by Mike Ghia*
Introduction: the Landless New Farmer Dilemma
In 1989, at age 20, after two years at Rutgers University studying environmental science, I worked on the campus livestock farm. I had thought that I’d had my share of shoveling manure, growing up on my family’s part-time livestock operation, but the more time I spent on the farm, the more I realized that I actually enjoyed the work. From that summer forward, I became determined to pursue farming as my vocation. For the next eight years, I increased both my academic agricultural knowledge and my practical farming skills. Along the way, I met Margo, who eventually became my wife. Together, we have been working hard to build a viable business and find a place where we can secure long-term farm tenure so we can invest in our future.
To start out, we rented a farm that was set up to be a highly specialized sheep dairy and cheese-making operation. We lived and worked there for four years and came within two weeks of closing on an agreement to purchase that farm, only to find ourselves having to leave it altogether a few months later. Since then, we have downsized our operation and now rent a farm four miles from an apartment we rent. We have no intention to buy either the farm or the apartment. Along the way, our difficulties in securing ownership have led us to consider a number of other options and alternatives to securing long-term tenure.
Many, if not most, young and new farmers want to “own” their own farm. For some, owning their own farm is an even more important goal than having a successful business that supports it. As my wife and I began planning our farm, we were determined to own from the very beginning. With the high cost of farms in Vermont and the Northeast in general, this was an unrealistic, even naïve, goal.
Some argue that the costs of ownership are actually a drag on capital investment in the farm business itself. But this is often hard for the new, landless farmer to hear, and even harder to accept. It’s important to understand why many farmers aspire to traditional farm ownership and see it as an imperative. If alternative tenure options are going to work, many of the same benefits of ownership need to be integrated or addressed otherwise these options are neither practical nor attractive.
Ownership, Investment, and a Connection to Place
Home ownership is the “American Dream.” It gives us more options, freedoms, and rights than renting, making the extra responsibilities worthwhile. Of course, you don’t have to own a farm to own a home.
However, there is also the ideal of “living where you work.” One of the attractions of farming is that farmers don’t have to commute to their jobs as most other Americans do. The paybacks for the long hours of farming are to “be home” on the farm and to intertwine family and work life. “Living where you farm” also increases levels of efficiency, security, and management. Like most livestock and dairy farmers in similar positions, we are often uncomfortable because we cannot monitor our stock as closely as we could if we lived on the farm. We are also less likely to know about fires, escaped livestock, and other problems. Not living where we farm also reduces our efficiency because our farm office is in our house, not on the farm itself.
One of the hardest things for us when we left our first rental was breaking the bond with the land and the community where we lived. Even though we moved to the next town, moving altered many of our associations and civic activities. Whether through ownership or through another long-term tenure mechanism, we very much want a situation where we can “sink down some roots” and establish deep connections to a place and a community. A farmer once told me that his farm was the best investment that he ever made because everything else that farmers spend money on will “rot, rust, or depreciate.” Only the real estate will appreciate, even if it is minimally maintained and updated.
Ownership also allows farmers to get the full useful life out of other investments. While many investments will rust, rot, or have to be replaced, farmers want to know that they are going to have sufficient tenure to see investments such as fencing, maple sugar lines, and food processing facilities at least pay for themselves. When we left our first rental, I was glad that I had not put in permanent fence there. But at the same time, relying on temporary fence makes our farm inefficient. Thus, our experiences have made us feel that we need to have long-term tenure in order to justify long-term investments.
Farmers often use their equity in real estate to support financing for farm and personal needs. When a farmer “owns” his property, he has more financial options. Even more importantly, as farmers make mortgage payments, they are investing in something rather than “throwing away their money on rent.” As any farmer can tell you, farmers often rely heavily on their farm’s value for retirement. Even if they don’t initially sell their farm for retirement money, they have the security of knowing that they have a home in which to live. In the end, the expenses involved in other tenure models must allow enough savings to make it possible to save for retirement. Otherwise, the country needs to consider “farmer pension plans,” such as those currently being implemented in the European Union.
