Land tenure describes how land is held. The word tenure comes from the Latin tenir, which means “to hold”.
The two main types of farmland tenure in the U.S. are ownership and tenancy. The most common form of landholding in many cultures, including our own, is private ownership. Nonetheless, in reality nearly half of U.S. farmland is rented.
Ownership of land can be thought of as a bundle of rights. You have many rights associated with ownership – rights to use, rent and sell it, cut down trees, build structures, extract minerals, hunt, and so on. However, limits are placed on that bundle of rights. Laws and regulations, as well as any easements attached to a deed, can limit the landowner’s rights to the land. Land ownership is a strong cultural value in the U.S. For cultural and practical reasons, owning land is a goal for many farmers. However, ownership is not a goal for all farmers. Nor is owning land a realistic or advisable goal for many farmers and in certain situations, especially those starting out.
Tenancy is defined as the right to use property for a specified amount of time as granted by the owner. The right to let others use one’s property is among the rights associated with property ownership. Tenancy rights mean that you do not need to own the property in order to use, care for, and benefit from it. In some ways, controlling the land–dividing the rights and responsibilities of land use–becomes more important than who owns the title.
Many types of people, organizations and public entities own agricultural land that they do not farm. In fact, nearly 90% of farm landlords are not farmers. They have various motivations to have their land in agriculture. As a result, they are willing to assign certain rights out of their “bundle of land uses” to another party. In these cases, a farmer can obtain rights through a rental or lease agreement to use the land, buildings, or related infrastructure without outright ownership.
Land rental arrangements determine who can use what resources for how long, and under what conditions. Rental agreements may be well or poorly defined, often characterized by ambiguities that can lead to confusion and exploitation. Leases may be formalized by written documents or may be based on a handshake agreement. Informal (unwritten) agreements can be acceptable and work most of the time, but they may not help resolve unforeseen disputes or be legally enforceable if disputes arise. A written document is more likely to be clear and legally enforceable.
Land For Good strongly recommends that lease agreements are thorough, carefully crafted and put into writing. This makes them legally enforceable and enables all parties to refer to a written document if a question arises.
What’s right for you? This tutorial is meant to help you answer that question. Within ownership and tenancy there are multiple strategies to acquire land for farming. You can own land on your own or with others. You can carve a path to ownership. Your lease can be customized to meet the needs of both parties. See this decision tree (link coming soon) for a depiction of land tenure methods.
In the U.S. land tenure issues go back to the founding fathers, who felt property ownership was a necessary condition to vote. Private landowners viewed land ownership as an exclusive right. Often, they assumed that this meant they held all rights completely. The Homestead Act of 1862 made privatization of land part of public policy.
Our public policies have fostered land ownership. At the same time, history has shown challenges associated with private ownership of agricultural land, particularly around: a) concentration; and b) the separation of ownership and use (landlords and tenants). A 1937 report by the Roosevelt administration documented displacement, landlessness, and poverty among the nation’s small farmers. It also revealed environmental problems that both drought and high levels of absentee ownership created.
In fact, by 1940 tenant farmers worked nearly 40% of U.S. farmland. Environmental and social evils were pinned on absentee ownership and landless farmers. Bans on long-term leases were instituted as a way to encourage outright sale instead. It was also believed that ownership would better address soil erosion. What is now the Farm Service Agency was started to promote land ownership as the best way to conserve agricultural resources and “promote economic democracy.”
Until the 1950s, policy makers and social scientists held that owner-operatorship was the best tenure. Full-owners did, in fact, predominate both numerically and in terms of acres farmed.
However, beginning in the early 1970s many farmers began to slide deeply into debt while agricultural land values dropped by as much as 60 percent. At the same time, new investors were entering the market. These new investors competed for land, often resulting in the cost being bid up beyond its realistic economic value. The 1980s saw a dramatic shift in the capital structure of American agriculture and the ownership of its assets.
