housing from the private sector in return for another piece of land that the state may own in another less appropriate area. Land consolidation and readjustment involves the state ‘consolidating’ a number of smaller private portions of land into one larger development area, investing in roads and other infrastructure in this consolidated project area, and then returning smaller portions of land to the original land holders and using the surplus land for low income housing or other social purposes. This is possible because the market value of the land (now serviced) is more than it was when the land was un-serviced. (3)
It is important that once this ‘unearned value’ is captured by the state or some other similar entity on behalf of society, that this income is used for public goods like roads and parks or for supporting the poor to access and develop their own land. Decisions on how to spend captured value can be made by government as part of their normal planning and budgeting cycles and/or made through some form of people’s budget where the general public as a whole decides how best to spend this money.
A lot more research and capacity building is needed in South Africa to draw people’s attention to the concept of Land Value Capture - why it is used and how it can be implemented. From experience of the Development Action Group, in its work on Land Value Capture with municipalities in the Western Cape, they found that officials and councillors had very little awareness and understanding of Land Value Capture. (4)
It is also very likely that there will be a lot of resistance to land value capture from those that are benefiting from the status quo. This includes private land owners who are presently reaping land value increments due to rises in property values to which they have not contributed; and also from bureaucrats who are resistant to implementing new intervention strategies that require significant changes to the way they are used to doing things. Many bureaucrats and politicians also fall into the first category of private land holders benefiting from the status quo.
Land Tax
A property tax (also called rates in South Africa) is an annual or monthly tax presently charged by local government based on the value of the property. There are broadly three ways to determine the tax charged on this property:
• Flat rates or improved value ratingProperty taxes, where rates are calculated based on the value of the whole property – the land and the improvements on this land like buildings and infrastructure;
• Site value ratingLand (or site) taxes, where rates are based only on the value of the land and do not take the value of any improvements into account; and
• Composite ratingtaxes, where the rates are calculated separately based on both the value of the land and the value of the improvements, with a higher percentage rate on land compared to improvmentsusually using different rates formulas for each.
The value of the land depends mainly on the locational characteristics of the land. Land that is well located in relation to transport, jobs and shops, etc., tends to be more valuable than land that is located in a more peripheral location. Natural features like views, slopes and agricultural soil quality also affect the value of the land. The value of the improvements can be based on, for example, replacement costs for this improvement, taking wear-and-tear into account.
In South Africa, the Municipal Rates Act of 2004 has effectively forced all municipalities to calculate rates on the value of the land and improvements combined (i.e. improved value ratingthe property tax). The logic at the time was probably to have a uniform property rating system across the whole country and it was also felt that by calculating rates at full property value the state would be able to collect more rates from this higher combined value.
A disadvantage of the Improved value rating property tax approach is that it discourages further development of properties, as any improvements made on the land increases the value of the property and thereby the taxes. If tax was just on the land, then land owners could make significant improvements to their property without this affecting their rates. International experience has shown that taxes on property (i.e. land and improvements) have led to land speculation, where the land owner does not develop his/her land; their land values then increase as the land becomes more accessible to roads, schools, shops, etc., and the land owner is able to sell this land at a high price thereby making speculative gains. This makes it difficult for lower income households to access such land. (5)
Consideration has been given in some areas, like the City of Johannesburg, to increasing the tax on vacant land, thereby encouraging land owners to develop or sell this land, because they would pay a higher tax for undeveloped land. (6) Consideration also needs to be given to having valuing land of different uses a different land tax rate for different land uses so that, for example, agricultural land within urban areas at a lower value than is not taxed at the same rate as business land in the same neighbourhood.
It is proposed that the whole municipal rates policy of South Africa should be reviewed and serious consideration given to allowing different municipalities to determine what form of rates system they would like to use. The impact of municipalities using these different rating systems would need to be carefully monitored so that lessons from these experiences can be shared allowing the most appropriate rating system for the South African to emerge.
Community Land Trusts
A Community Land Trust (CLT) is a legal structure where the ownership of the land is separated out from the ownership of any improvements made to the land. CLTs, as specific legal entities, can be found in the United States and the United Kingdom. Land Trusts as a broad concept are found throughout the world.