Ideals and Realities
During 1996, we spent a great deal of time planning our sheep dairy. Through a computer model used by an Extension Specialist, it became clear that we were in no position to own a farm. We had no equity and no money for a down payment or closing costs. We had no track record to demonstrate that we could generate the farm income needed to make the payments or the level of “off-farm income” that would have offered lenders security. With the other start-up capital investments we needed to make in livestock and equipment, it was clear that we would be taking on far too much debt if we bought a farm at the same time we were starting our operation. We needed to start out by renting first, much to our disappointment. In our first short-term rental situation, we spent almost a month hashing out a lease with the landowner. We took a template from the Extension Service and modified it to our specific situation. We also consulted a local lawyer. We wanted to make sure that the rights and responsibilities of each party were clearly spelled out and that the lease would hold up legally. In hindsight, this proved essential when issues arose, although we ended up finding areas where we should have been even more specific.
Addressing improvements to the farm, especially those necessitated by past abuses or neglect can be difficult. This is particularly so when it comes to improvements in soil fertility and controlling soil erosion because our society has very little recognition of the value of a tenant farmer’s stewardship. Even for the most well-intentioned steward, it’s a challenge for a time- and cash-strapped new farmer to make improvements to someone else’s property without assurance of a financial return or other compensation.
In our current situation, the owners recognize that the farm has been long abused and neglected. The fields are full of weeds including multi-flora rose, and the barn is in disrepair. As a result, we currently rent the land for no cost and pay only a marginal annual fee for the use of the barn. This has allowed us to put some capital into the farm without worrying about the financial implications.
Ownership: Affordability and Easements
Three years of sheep dairying and cheesemaking and running our own business taught us more than any of our previous experiences about farming, finances, and management. During that time, we also developed a maple syrup enterprise, lamb and wool markets, and expanded into free-range broiler chickens, heifer cows, and to some degree, horticulture. By our third year, it was clear that we needed to have more “control” over our farm than a conventional lease would allow. Our long-term goals were not necessarily those of the landowner. We needed to know that we could make significant capital investments in the farm to grow our business—capital investments that would take years to pay off or yield a return. We also wanted to be able to take advantage of USDA cost-share programs that would allow us to make our farm more efficient. Help for fencing, watering systems, laneways, and nutrient management plans was there if we applied and if the landowner agreed to sign the long-term maintenance agreements.
So, in 2000, we and another couple decided to buy the rental farm. We had an appraisal done; the price for the farm was $340,000. When the current owners bought the farm in 1995, they did so with the help of the Vermont Land Trust (VLT) and a conservation easement sale that brought their purchase price down to $252,000 from an original appraisal of $415,000. The 35% increase in the farm’s price between 1995 and 2000 was partially due to renovation of one of the houses on the property. However, the greatest influence was the local real estate market. The appraisal noted that real estate values in the area had grown by 20% in the previous five years. So we learned first-hand that unless an easement is specifically designed to maintain affordability, it can only address protection against development, not appreciation. This is especially true in terms of housing because rural residential housing costs will continue to grow dramatically.
Because we planned to buy only part of the farm, we thought we could do it for about $207,000. If we had tried to get a conventional mortgage with the usual interest rate and down payment, we would not have been able to consider it. However, we had talked to the USDA Farm Service Agency and believed that we could get a 40-year loan for their maximum amount, $200,000, at five percent. FSA’s $200,000 limit meant that we could not have bought the whole farm for $340,000, even with rental income from two apartments on the property. Because most farms in the Northeast cost more than $200,000, this cap seemed low to us.
Ultimately, our plans unraveled over the issue of subdivision of the farm under the terms of the easement. The owners of the farm ultimately decided that the whole process was too complicated and that they would keep the farm and use it for their own operation, leaving us out of the picture. As we look for a farm to buy, we always keep the option of selling the development rights and the criteria for an easement in mind. Unfortunately, we have yet to find a suitable candidate in our region. Some of the farms that we have considered haven’t had enough acreage or good enough agricultural soils to be competitive. The VLT and State of VT understandably want to prioritize their limited funds for the best soils and for projects that will conserve the largest blocks of land. But the result is that farmers interested in preserving smaller parcels are less able to use conservation easements; conservation staff often discourage them from applying to easement programs.
