America needs more land that’s under stewardship of people who want to conserve it for the future. We’ve lost so much native biodiversity, but there’s still pockets that can revive it if managed appropriately.
In the early 80's, Congress passed some laws that allow people to buy undeveloped land, and declare it to be undeveloped for perpetuity (no one can develop on it even if sold). The owner gets some tax benefits from doing so.
It became a niche segment in the real estate. The idea is you find land that is cheap, but you have a feeling it has mineral wealth. You buy it cheap, get the survey done, and show that it was really worth a lot more. But instead of building a mine/oil well, you declare the land undeveloped for perpetuity. The tax benefit you receive is commensurate to the (now highly increased) value of the land.
You make a profit this way, and the environment benefits.
It's a very risky part of real estate. There are lots of environmental groups who closely monitor the land, and will file a lawsuit if they suspect you are developing on the land. Fighting lawsuits is part of the risk.
Anyway, the person who did the presentation showed some interesting statistics. Supposedly, for every 10 acres of land that is developed in a given year, roughly 9 acres are declared undevelopable for perpetuity. That's really significant (if true).
This segment is not as niche as it used to be and is frequently abused for enormous tax benefits now. There doesn't need to be any real economic or environmental value to the land, you can just pay someone to do a fake survey/appraisal and assign an astronomical value, and then not pay any taxes because you're now forgoing all that fake value with your conservation easement.
> One example: the former Millstone Golf Course outside of Greenville, South Carolina. Closed back in 2006, it sat vacant for a decade. Abandoned irrigation equipment sat on the driving range. Overgrowth shrouded rusting food and beverage kiosks. The land’s proximity to a trailer park depressed its value. In 2015, the owner put the property up for sale, asking $5.8 million. When there were no takers, he cut the price to $5.4 million in 2016.
> Later in 2016, however, a pair of promoters appeared. They gathered investors who purchased the same parcel at the market price and, with the help of a private appraiser, declared it to be worth $41 million, nearly eight times its purchase price. Why? Because with that new valuation and a bit of paperwork, the investors were suddenly able to claim a tax deduction of $4 for each $1 they invested.
Well, this may explain why the presenter said it is one of the most litigious parts of Real Estate :-)
Yes, I do know about the potential for fraud. Ultimately, this sounds more like a problem with the government not doing their due diligence as opposed to a problem with the idea itself.
And yes, this is fundamentally something only rich people can make use of. The average Joe doesn't have over $100K sitting around to buy a piece of land only to intentionally lower its value!
The example of the golf course they give is weird. You're not allowed to do it to a property that has a structure on it (at least not one with utility connections). Nor can it have paved roads. What kind of golf course was this?
Still, thanks for the article. It provides a more down to earth context.
> To be eligible for a deduction, land needs to meet at least one of four broadly defined “conservation purposes.” These include protecting “relatively natural” habitats; historic sites or buildings; land for public recreation or education; and open space (including farms, ranches and forests).
My guess is that since the golf course was primarily for public recreation (or could be), and was mostly "natural" open space (grass), they argued it qualified. Probably not hard it claim it as historic as well.
Yeah, but the government would have to prove it in court, which is hard and takes a long time. As long as there are a bunch of other people doing it chances are you will die of old age before law enforcement does anything about it. Lots of rich people crime works this way. Make it hard enough to prosecute and you can get away with it, especially when you can afford to hire good lawyers.
> Yeah, but the government would have to prove it in court, which is hard and takes a long time.
Isn't this "undeveloped in perpetuity" status an application, so that you have to request an agreement to your valuation and the government has to approve it, meaning that the burden of proof goes the other way from your comment? At least, for my personal residence where I have the opposite incentive, it's not that I can go to the local government with a valuation of $3.50 for my house and they have to prove it's not; I can object to their valuation and try to prove my case, but the burden is on me, not on them.
O you think the IRS exists to prosecute rich people for creating money out of thin air? No they are focused on withholding from the underpaid “unskilled” workers who messed up their taxes thanks to TCJA.
I go back and forth on this. I love the idea of preserving land but this also seems to be a way for the wealthy to insulate their home eg buy 10 acres next to your house and declare it undeveloped. Now you get an amazing property in a pristine zone that nobody can touch all while getting a tax break you don’t need and boxing out the next generation.
"Boxing out the next generation" is exactly what the law is for. I guess we have to decide whether we want more natural wilderness or more luxury homes with nice views.
The only way I can think of to preserve the wilderness without any isolated homes for the wealthy is for the government to buy up the land. I'd probably support that, if we could get it done, but it does mean that if the money for it comes out of the general fund, then you probably have average people paying for more of it, instead of mostly the wealthy.