Basically the trust owns the land and gives households (and others, depending on the context) the right to occupy a particular portion of land owned by the trust. The trustees of the Trust act as custodians of the land. The founding documents of the trust outline the rules for how the trustees govern the trust, and they can also specify the relationship between the trust and the users of the trust’s land. These rules and relationships can take many forms, ranging from the trust leasing the land to users, to situations where the user of the land has rights to improve and sell improvements to the land.
The idea behind CLTs is to remove the locational value of the land from any land transfer transaction. People using the land would effectively ‘own’ the improvements to the land, and have the right to sell these improvements, but would not own the land which stays with the trust.
Community Land Trusts are, therefore, able to keep the price of buying a house from a CLT low for low income households. Unlike rental housing, they also provide an incentive for households to make their own improvements on the land, as they are able to trade in the value of the top structure. It is very important that households moving into a CLT understand that when they leave the trust they will not be able to take out any value accrued as a result of the locational advantages of the land. Land in this case does not become an asset or investment with which to trade and move up the property ladder. For the poor, however, CLTs provide a valuable opportunity to keep prices of houses low, especially in well located areas, where locational advantages would push prices up making these properties unaffordable for the poor.
The concept of land trusts can also be used in the agricultural sector (and conservation sector), where for example a trust owns agricultural land, and then enters into a long-term lease or some other arrangement with the farmer (or farmers) to make use of the land or portions of the land (e.g. in a community garden context) for agricultural purposes. Rules are created that govern the relationship between the trust and the users, that addresses issues like what happens when a farmer invests her own money on trust land.
There are no CLTs in South Africa, but there are a few examples where there have been some attempt to separate out the ownership of the land and the ownership of top structures. Communal Property Associations (CPAs) are one such example, where the CPA owns the land on behalf of members of the Association and rules are developed to deal with what rights members of the Association have to the land, including what rights they have to sell improvements.
The limited equity housing co-operative model piloted by Afesis-corplan in the Amalinda co-operative settlement project in East London is another example where an attempt was made to separate out land values from the value of the improvements to the land. The idea being that when a household leaves a limited equity housing co-operative the incoming person (who is identified from a waiting list – not through a willing seller willing buyer arrangement) pays the outgoing person for the value of the improvements alone, not taking into account any increases in value due to land location factors. In this way, households are compensated for investments made to their house, while at the same time the houses are kept affordable for incoming households who don’t have to pay for the land. Unfortunately, however, due to problems relating to allocation of beneficiaries to the original houses, this pilot project has been unable to explore in more detail this limited equity concept. (7)
The way that land is managed in rural communal areas also has many similarities to the Community Land Trust model, in that households are given rights by the local traditional authority to occupy a certain piece of land and build their own houses. However, in communal land areas, the transfer of property (that is land and/or improvements) between households is just about non-existent, because in these areas housing is valued for its social function of providing a home for the extended family, and not for its economic function of providing a tradable economic asset. In situations where there is no one to take over a property (e.g. in death and where family members have all moved away) there will usually be someone from the broader extended family who will take over responsibility for management of that home.
A detailed investigation into the suitability of Community Land Trusts to provide a mechanism to separate out the ownership of land and the ownership of improvements, and to make housing more affordable, is long overdue in the South African context. Case studies looking at how limited equity housing co-operatives, Communal Property Associations, and other similar structures could incorporate many of the features of Community Land Trusts need to be conducted. A decision on whether there is a need to create a new legal entity, along the lines of the Community Land Trusts found in the United States and United Kingdom, or use existing legal structures already found in South African law can only be made after careful consideration of these case study findings.
Conclusions
In summary, if we want to implement the ideas raised in this paper, a good starting point would be for all role-players to agree that viewing land as a commons provides a useful framework within which to explore alternative and innovative solutions to the land and housing challenge in the country. The state and society can then explore mechanisms that:
• Capture ‘unearned’ income made by land owners when they sell land (land value capture);
• Tax the land at a different rate to the value of the improvements (land tax); and
• Separate the ownership of the land from the ownership of the improvements to the land (Community Land Trusts).
These land value capture, land tax and community land trust concepts will not be implemented if there is no demand for them from the ground up. Many powerful interested groups are happy to see the status quo remain and will contest any attempts to change the way that land is perceived and managed. It is up to civil society organisations concerned with issues relating to public and private socio-economic rights to work together, raising awareness amongst themselves and amongst progressive forces within government and the private sector, to advocate and lobby for the changes necessary to make these approaches work. It’s not going to be an easy task, but we need to start somewhere.