Long-Term Leases and Land-Holding Trusts
In 2002, we gave up the dairy aspect of our farm. After much searching, we found another short-term situation at a semi-abandoned farm four miles from where we currently live. We are operating a much smaller flock and are looking at de-emphasizing the role that sheep play in our diversified operation. We have put our farm business development and expansion on hold while we struggle to find a place that will meet our long-term needs. Recently, we have been more willing to look at long-term lease and lease-to-own options. When we approach landowners, we ask about their long-term goals and the role they see a tenant farmer taking in meeting those goals. We ask for the owner’s thoughts about legal protections for tenant farmers should they or their heirs change their goals or liquidate the property. Most landowners are receptive to this concept but have not thought much about the issue. They are often hesitant to give up too much control of their property rights. Ultimately, the financial and equity aspects of a long-term lease will determine if this option will work for us.
The lease cost must be significantly lower than ownership cost to trump the value of building up equity in the real estate. Some non-farmer landowners have bought their properties thinking that they could lease them for enough to “cover their costs.” But if we could afford to “cover their costs,” we could buy a place of our own instead of throwing money away on rent.
At one point, the landowner of our first farm considered selling the farm to the nearby Earthbridge Land Trust. Earthbridge is a land-owning cooperative that is dedicated to affordable farming and affordable housing options. After several meetings with the supportive Earthbridge Board, we asked the farm owner to hold off on further discussions because we had many concerns, including some about our business viability. Our major concern was with certain logistical issues with that farm. We were also skeptical about the whole approach of a “land-holding trust.” But now that we are more familiar with Earthbridge and land-holding trusts in general, we have grown interested in that approach. We have now looked into three landholding trusts in Vermont. Members of these trusts/cooperatives each own their own home, often building on designated parts of the property. They also own the “improvements,” such as greenhouses and barns. However, the land, often including the land under the houses and other improvements, is owned by the trust. Those living on and farming the land pay annual lease fees for it.
The trust determines the fee amounts and the members usually have long-term or lifetime leases. This arrangement allows the members to own and build equity in their homes and gives them ownership security. They can also maintain more control over barns and other improvements than other lease scenarios typically provide. Even more importantly, the farmers can maintain an ownership stake in the land without having to bear the sole burden for its upkeep because the fees are kept to a minimum to make it possible to farm. This arrangement is not without drawbacks. Without some sort of subsidy, such as an easement sale, grants, or a strategy of spreading the costs among multiple households, the buy-in costs are not always more affordable than other options. At least one of the trusts we researched restricted the growth in the value of the housing in order to ensure perpetual affordability. It can also be difficult to get financing for the house and other improvements because lenders are wary about loaning money for an asset that is on land that is not a part of the collateral.
However, some lenders are becoming less concerned about this, and other land trusts are structured so that the farmer owns the land under the house and/or farm structures with covenants that restrict sale and use of that land. As with any leasing situation, legal agreements about land use, improvements, and equity are necessary to protect everyone’s interests, especially in the event that one of the parties wants to terminate the agreement. Leasing farmers must work within the group dynamic—communication and compatibility with multiple owners becomes necessary. But the farmer has a vote or a veto in a consensus process, which is different from renting from a private landowner or an institution. The multiple-owner situation can also be turned to a plus because the members often have a vested interested in working together on cooperative projects and improvements and also in providing neighborly assistance.
Conclusion: Avoiding a Modern Serfdom
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.” To truly be sustainable, we cannot simply provide cheap places for people to do battle against the cheap food system and cheap food mentality like modern day Don Quixotes. 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. It is important, in our present and future models of land tenure, that farmers do not seem more like “occupants,” “employees,” or “serfs” than like “stewards.” I have hope that we can move towards the direction of stewardship tenure.
* Reprinted with permission from Holding Ground: A Guide to Northeast Farmland Tenure and Stewardship, New England Small Farm Institute (2004).