Bacon's Rebellion

Conservation Easements: Worthwhile but a Partial Solution at Best

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James A. Bacon
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In an editorial today, a Roanoke Times writer likes Gov. Timothy M. Kaine’s goal to protect 400,000 acres of Virginia land from development by the end of his four-year term in 2010, and endorses the practice of providing tax credits for conservation easements. However, the Times sensibly supports a proposal to put a cap on the conservation tax credit that would limit abuses, such as inflated land appraisals and gigantic tax windfalls for land developers.

I agree that conservation easements are a valuable growth-management tool — they can protect land containing unique environmental, aesthetic and historical assets. However, no one should deceive themselves that conservation easements will do much to address the underlying problem they’re designed to protect against: the extraordinarily land-intensive pattern of development that is consuming ever larger chunks of Virginia’s countryside.

The underlying problem is zoning codes enacted by counties in the major population centers of the Washington, Richmond and Hampton Roads New Urban Regions that restrict the ability of developers to respond to market conditions and build, or redevelop, at higher densities. Virginia’s major metro areas could accommodate decades of population growth simply by allowing a market-driven evolution toward denser settlement patterns. When they restrict density, these jurisdictions don’t halt growth — they displace it. Developers seek land elsewhere, usually on the metropolitan periphery.

Conservation easements don’t halt growth either — they, too, displace it. If developers can’t build on land protected by easements, they’ll just sniff around for land nearby to build upon.

Whether you conserve land through outright purchases or tax credits, there’s not enough money in Virginia’s budget to purchase or protect all the land potentially threatened by development. If Virginians want to save their Countryside, they must come to grips with the policies in the major population centers that prevent developers from building “up” and force them to build “out.”

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6 responses to “Conservation Easements: Worthwhile but a Partial Solution at Best”

  1. James Atticus Bowden Avatar
    James Atticus Bowden

    I just fell off the turnip wagon. So, how do developpers make windfall profits from land kept out the market for conservation. Thanks for your instruction.

  2. Ray Hyde Avatar
    Ray Hyde

    JAB: Developers absolutely make money from land kept out of the market for conservation. Likewise for other low density regulations: they both make housing much more expensive. Land use regulations are the best thing that ever happened to construction company profits. For one thing, they make it impossible for the little guy to play.

    Here is where I fall off the turnip wagon:

    The underlying problem is zoning codes enacted by counties in the major population centers of the Washington, Richmond and Hampton Roads New Urban Regions that restrict the ability of developers to respond to market conditions and build, or redevelop, at higher densities.

    That would be fine, except that we know that higher income translates into choice of lower density residential location.

    Central area high density housing is frequently more expensive, unless you are an urban pioneer. Jim makes the argument that if we built more high density housing in the areas where prices are highest, then the values would fall, and they would be more available for those that might otherwise choose to live there.

    But what we know is that people who can afford to make a choice choose lower density locations. Therefore there is no reason to believe that “the market” wants higher densities. This is the same as the Metro problem: everyone wants it— for everyone else.

    Jim also makes the argument that subsidies make living in lower density areas less expensive than they would be otherwise and this encourages low density living. Sure enough, if you wrote regulations that artificially make higher density living look less expensive (for example gross land set asides or artificially large lots, to raise the prices) then more people would choose to live in high density areas.

    It is not much of a choice if the other options are closed off for all eternity in a perpetual easement.

    Conservation easements are tax subsidized open space, and we know that higher income people choose less dense environments, so conservation easements are both a subsidy to the wealthy, who can easily pay for their own locational choices, and they are a subsidy to densely populated areas as well. I think Jim’s subsidy argument is upside down.

    Rather than go through the tortuous path of making the wealthy more well off through conservation easements, we could just pay to artificially lower the rent in densely populated areas. Sure enough, if you artificially subsidised high density housing to make it cost less, then (some) more people would choose it. If enough people chose it the open space would be “saved”.

    There are problems here. How will you get people who own high value homes in a dense area to support a program that will lower their value by creating an artificial surplus? Then, if you do lower the price range, what makes you think that those at the new price point will make any different decsions than those that can afford either condition now? How can you argue against artificial subsidies for low densities and not argue against artificial subsidies for high density?

    The best information we have is that somewhere between 25 and 33% of dwellers will choose such “favored”locations and the rest will want individual homes. Whether they are in low density or high density places, they will want open space around them which lowers the overall density and makes things more disconnected.

    We should recognize all of these things as facts, as constraints on a system of nonlinear equations. We should accept the results and plan accordingly.