Useful internet addresses:
• http://onthecommons.org/
• http://www.communitylandtrusts.org.uk/
• http://www.earthrightsinstitute.org/
• http://www.course.earthrights.net/
• http://www.theiu.org/
• http://www.henrygeorge.org/
• http://www.progress.org/geonomy/index.html
References
1. Peter Barnes, Capitalism 3.0, 2006 – downloadable for free from http://capitalism3.com/
2. “Water Rights - the Cinderella of Property Sales”, Claire Tucker, (2004) http://www.bowman.co.za/LawArticles/Law-Article~id~888894577.asp
3. “Accelerating housing delivery through value capture”, Dr. Mercy Brown-Luthango, Transformer, April/May 2009, http://www.afesis.org.za/images/stories/pdf/journal/April%20May%202009.pdf
4. “Capturing Unearned Value/ Leakages to Assist Markets to Work for the Poor”, Dr. Mercy Brown-Luthango, Development Action Group, no date. http://www.dag.org.za/docs/research/Mercy%20Brown-Luthango%20Paper%20for%20SLM.pdf
5. “Land Rights and Land Value Capture - Long Form Brochure”, Earth Rights institute, undated, http://course.earthrights.net/node/15
6. “Municipal rates policies and the urban poor - How can municipal rates policies promote access by the poor to urban land markets?”, PDG and Isandla Institute for SA Cities Network and Urban LandMark, October 2009, http://www.urbanlandmark.org.za/downloads/municipal_rates_policies_urban_poor.pdf
7. http://www.afesis.org.za/Sustainable-Settlements-Articles/housing-co-operatives-lessons-learned and http://www.afesis.org.za/Sustainable-Settlements-Articles/understanding-housing-co-operatives for more on housing co-operatives
Access to land is a birthright – it’s needed for survival. There is, however, only a fixed amount of land on this planet. More land cannot and is not being made.
The preamble to the South African constitution states that “(w)e, the people of South Africa, ... (b)elieve that South Africa belongs to all who live in it, united in our diversity.” This can be interpreted to mean that we all ‘own’ South Africa’s land collectively.
The constitution goes on to say in the property clause of the Bill of Rights (section 25) that:
“No one may be deprived of property except in terms of law of general application, and no law may permit arbitrary deprivation of property”; and
“The state must take reasonable legislative and other measures, within its available resources, to foster conditions which enable citizens to gain access to land on an equitable basis.”
Achieving these multiple rights requires a balancing act between protecting the property rights of those that already have land; helping those who don’t have land to get land; and managing the land for the benefit of all who live in the country.
Almost all land in the country has been claimed by someone or some group. Those without land find it difficult to access land as they have to buy it from those with land. In economics, when you have a limited supply of a good with a rising demand, this increases the price of that good - land in this instance.
What this leads to is that those with land get richer; and those without get poorer. The rich make money from increases in land prices; and the landless—who are not on this landed property economic growth ladder—fall further behind, increasing land and economic inequality. As a country, we seriously need to confront our landed inequality if we are to address our economic and other inequalities.
One way to address this challenge of securing land for those without land is to view land as a commons. A commons is something that belongs to everyone to use and enjoy. It is a ‘shared gift’ we have received from nature (like natural resources, the electromagnetic spectrum, etc.), or we have received from the past (like languages, culture, the market, etc.). We have not created or earned this gift ourselves, only built on what we have received from nature or previous generations. We also ‘share’ this gift with others in the community now and in the future. (1)
Water is a good example of how taking a commons approach affects the management and use of this common resource. According to the Water Act of 1998, no one in South Africa can own any water. Water is effectively owned in common by everyone, with the state acting as custodian of this water. Farmers, for example, are no longer guaranteed the right to use water flowing over their land, like they were prior to 1998. To use water a person must get a licence from government. These licences are not transferable with the transfer of land, meaning that new land owners must reapply for a licence. (2)
When it comes to treating land as a commons, it may be a bit difficult to make all land a commons like water now, given our long history of private (and communal) land ownership in South Africa. However, if we start thinking of land as a commons—owned by everyone—then some interesting options open up for us in terms of making land accessible and affordable for all.