Boxing out the next generation with environmentalism as the excuse.
This is also a massive problem in BC; the ALR exists to do exactly this. There's lots of land available, it's just illegal to build anything other than a farm on it, and the real estate market is as a consequence as usurious as you'd expect it to be.
Of course, none of this is new. Enclosure predates the Romans.
See I’m more happy with the gov doing it and making it a park but when someone rich gets to carve out a special little haven for themselves it doesn’t seem as fair. If we increase the tax rate on HNWI then they will still mostly pay for it.
If you want to see the actual mechanisms and debate, Boulder, Colorado did this with a belt of “open space” in the 1980s. One consequence was that it brought natural parts of that land close, which includes wildfire.
Or locking them out of options. Why not let them do it? It’s their world. We all like to complain about boomer control of society but whose to say in 50 years we get looked down upon for this stuff.
The appropriate countermeasure is to allow upgrading land that is sufficiently near an urban area if it will be used to build above a certain density, e.g. 2000 homes per square kilometer. That's already denser than most urban areas in the US, so it wouldn't create sprawl in the sense that we're used to seeing it.
It reminds me of all the desert shithole land I looked at that had covenants created by a dead boomer back in the 80s that require something ridiculous like "we will only allow a mansion to be built next to our pigfarm."
In theory it's possible to reverse but in practice it requires something like standing on one foot, holding your breath, and reciting the entire bible.
People desperately need housing and even in bum fuck nowhere where I live they are desperate to build a little homestead just so they can have something, and then you have this insanity with people creating covenants that basically have dead people in their graves reaching out to smite living people.
Isn't this (covenants that basically have dead people in their graves reaching out to smite living people) exactly what the dead hand rule was created to prevent? This was a major part of the "defeudalization" that took place between the 17th-19th centuries in most of western Europe, as before then the nobility would entail their estates so as to keep them whole in the senior male line. It does allow for limited postmortem control, but practically not more than one human lifespan thereafter.
I mean, this is the entire intent. It lowers your resale value quite a lot too though, since it's not open for development.
I was moderately interested in a property in the middle of nowhere that had about 8 acres buildable (with two structures on it already) and about 220 acres of forest and a lake under a very strict conservation easement. It would have been the only property of that size and type I could even dream of affording. It was still expensive, but less than a million dollars where if that 230 acres had not been under conservation easement in the same area it'd have sold for over 10.
And it's not like indefinite means forever forever. If the next generation 4 generations from now decides these easements are not in their best interest they will be repealed. It's just a piece of paper in the end.
Try $50k and 1-3yr. More if you're doing something other than residential. You can thank the EPA for that. Can't do get approval without a plan for the stormwater. Can't do that without engineers. Engineers won't draw and stamp without surveys and the like.
Mega-corps building cookie cutter subdivisions or commercial space obviously pay less because they're vertically integrated and highly streamlined.
Some small scale 1-4 unit stuff (single structure here and there) is exempted, unless it's too close to water of course.
The problem is, what Congress can do, Congress and the Supreme Court can undo - and now you have a trove of pristine but already-surveyed land that can be exploited almost without risk.
It used to be unthinkable that the US government would outright cancel such things... with the current administration, legislation and justice system, it's not just not unthinkable but expected.
> There are lots of environmental groups who closely monitor the land, and will file a lawsuit if they suspect you are developing on the land. Fighting lawsuits is part of the risk.
Unless you intend to develop the land the risk seems pretty acceptable.
Only if you assume those 'environmental groups' are true to their cause and not running a shakedown operation (like e.g. the SPLC does in another politically contentious area) where they'll start accusing you of developing on your land if you don't pay them some contribution/fee/bribe.
Find people who will donate their land to conservation trusts, whether out of the goodness of their heart or a tax donation. As an owner, you can even keep the land with a conservation easement if you prefer (this is ideal if you're not near end of life, where you might want to continue to enjoy the land versus transfer it to a conservation steward org); you get the tax deduction and continue to own the land, but you cannot develop it. Buying it, imho, is a last resort, because of the legwork to put the funds together. This buy was $35M, for example (or rather, this announcement indicates that was the listing price; the transaction price might be lower, would have to look at property records to confirm).
(i work with a land conservation trust in the midwest)
Alongside the environmental disasters that the USA and the rest of the world face, there is some good news to celebrate now and then. Like this HN story, but also things like the new 'wildlife bridge'[1] over Route 101.
There is a guy in Alabama that is working to preserve and restore native habitats and plants including prairies, through things like prescribed burning and felling invasive species.