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  3. RedBull Avatar
    RedBull

    There was a situation in Frederick County a few months ago involving Conservation Easements.

    The County, in order to centralize growth, created what it dubbed the UDA – Urban Development Area. This is the area where the county wants a majority of the growth to occur over the next 25 years or so. They even have a website which can be found here, http://www.co.frederick.va.us/PlanningAndDevelopment/UDA/Basic%20Information.htm.

    Fine. Great idea.

    However, prior to creating the UDA several pieces of land were placed into Conservation Easements in order to preserve open space. That land is now part if the UDA.

    Now, I am not faulting the County for creating the UDA, or the landowners for placing it in a Conservation Easement, but in doing so, the county made several land owners a ton of money by placing their land (which was already in a Conservation Easements) part of the UDA, thus opening it up for high density development and approving the new zoning.

    Ray makes a valid point when he says that developers “make money from land kept out of the market for conservation.” The above story is a great example of that. I think the land should have been kept in a Conservation Easement and been denied high density zoning. Why? Developers will just keep buying land right ouitside the UDA’s waiting for the day when they know the space will have to be developed.

    The only way to prevent this is to require landowners to keep the land in a Conservation Easement for several generations.

    It’s just a game of cat & mouse as long as developers keep buying land right outside UDA’s waiting for the day when they know the land will have to be developed.

  4. Ray Hyde Avatar
    Ray Hyde

    Redbull:

    I don’t know for sure, but I seriously doubt you have the facts right, or else I misunderstand.

    Conservation esements are among the most durable contracts around: thy cannot be broken except in a court of law, and sometimes only by the legislature. They are usually perpetual, however I believe nine states have outlawed them on the basis that they violate the dictum that you cannot reach out of the grave to control the future. In those states easements are restricted to a term of years, usually 20, or 40. They are not eligible for federal tax consideration unless they are permanent.

    Unless Frederick county held the easements themselves, they had no authority to grant zoning that overrides the easement contract. The whole point of easements is that it takes land use authority out of the hands of the government. I have said that they amount to eliminating the right to vote for our grandchildren, and they will wind up being the full employment act for our great-grandchildren’s attorneys.

    If the county did hold the contract themselves, then they are free to renegotiate the terms with the landowner, and your scenario might play out. You can see what kind of public abuse of power that could lead to, with the government holdiong court over who gets to wiggle off the hook.

    I believe that easements hava a lot of things wrong with them: so many I don’t know where to start, actually. Even so, they are the best means we have for preserving land, at present.

    In the post above EMR apparently makes the case that we should all live on only 5% of the land and the other 95% should be conserved. At the same time, he argues that all the land we have conserved so far is in the wrong place. If 95% of the land is going to be conserved, how can anything we have done be in the wrong place? Virtually everyplace will be the right place, in the end.

    Conservation easements and large lot restrictions have made more densely settled areas possible. Without them, we might see a dense area surrounded by a townhouse area surrounded by 1/5th acre lots, surrounded by 1/4 acre lots, etc. As bad as they are, the alternative to low density is worse. Like Metro, they haven’t solved the problem, but the alternative is worse.

    The people that hae capitalized on highly expensive and dense dwellings have mad a killing. Their dwellings are made possible by transit contributions by people who will never use transit. They are made possible because whatever other alternatives people might have chosen are not available or priced out of sight. They are kept uncongested by parking restrictions that turn public streets into private parking for neighborhood residents only. Their taxes are kept (relative to what they might be) low because of the large concentration of tax positive jobs. They are made possible by the air and water regeneration provided by their rural neighbors, along with a place to bury their garbage. And yet, the urban areas want still more benefits: commuter taxes, congestion fees, dedicated funding for Metro, and more.

    Look at it this way. If I subdivide my farm into half acre lots, I could make as much money as I would by farming it for over two hundred years. But, that is only true because my neighbors are prohibited from subdividing their land. If we all did that then the price of housing would collapse: you could buy a nice home on a half acre for $120,000, just as you can in much of the nation.

    If that happened, then many people who now live in apartments or condos might choose to move out and buy, if they could find a job. But, at those home prices, you can afford to be a teacher or fireman. You don’t need the high end jobs the urban areas provide, and anyway, you can always telecommute.

    Paradoxically, this would raise the price for some other buyers. Even at those bargain basement prices, the farm is worth $40 million, but farms around here now sell for as “little” as one to ten million. Restricted land use makes farm estates a buyers market for those that can afford them: it is a subsidy to the rich. Not only that, but the Rich SOB who buys a farm can claim an outrageous valuation, slap an easement on it, and get the land for a song, after taxes.