In recent times, “part owner-operators” are the largest segment of farmers in the U.S. This means they own some of the land they farm and rent some of the land they farm. According to the USDA Economic Research Service, about 40 percent of U.S. farmland has been rented over the last 25 years, ranging from 35 percent to 43 percent of all land in farms over the 1964-2012 time period. In 2012, 30 percent of all land in farms was rented from someone other than a farm operator. Only about a quarter of the farmers in the Northeast own all the land they farm. Nearly two-thirds both rent and own. Eleven percent of Northeast farmers do not own any farmland. The smaller the farm, the more likely the operator is to own all the land.
Between 1997 and 2002, the value of farmland increased by a national average of 23 percent, with farmland values in some areas of the Northeast as much as ten times the national average. Escalating farmland prices, coupled with a lack of access to the capital necessary to purchase farm assets and declining farm profitability, are the biggest barriers to land ownership in the Northeast. Compounding the challenge are the difficulties farm seekers face in locating suitable property, and finding affordable and convenient housing.
The vast majority of farmland rental agreements are short-term and verbal. While there can be a strong, positive cultural context for such agreements (some handshake agreements last for generations), short-term agreements do not provide adequate security for farm operators. Tenants don’t typically have ways to build equity off or in the land they farm. Today, nearly 40 percent of the productive agricultural capacity in the Northeast is owned by those who do not farm it. Nationally, non-operators (landowners who do not themselves farm) owned 29 percent of land in farms in 2007. Challenges related to both ownership and tenancy persist.
The five basic principles of farmland tenure are: access, security, affordability, legacy, and stewardship. Each has its own set of challenges and opportunities.
Often, people refer to the bundle of issues surrounding land tenure as access to land or land access. In this context, access implies a broad social goal to foster opportunity for new and expanding farmers. Rising land values, competition for good land, and declining farm profitability make it harder and harder for entering farmers to acquire land, whether through purchase, rental or other alternative tenure arrangements.
In this discussion, access refers to two specific elements. One is physical access – getting onto the land. The other is use – being able to use the land for the desired purposes without undue restraint. When one owns the land, both physical access and use are maximized (within any regulatory constraints). When the owner and the occupier are different, the nature of access shifts.
Access addresses the user’s rights to get onto and control the land sufficiently to meet farming goals. If a farmer owns the land, he or she enjoys maximum rights and control. Tenancy offers a farmer access to the property, subject to the conditions in the agreement. In practical terms, access also means that the operator must be able to get to and onto the land without undue constraint. For example, if a landlord keeps the gate to the leased property locked or blocked, the tenant may have an agreement to use the land, but experiences barriers to access.
Security refers to how much risk is associated with the land tenure situation. Land ownership is the most secure tenure. Owning the land is the lowest risk; the farmer can feel sure about her ability to stay on and use the land. Ad hoc, informal use agreements are the least secure since the risk is high that the situation could change.
The degree and type of land tenure security may vary for strategic reasons depending on the farm’s business stage. Starting out, a farmer might need more flexibility and less security. As the business grows and investments grow, greater security may be a priority.
In New England, good land in premium locations is unaffordable for many farm seekers. This doesn’t mean giving up on farming where you want to farm, but it does require flexibility, compromise, and patience. You may not find the ideal farm in your price range. You may start small. You may need to expand your search to other areas. You may start on rented land. Some farmers are content to always farm on rented land; it fits their personal values and makes business sense.
The cost of land acquisition has to be reasonably proportioned to the farm enterprise. Many farm business management specialists will argue that it makes more sense for a beginning farmer to start on rented land and build equity in other ways, rather than to start off with land debt. In terms of return to family living, it costs less to rent than to purchase. And some rental agreements offer more financial advantage than others (for example, a share lease versus a cash lease). Each farmer needs to pencil this out for him or herself.
In The Possibility of a Farm, Andrea Woloschuk writes about her family’s decision to immediately purchase a farm as a new farmer: “Today, our farm is too small to recover a profit and we are too poor to invest the resources that might make it large enough to become profitable. If we had decided to wait to buy and had leased land, even for a short amount of time, we’d probably be making a living as farmers today. However, at the time we bought, we believed that for the future of ourselves and of our son, we needed to own land and a home. Now, we believe differently.”