This article will touches on three concepts that can be considered if we start to view land as a commons: a) Land Value Capture, b) Land Tax, and c) Community Land Trusts.
Land Value Capture
The challenge for us as South Africans is to find a way to balance the principle that ‘land belongs to all of us’ with the principle that ‘land belongs to those individuals (or companies, or groups) who own it’. The concept of land value capture can help us address this challenge.
The broad logic behind land value capture is that if someone wants to benefit from the exclusive use of a piece of land, they are in effect barring others (the public/ society) from benefiting from the use of this land. In order to justify this private use of land, it is argued that these users or owners should compensate society as a whole by paying a ‘fee’ of some sort to ‘society’ for their exclusive use of this land. This fee is then used for developmental purposes . or
to replace other taxes like income tax and value added tax.
Land values increase for a number of reasons. The first is when population numbers increase and there is an increased demand for the land with a limited supply of land thereby increasing land prices. Another way that land values increase is when the governmentstate invests in new infrastructure (e.g. a new road) that makes the area around that infrastructural investment more desirable, thereby increasing the value of this land. Changes in zoning of land from say residential to business can also result in land value increases as new more productive land uses are permitted on the land.
At the moment all increases in the value of land accrue to the owner of this land. If land is understood as a commons, that balances private and public land rights, then this land value increase can be seen as an ‘unearned’ increment for the private land holder. The land value increase was created not as a result of the land owner’s actions, but rather as a result of the actions of society and/or government.
Land value capture is the process of capturing this ‘unearned’ value so that it can be used for public purposes such as, for example, building more schools and roads, and/or supporting the poor in their land and housing needs, that benefit the public and society as a whole and not just a few private individuals. It recognises the public right to land.
The following are a few examples of how this land value can be captured:
• Taxing property owners on an on-going basis based on the value of the land they own. (See the next section on land taxes.)
• Charging a once-off levy that is payable on the sale of the land (based on the value the land when sold) or on the rezoning of the land (based on the effective increase in value due to the change in land use).
• Introducing Inclusionary Housing mechanisms where, for example, developers are required to develop a certain percentage of houses (or community halls, etc.) on or off their property as a condition of their development approvals; or they contribute towards a development fund that is used by municipalities for development purposes.
• Allowing developers to develop at a higher density to what is allowed in the town planning scheme for that particular area on condition that they contribute to a municipal development fund or include low income housing as part of the development.
• Supporting land swops or land consolidation and readjustment. Land swops are where the state acquires more appropriate land for low income housing from the private sector in return for another piece of land that the state may own in another less appropriate area. Land consolidation and readjustment involves the state ‘consolidating’ a number of smaller private portions of land into one larger development area, investing in roads and other infrastructure in this consolidated project area, and then returning smaller portions of land to the original land holders and using the surplus land for low income housing or other social purposes. This is possible because the market value of the land (now serviced) is more than it was when the land was un-serviced. (3)
It is important that once this ‘unearned value’ is captured by the state or some other similar entity on behalf of society, that this income is used for public goods like roads and parks or for supporting the poor to access and develop their own land. Decisions on how to spend captured value can be made by government as part of their normal planning and budgeting cycles and/or made through some form of people’s budget where the general public as a whole decides how best to spend this money.
A lot more research and capacity building is needed in South Africa to draw people’s attention to the concept of Land Value Capture - why it is used and how it can be implemented. From experience of the Development Action Group, in its work on Land Value Capture with municipalities in the Western Cape, they found that officials and councillors had very little awareness and understanding of Land Value Capture. (4)
It is also very likely that there will be a lot of resistance to land value capture from those that are benefiting from the status quo. This includes private land owners who are presently reaping land value increments due to rises in property values to which they have not contributed; and also from bureaucrats who are resistant to implementing new intervention strategies that require significant changes to the way they are used to doing things. Many bureaucrats and politicians also fall into the first category of private land holders benefiting from the status quo.
Land Tax
A property tax (also called rates in South Africa) is an annual or monthly tax presently charged by local government based on the value of the property. There are broadly three ways to determine the tax charged on this property:
• Flat rates or improved value ratingProperty taxes, where rates are calculated based on the value of the whole property – the land and the improvements on this land like buildings and infrastructure;
• Site value ratingLand (or site) taxes, where rates are based only on the value of the land and do not take the value of any improvements into account; and
• Composite ratingtaxes, where the rates are calculated separately based on both the value of the land and the value of the improvements, with a higher percentage rate on land compared to improvmentsusually using different rates formulas for each.
