The pandemic has inspired city dwellers and investors to buy land in rural areas. That’s driving up farmland prices and pushing some beginning farmers out of the market.
Abel Dowden, age 20, grew up on his family’s beef farm in the Missouri Ozarks. He just got married and is ready to start his own farm. Dowden had his eye on a neighboring place but he is a day late and a dollar short. Over the span of the last year, the price of the adjoining property has tripled. Since Dowden can’t afford the new price, the landowner decided to hold on to it until the right buyer comes along.
What caused this rapid spike in land value? Who will the right buyer be?
The data is still being analyzed but already agricultural economists across the country have noticed a marked increase in agricultural land value caused by the Covid-19 pandemic. In this new market, locals looking for their retirement property and out-of-staters looking for some peaceful country living or an easy investment compete with, and often out-compete, new farmers.”When newcomers move in and take that land out of production, they actually threaten rather than boost the rural economy.”
During the pandemic, federal stimulus money has poured into rural communities in the form of small business assistance, farm aid, unemployment benefits and income-based payments. While the money has helped some scrape by this year, it has left others with cash on hand they wouldn’t otherwise have. Levi McDaris, a commercial banker in the Missouri Ozarks, says that in his area many people are turning around and putting that money into land, driving up demand and prices.
At the same time, the uncertainty of Covid-19 prompted investors to seek out stable investments in an otherwise turbulent market. Ag land?—?known for steady, reliable returns?—?has long been a go-to investment for large firms but this last year also saw new people investing in land, says Ray Massey. Massey is an ag economist at the University of Missouri Extension which conducts an annual survey of the ag-land market. Moreover, the Federal Reserve has kept interest rates low to encourage investment, which has made land purchases easier for individuals and investors.
Those individuals are not only rural people. As Covid-19 has redefined the limits of modern work, urban people have reconsidered city living. Nearly 40% of U.S. adults living in urban areas would consider moving to rural areas according to an April 2020 Harris Poll. Rural housing markets around the country have been blown apart by this sudden demand. In parts of rural California, for example, housing prices have increased by an average of 25% since the start of the pandemic. In the small city of Springfield, Missouri, about an hour West of where Dowden lives, housing prices have increased about 11% since May 2020. This demand extended to ag land, especially into what might be called recreational ag land: often hunting grounds or small 40-or-less-acre lots used for lifestyle farming. While the demand has mostly increased within an hour and a half of larger urban areas, this has also pushed up the value of ag land farther out.
Since people looking for lifestyle or recreational properties ?“are willing to pay more than the agricultural value,” explains Wyatt Fraas, the farm and community assistant director at the Center for Rural Affairs, ?“all the surrounding ag land gets an increase in value.” The phenomenon has pushed up cropland prices across the U.S. in places like Iowa, Ohio, and Missouri.
Not only has the demand for lifestyle properties pushed up the price of ag land, but non-farming people moving into rural areas have also quickened the development of ag land into smaller, lifestyle plots around rural towns. When media outlets hasten to characterize the flight to the country as a revitalization of rural America, they miss this important part of the picture. ?“When newcomers move in and take that land out of production, they actually threaten rather than boost the rural economy,” says Julia Freedgood, co-author of the American Farmland Trust’s Farms Under Threat report.
Small towns afflicted by the real crisis of business and youth-flight can benefit from the arrival of newcomers, but only when the influx does not come at the cost of ?“ag land being split up” and new farmers being driven out of the land market, says Fraas. He explains that while rural towns do need more families?—?for healthy schools, businesses, and communities?—?land developed outside of town is an economic hardship for small towns because it increases demand for services but not tax revenue. Farmland on the other hand, he said, ?“provides a lot of tax income as well as other economic income. Every farm is essentially a small factory that buys lots of goods and services.”
Moreover, in a world flailing in the fight against climate change, low-density rural development is significantly more energy and greenhouse gas intensive than high-density urban core development, Freedgood explains. This is on top of the direct environmental destruction caused by such development, which breaks up animal habitats, damages watersheds and native ecosystems and, ironically, contributes to the spread of infectious disease.