Housing is often a bigger challenge in terms of affordability than the land. Sometimes the house is part of the farm property and sometimes the farmer can find appropriate housing nearby. Housing requirements depend on the nature of the business (how close do you need to be?) as well as personal and family considerations. You could buy your housing and rent land, or vice versa. You could start renting both land and housing.
Certain non-traditional arrangements address the affordability issue. For example, some long- term and ground leases build in affordability provisions, so that the land is affordable for farming in perpetuity. Easements can reduce the price of a property. Share-lease agreements remove some of the risk from rental payments, making them more affordable. Owner financing and new mission-driven investor financing can offer friendlier terms for farm purchasing.
In Experience of a Landless New Farmer, Vermont farmer (and LFG field agent) Mike Ghia reflects on accessing farmland and housing and concludes that, “We must develop a system that allows farmers to build up economic security for themselves and their families. While it’s only one piece of that puzzle, long-term access to land for farmers is a key part of developing a sustainable future for an agricultural model that more resembles Jeffersonian democracy than the European feudal system.”
Legacy refers to what you pass on to next generations. If you own land, you can pass it to your heirs. Most farmers feel strongly about their land and want to pass it on as a meaningful legacy. Others see land as a working asset and don’t attach the emotional aspects of legacy to it. The reality is that sometimes the legacy includes insurmountable debt. Sometimes it is complicated by inadequate succession planning that can result in the legacy being sold off.
If you own a farm, you can arrange for it to be passed on – within the family, or however else you might choose. Sometimes a farm family will pass the farm to a non-family member, or to a charity such as the church or a land trust.
It is possible to have a meaningful legacy without owning land. For example, long-term leases can be inheritable. Ground leases also are inheritable. In the case of a ground lease, you can pass on the improvements you own, as well as the lease itself.
In the farmland context, stewardship refers to the regard for – and management of – the land and associated natural resources. Stewardship implies both values and responsibilities. Most farm property owners feel responsible for making sure that the land is cared for and not abused. Of course, people have different ideas about what constitutes use and abuse. If the owner is the operator of the land, her uses will correspond to her values and goals for it. If the user and owner are different entities, there needs to be an agreement about how both parties’ stewardship goals and values are addressed.
Contrary to historic mythology, tenants are not inherently less responsible or careful than owners. The factors that influence stewardship are complex and include community, culture, and education. Sometimes it is the tenant who sets a higher bar than a landowner. This dynamic can be compounded if the landowner lives away from the property. Increasingly farmland owners are separated from the property by both distance and generation. They may not even visit the property at all.
Spelling out stewardship standards and plans is the best way to establish the path for managing the land, water, habitat, and other natural features of a property. NRCS Farm Conservation plans, Holistic Management plans, and organic certification are examples of tools that can help owners and users of farm property address stewardship.
The Possibility of a Farm by Andrea Woluschuk. Andrea recounts and reflects on the decision to immediately purchase a farm, which left her family unable to invest in their business or withstand unexpected setbacks. “… We believed that with a little gumption and hard work, we could make our farm dream a reality. We found 20 acres in Eden, Vermont, on the edge of the Northeast Kingdom. It was affordable, and we thought, a mostly risk-free endeavor. We sold our home in Portland and moved our family to Eden…” Read more.
Experience of a Landless New Farmer by Mike Ghia. Mike tells his story of accessing farmland and housing, while pondering the assumptions, realities, options and trade-offs involved in gaining secure land tenure. “At heart, I agree with the belief that no one really owns land; they provide stewardship while it is in their control. But I am also pragmatic about the political and economic system in which we live. Thus, while I applaud creative efforts to make it possible for more people to make a living from farming the land as conscientious stewards, I also feel that farmers should not become modern serfs or crofters working the property of the “landed gentry.”Read more.
2014 Tenure, Ownership and Transfer of Agricultural Land (TOTAL) Survey Summary (pdf) and Full Report by the USDA National Agricultural Statistics Service (USDA-NASS). Part of the Census of Agriculture program.