The value of the land depends mainly on the locational characteristics of the land. Land that is well located in relation to transport, jobs and shops, etc., tends to be more valuable than land that is located in a more peripheral location. Natural features like views, slopes and agricultural soil quality also affect the value of the land. The value of the improvements can be based on, for example, replacement costs for this improvement, taking wear-and-tear into account.
In South Africa, the Municipal Rates Act of 2004 has effectively forced all municipalities to calculate rates on the value of the land and improvements combined (i.e. improved value ratingthe property tax). The logic at the time was probably to have a uniform property rating system across the whole country and it was also felt that by calculating rates at full property value the state would be able to collect more rates from this higher combined value.
A disadvantage of the Improved value rating property tax approach is that it discourages further development of properties, as any improvements made on the land increases the value of the property and thereby the taxes. If tax was just on the land, then land owners could make significant improvements to their property without this affecting their rates. International experience has shown that taxes on property (i.e. land and improvements) have led to land speculation, where the land owner does not develop his/her land; their land values then increase as the land becomes more accessible to roads, schools, shops, etc., and the land owner is able to sell this land at a high price thereby making speculative gains. This makes it difficult for lower income households to access such land. (5)
Consideration has been given in some areas, like the City of Johannesburg, to increasing the tax on vacant land, thereby encouraging land owners to develop or sell this land, because they would pay a higher tax for undeveloped land. (6) Consideration also needs to be given to having valuing land of different uses a different land tax rate for different land uses so that, for example, agricultural land within urban areas at a lower value than is not taxed at the same rate as business land in the same neighbourhood.
It is proposed that the whole municipal rates policy of South Africa should be reviewed and serious consideration given to allowing different municipalities to determine what form of rates system they would like to use. The impact of municipalities using these different rating systems would need to be carefully monitored so that lessons from these experiences can be shared allowing the most appropriate rating system for the South African to emerge.
Community Land Trusts
A Community Land Trust (CLT) is a legal structure where the ownership of the land is separated out from the ownership of any improvements made to the land. CLTs, as specific legal entities, can be found in the United States and the United Kingdom. Land Trusts as a broad concept are found throughout the world.
Basically the trust owns the land and gives households (and others, depending on the context) the right to occupy a particular portion of land owned by the trust. The trustees of the Trust act as custodians of the land. The founding documents of the trust outline the rules for how the trustees govern the trust, and they can also specify the relationship between the trust and the users of the trust’s land. These rules and relationships can take many forms, ranging from the trust leasing the land to users, to situations where the user of the land has rights to improve and sell improvements to the land.
The idea behind CLTs is to remove the locational value of the land from any land transfer transaction. People using the land would effectively ‘own’ the improvements to the land, and have the right to sell these improvements, but would not own the land which stays with the trust.
Community Land Trusts are, therefore, able to keep the price of buying a house from a CLT low for low income households. Unlike rental housing, they also provide an incentive for households to make their own improvements on the land, as they are able to trade in the value of the top structure. It is very important that households moving into a CLT understand that when they leave the trust they will not be able to take out any value accrued as a result of the locational advantages of the land. Land in this case does not become an asset or investment with which to trade and move up the property ladder. For the poor, however, CLTs provide a valuable opportunity to keep prices of houses low, especially in well located areas, where locational advantages would push prices up making these properties unaffordable for the poor.
The concept of land trusts can also be used in the agricultural sector (and conservation sector), where for example a trust owns agricultural land, and then enters into a long-term lease or some other arrangement with the farmer (or farmers) to make use of the land or portions of the land (e.g. in a community garden context) for agricultural purposes. Rules are created that govern the relationship between the trust and the users, that addresses issues like what happens when a farmer invests her own money on trust land.
There are no CLTs in South Africa, but there are a few examples where there have been some attempt to separate out the ownership of the land and the ownership of top structures. Communal Property Associations (CPAs) are one such example, where the CPA owns the land on behalf of members of the Association and rules are developed to deal with what rights members of the Association have to the land, including what rights they have to sell improvements.
