The Costly Earth

The man who faces inflation's crudest bite is the U.S. homebuilder who starts off in search of land for his dream house.

Since 1950 the price of U.S. land for homebuilding has soared anywhere from 100% to 3,760%--while building material prices have climbed a less spectacular 24% and building-trade wages 60%. In parts of Miami, land worth $500 an acre ten years ago sells for $7,500. On Long Island, builders pay $16,000 and up for acreage they could have bought for $3,500 in 1950. Near Albuquerque, land selling for $4 an acre in 1950 now costs $1,000. Result: the family that wants to build in the suburbs now has to pay 19% of a house's total cost for a far-out piece of land v. 12% on a similar house in 1950 for land much closer to the city.

The land boom threatens to price good housing out of the market despite the fact that "the area actually occupied by all of the cities and villages of the U.S. covers only one-half of 1% of the surface of the country." So warns HOUSE & HOME in its current issue, devoted to a searching critical diagnosis of the causes and consequences of the decade-old U.S. land boom.

"Overdue for a Fall." It is not lack of land that has sent land prices sprinting ahead of the rest of the U.S. economy. Higher prices are mostly created by real estate speculators who hold on to great tracts of choice land in the hope that future demand will bring even higher profits. The speculators may be in for a shock. Historically, land prices go up and down in bigger and wilder swings than any other prices in the economy. They are "now overdue for a fall," says HOUSE & HOME. "Suburban land will sell for much less before it sells for much more." Farm land prices outside the suburbs have already turned downward.

Not all of the blame for today's apparent shortage in the midst of plenty can be placed on speculators, though they have pushed paper values in land up to an astounding half a trillion dollars. Lack of planning by cities and wasteful over-zoning by many suburban communities have contributed. Many of the choicest U.S. suburban towns keep out small-home buyers (whose children would cost the town more to educate than their parents would pay in taxes) by requiring two-acre lots, setting stiff building codes that make new houses expensive.

Most big cities have failed to redevelop their biggest land resource: slums. Slums are undertaxed, while good new apartments are overtaxed. A slum landlord has so little incentive to improve his property that often only the Federal Government can afford to build new middle-income housing on slum sites. If slum areas were taxed on the basis of the actual high value of the land in the city's heart rather than on the basis of the ramshackle buildings on it, landlords would be forced to build new higher-rent apartments.

Making Millionaires. In city and suburb alike, says HOUSE & HOME, the present tax structure harnesses the profit motive backward: it abets speculation, penalizes development. Underdeveloped land and vacant city lots are taxed, on the average, at less than 25% valuation across the U.S. v. 40.8% for business properties. Land, comprising one-third of the U.S. national wealth, carries less than 5% of the total tax load. Not surprisingly, land speculation has made more millionaires since World War II than any other form of U.S. business or investment.

If the U.S. is to avoid an even bigger land bust than in the '20s, concludes HOUSE & HOME, cities and towns must act fast. Most experts agree that "the first point of attack should be to ease the too-heavy tax burden on houses and other improvements, multiply the too-easy tax load on unimproved land, and make the unearned increment in land prices provide much more of the taxes needed to provide the streets, water, sewers and schools without which unimproved land would be neither livable nor salable."

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