Despite the economic and environmental costs to local communities, the Farms Under Threat report finds that between 2001 and 2016, nearly 7 million acres of farmland were converted to low-density residential (lifestyle) land use.
And, of course, conversion into housing developments takes ag land out of the market and drives up land prices. The surging price may be good for landowners but it’s ultimately changing who can afford to become a landowner. Abel Dowden’s neighbor saw his property value triple, but this means Dowden, the new farmer, is unlikely to be able to buy his farm.
Some of the factors driving up farmland prices?—?such as low interest rates and federal stimulus money?—?probably won’t last. The newfound interest in rural living, however, may stick around or even increase. Currently, about 42 million people—mostly in rural America—are without access to broadband internet. Businesses and families alike view poor broadband access as a major detractor of rural living; thus, broadband access is arguably a major factor limiting rural growth. In response, Biden’s American Jobs Plan includes $100 billion for broadband infrastructure. As rural broadband access increases, more people may want to move to rural areas, buy land and build homes, further limiting the availability of affordable farmland. “The future of farming is not farm ownership because the cost of farm ownership is just getting too high.”
Land access is the number one challenge that young farmers and ranchers face, according to the National Young Farmers Coalition, a network of young farmers fighting for the future of agriculture. As traditional farms and ranches continue to struggle with profitability, fewer and fewer retiring farmers are passing their land onto their children. Instead, their land enters the ag-land market, where it is difficult for new farmers to compete with industrial ag operations, investors, and developers. As prices go up, the imbalance of purchasing power intensifies. The Covid-19 uptick in prices and corresponding rise in investment and non-farming purchases is accelerating this long-running trend. Sadly, says McDaris, a banker who often works with farmers on getting loans, ?“the future of farming is not farm ownership because the cost of farm ownership is just getting too high.”
Independent family farms are the ?“key to maintaining a resilient farm sector and healthy rural communities,” reads one of the National Young Farmers Coalition guiding principles. In fact, small-scale farms are vital not only for rural communities but America’s food system at large. The pandemic made this point all too clear as industrial ag produced piles of pig corpses while people waited in line for hours in food bank lines where supplies were running short. The Young Farmers Coalition finds that not only is farmland overwhelmingly concentrated in the hands of older farmers (according to the USDA, the average age of farmers is 57.5), 98% of farmland is owned by white people; it is imperative that new, young, diverse farmers replace aging farmers, not industrial ag behemoths.
Some states have policies meant to address farmland development and encourage transition to new generations of farmers. These policies can protect agricultural viability and use zoning laws to control low-density sprawl. For instance, under some state programs?—?which are fairly limited in Missouri but more prevalent in other parts of the United States?—?Dowden might be able to sell an agricultural conservation easement on the land in order to make up part of the higher price. This would help him with the purchase now and ensure that the land is not developed even after he is done farming. Some states have also implemented Farm Link programs that connect land seekers with landowners who want their land to stay in agriculture. If such a program was established in Missouri, it might help young farmers like Dowden gain access to farmland.
According to Freedgood, of the American Farmland Trust, there’s a lot of important work to be done on the local level. ?“Good rural planning is incredibly important,” she says. ?“Not just land use planning but comprehensive planning that supports agriculture and rural economies. If done well, not only will it protect the working landscape, it will enhance community resiliency and food security in the face of climate change.”
For now, beginning farmers like Dowden continue to face an uphill battle, only exacerbated by the Covid storm. McDaris, the Ozark banker, reflects: ?“It’s not that people wanted it to become this way, I think it’s just the unintended consequences of who we are and what we’ve done.”
This blog originally appeared at In These Times on June 14, 2021. Reprinted with permission.
About the Author: Sadie Morris is a former In These Times editorial intern. She is pursuing a bachelor’s degree in Culture and Politics at Georgetown University with a focus on political economy and the environment.