The limited equity housing co-operative model piloted by Afesis-corplan in the Amalinda co-operative settlement project in East London is another example where an attempt was made to separate out land values from the value of the improvements to the land. The idea being that when a household leaves a limited equity housing co-operative the incoming person (who is identified from a waiting list – not through a willing seller willing buyer arrangement) pays the outgoing person for the value of the improvements alone, not taking into account any increases in value due to land location factors. In this way, households are compensated for investments made to their house, while at the same time the houses are kept affordable for incoming households who don’t have to pay for the land. Unfortunately, however, due to problems relating to allocation of beneficiaries to the original houses, this pilot project has been unable to explore in more detail this limited equity concept. (7)
The way that land is managed in rural communal areas also has many similarities to the Community Land Trust model, in that households are given rights by the local traditional authority to occupy a certain piece of land and build their own houses. However, in communal land areas, the transfer of property (that is land and/or improvements) between households is just about non-existent, because in these areas housing is valued for its social function of providing a home for the extended family, and not for its economic function of providing a tradable economic asset. In situations where there is no one to take over a property (e.g. in death and where family members have all moved away) there will usually be someone from the broader extended family who will take over responsibility for management of that home.
A detailed investigation into the suitability of Community Land Trusts to provide a mechanism to separate out the ownership of land and the ownership of improvements, and to make housing more affordable, is long overdue in the South African context. Case studies looking at how limited equity housing co-operatives, Communal Property Associations, and other similar structures could incorporate many of the features of Community Land Trusts need to be conducted. A decision on whether there is a need to create a new legal entity, along the lines of the Community Land Trusts found in the United States and United Kingdom, or use existing legal structures already found in South African law can only be made after careful consideration of these case study findings.
Conclusions
In summary, if we want to implement the ideas raised in this paper, a good starting point would be for all role-players to agree that viewing land as a commons provides a useful framework within which to explore alternative and innovative solutions to the land and housing challenge in the country. The state and society can then explore mechanisms that:
• Capture ‘unearned’ income made by land owners when they sell land (land value capture);
• Tax the land at a different rate to the value of the improvements (land tax); and
• Separate the ownership of the land from the ownership of the improvements to the land (Community Land Trusts).
These land value capture, land tax and community land trust concepts will not be implemented if there is no demand for them from the ground up. Many powerful interested groups are happy to see the status quo remain and will contest any attempts to change the way that land is perceived and managed. It is up to civil society organisations concerned with issues relating to public and private socio-economic rights to work together, raising awareness amongst themselves and amongst progressive forces within government and the private sector, to advocate and lobby for the changes necessary to make these approaches work. It’s not going to be an easy task, but we need to start somewhere.
Useful internet addresses:
• http://onthecommons.org/
• http://www.communitylandtrusts.org.uk/
• http://www.earthrightsinstitute.org/
• http://www.course.earthrights.net/
• http://www.theiu.org/
• http://www.henrygeorge.org/
• http://www.progress.org/geonomy/index.html
References
1. Peter Barnes, Capitalism 3.0, 2006 – downloadable for free from http://capitalism3.com/
2. “Water Rights - the Cinderella of Property Sales”, Claire Tucker, (2004) http://www.bowman.co.za/LawArticles/Law-Article~id~888894577.asp
3. “Accelerating housing delivery through value capture”, Dr. Mercy Brown-Luthango, Transformer, April/May 2009, http://www.afesis.org.za/images/stories/pdf/journal/April%20May%202009.pdf
4. “Capturing Unearned Value/ Leakages to Assist Markets to Work for the Poor”, Dr. Mercy Brown-Luthango, Development Action Group, no date. http://www.dag.org.za/docs/research/Mercy%20Brown-Luthango%20Paper%20for%20SLM.pdf
5. “Land Rights and Land Value Capture - Long Form Brochure”, Earth Rights institute, undated, http://course.earthrights.net/node/15
6. “Municipal rates policies and the urban poor - How can municipal rates policies promote access by the poor to urban land markets?”, PDG and Isandla Institute for SA Cities Network and Urban LandMark, October 2009, http://www.urbanlandmark.org.za/downloads/municipal_rates_policies_urban_poor.pdf
7. http://www.afesis.org.za/Sustainable-Settlements-Articles/housing-co-operatives-lessons-learned and http://www.afesis.org.za/Sustainable-Settlements-Articles/understanding-housing-co-operatives for more on housing co-operatives