    Its a scam because Joe SixPack thinks we are preserving “our open space and prime farmland”. The killer is, that with the easement recorded, the owner is free to stop losing money by farming, and still keep the land use valuation. Furthermore, as soon as the easement is recorded, the value of the property next door soars, and all of this drives still more people like Joe into condos.

    Individually poor people don’t have as much money as rich people, but collectively they have more. The picture that Bacon and EMR paint of “the market” is highly distorted because there are many markets.

    From a practical standpoint, some developers do manage to get permission to build, and they get the kind of windfall others can only dream of. Where builders might have scraped by on 5% profit, 20% and more is now common, and necessary because of the building restrictions, uncertainty in the development process, and bureaucratic delays.

    So, yes, developers profit from lan restrictions, but I doubt very seriously it happens as you described in Frederick County.

    Profit gives some people apoplexy. They have the idea that anybody who invests for the future is a speculator, but I can tell you that the most profitable part of my “farm” is the parts I don’t own: it is land owned by speculators and not currently used.

    BTW, the usual language in an easement contains clauses that are a huge benefit to the esment holder, if the easement is broken, the landowner has to give back all the tax benefits and administrative costs.

    EMR makes a big noise about putting conservation easements in the wrong areas. A good example is using easements to create greenbelts around an urban development area in an attempt to create a clear edge or artificial boundary. This idea strikes me as dumb as toast, because you are conserving the very area you might need someday, or as EMR puts it the land the market values most. I know of one town that had such a thing and later dismantled it, at great expense, to make room for affordable housing.

    At the same time, I don’t see much point in conserving 95% of the land in such a way that we have to drive to go visit it. PW county just completed an extensive survey, and they concluded that more people wanted more public open space, and they wanted it where they could walk to it. This has got to mean more densly populated local areas and less densely populated average area. It is also going to mean less “connectedness” as residential or mixed use areas will necessarily be separated by parklands. This is particularly going to be true if the residents have their way and the parklands are chained together. What we are going to have to plan for is social schizophrenia because we all want things that are mutually exclusive: open space and cheap housing, etc.

    I have a problem with Ed’s contention that subsistence farms off the grid, hobby farms, estate farms, and anything other than a profit making commercial farm is an urban use. Our rural viewscapes aren’t that way by accident: an awful lot of people work very hard and spend a lot of money to make that scenery. Then people drive out from the city to enjoy it, for free.

    But if he is counting all of that as “urban uses” then the rest of his calculations are suspect. In particular, I’m convinced that if people actually had to pay the location dependent costs of goods and services, then our most densely populated areas would shut down tomorrow. If we only need 700,000 acres for all our forseeable urban needs, then why do the squirrels need to have 25 million acres at my expense?

    I agree with Ed that we are doing just as bad a job of planning our conservation land as we are our developable land. Each condition is going to wind up contributing to the default condition for the other. Despite some peoples personal claim to the contrary, no one is smart enough to determine what the right place is for everything.

    That is going to be determined piecemeal, over time, as opportunities become available, and when we look back we’ll be able to see where we could have done better. We could have run the Metro to Tyson’s instead of Vienna, for example, but at the time we didn’t really have the the opportunity because we could not afford it.

    At least Jim Bacon has the sense to realize that there is not enough money in Virginia’s budget to protect all the land potentially threatened by development. Sounds to me like he is asking for a tax increase. JAB will tell him that if we raise taxes enough, we will not only have enough money to be able to preserve the land, but we will take all that speculative money out of the economy, and kill all the jobs that would have made the development possible.

    I can’t wait to hear Ed’s explanation of the fair and equitable ways to make the transition. Maybe he’ll suggest we use the profits from the wasteful entertainment industry, after we finish using it to pay for our schools.

  5. RedBull Avatar
    RedBull

    Ray:

    I think is all the land owner did was go before the board and ask for a rezoning which was approved.

    I KNOW they have placed land in the UDA that is in a Conservation Easement….stay tuned.

  6. Ray Hyde Avatar
    Ray Hyde

    Sounds to me like the conservation land will be open space within the UDA. Even UDA’s need some breathing room so the ideas are not incompatible.

    He can be zoned any way he or the county wants, the easement holder controls what can be developed. Too bad for him he didn’t get the zoning changed before he granted the easement: his tax credits would have been much larger.

    If he sues to get relief fromn the easement, the usual language is that he is responsible for legal costs to defend the easement. If he does try to get out of it, expect that every easement holder in the state will play friend of the court to help fight it: they won’t want any Virginia precedent for allowing an easement to expire.

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