Impacts of land-based financial support mechanisms on land values, landownership diversification and land use outcomes (1)
Project Lead
Challenges
Rural land use occupies a pivotal position in some of the major debates about Scotland’s future. It shapes our landscape, contributes to greenhouse gas (GHG) emissions and biodiversity loss, yet offers significant opportunities to address these ‘emergencies’ through new management approaches.
Land-based financial support mechanisms paid to businesses are capitalised into land values. This can inflate land values, particularly where land is attractive for other purposes. Elevated land values represent a barrier for those wishing to acquire land, which can affect community outcomes. Land value effects can also increase the capital worth of landed businesses, acting as a driver for further investment, long-term retention, re-amalgamation, or expansion of holdings. These capitalisation effects, combined with the monetisation of ecosystem services and increased desirability of rural holdings, have intensified interest from large-scale investors, which can further limit land availability for local needs.
We currently lack a comprehensive, evidence-based understanding of factors influencing land market mobility and how public funding for land use impacts land values and landowner ownership and investment decisions and consequential effects for landownership diversification. In addition, support mechanisms may change substantially following EU-Exit and the Covid-19 pandemic. This may include greater redistribution of agricultural payments and an emphasis on payments for ecosystem services. There is considerable uncertainty around the impacts of these changes on landowner decision-making and the implications for land reform and land use outcomes. Relevant data on landownership and public funding is currently limited and/or poorly integrated. There is scope for a data-driven assessment of how land-based financial support mechanisms align or conflict with each other and to land reform and land use policy.
More research is also required to develop an improved understanding of how fiscal measures, might interact with existing land use funding, and affect land reform and land use outcomes. Acquiring public funding, landowners invest privately in their holdings and often use an integrated financial model across multiple activities. This can result in land uses which are dependent on private investment being subsidised by land uses which are more enabled by public subsidy or vice versa. It is, therefore, important to understand how public and private funding interacts and how these interactions might affect land reform outcomes and the viability of different land uses in the future.
Questions
- What data is required to understand the impacts of land-based financial support on land reform, land values, diversification, and other relevant outcomes?
- How can we make more effective use of land by joining up approaches to managing land for different uses, and across larger scales?
Solutions
This project increases our understanding of the impacts of land-based public funding mechanisms on land values and related outcomes for landownership diversification and land use. It provides an evidence base for understanding whether current funding mechanisms have direct or indirect effects which act to reduce landownership diversification and for investigating potential mechanisms for counteracting any such effects.
Reviewing international evidence and conceptual framework
This project is conducting rapid evidence assessment (REA) and developing a conceptual framework to focus the research process. The REA collates and assesses a wide range of international (peer-reviewed and grey) evidence relating to rural land values and linkages with land-based financial support and landowner decision-making behaviours and related landownership diversification outcomes. The conceptual framework identifies the linkages between drivers and how financial support mechanisms are linked to land values, landownership diversification (land sales, fragmentation, amalgamation, expansion of holdings) and land use change outcomes.
Landowner behaviours and investment and ownership decision making
We are conducting interviews to identify landowner and land manager behaviours, motivations and decision-making processes relating to investment, ownership change and land use change. The approach utilises a behavioural economics frame and consideration of behavioural intervention pathways and the potential role of ‘nudges’ with landowner investment and ownership change decisions (and the influence of valuation and land values). A separate landowner survey is targeting a sample of owners from across Scotland and collating data on owner motivations and drivers for decision-making.
Stakeholder participatory research on land value formulation
Land agents and other key stakeholders are being researched to identify key factors used for valuing land and how these have changed over time or may change in the future, relative to changes in public funding and other factors. This includes analysis of secondary data on land values and sales acquired from land agencies and other sources.
Database development: mapping monetary flows and landownership
We focus on mapping and quantifying land-based public funding and linking this with landownership (scale, type) and landownership change. The spatial analysis builds on previous case studies in addition to analysing single or grouped landholdings in these regions. Three Regional Land Use Partnership regions are being selected with contrasting land use and ownership.
Assessing linkages between funding, land values and landownership diversification and modelling outcomes of alternative funding options
We are synthesizing at the level of the case study areas, combining evidence concerning:
- Qualitative evidence from landowner interviews to identify drivers for landowner decision-making relating to investment and ownership change, including the role of public funding, monetisation of ecosystem services and land values.
- Spatial data on landownership, landownership change and the distribution of financial support.
These case-study-based findings are synthesized to identify areas of divergence and convergence between the sites and apparent links between funding mechanisms, land values and landownership change outcomes.
Intended impacts of this project
- Improved evidence on the impacts of land-based financial support mechanisms on land values and landownership diversification and a greater understanding of the drivers of rural land value and their effects on landownership outcomes.
- A set of evidence-based policy recommendations to support the development of effective approaches to providing land-based financial support which does not conflict with related land reform, community development or land use policies.
- A stronger and up-to-date evidence base, concerning land value effects and landownership diversification, can be used to inform specific measures relating to the proposed new Land Reform Bill and related land use policy.
Project Partners
Progress
Reviewing international evidence and conceptual framework
The team has laid the theoretical groundwork by conducting two interrelated literature reviews. The first was a REA (a systematic form of revieweing) focused on investment decsion-making on land. The search protocol produced literature largely concerned with forestry and renewable energy investments. Combining these results with qualitative data and building on a previous model of landownership scale, the team has created a conceptual framework, to be used during analysis in later years. This framework has been trailed by a group of stakeholders to assess its appropriateness. The second review targeted literature concerned with land values, funding and financial mechanisms and land use change. Several studies concerned with behaviour change and decision-making factors (including the role of policy 'nudges') for land use change have been reviewed, with the Individual Social Material model (developed by the Scottish Government) being chosen as the most appropriate. A conceptual framework model has been developed that will allow the team to analyse different pathways towards land use change, across a variety of ownership models and land uses.
Landowner behaviours and investment and ownership decision making
This is one of the main qualitative aspects of the project, involving interviews with landowners about land use change. This year, case study areas have been chosen and an interview protocol has been developed.
Stakeholder participatory research on land value formulation
This year the work involved speaking to stakeholders about land values, including roundtable discussions with those involved in community land ownership, a focus group with land valuers and interviews with land agents. A research briefing was produced during this process, as well as a matching policy spotlight paper.
Database development: mapping monetary flows and landownership
This year a mapping methodology was developed to allow the team to track land purchases and land use changes, and this new method was used to pick 6 potential case study areas in which to base the research.
Assessing linkages between funding, land values and landownership diversification and modelling outcomes of alternative funding options
This work package focuses on the analysis and synthesis of findings; with work for this section due to commence in Years 4 -5.
Knowledge exchange
Direct communication links have been established with the Scottish Government's Land Reform policy team, with the first briefing meeting having occurred early April 2023. The Scottish Land Commission (SLC) are also highly interested in the project, and the team has established solid relationships with key members of the Commission, mainly through a commissioned piece of research from SLC investigating trends in the land market, which the team conducted this year. SLC members were involved in a case study selection workshop and inputted into the rationale for selecting these areas.
Registers of Scotland (RoS) have engaged in the research, with members of the RoS's data team and the research team discussing the intricacies of their data, and how it can be improved. The RoS team are keen to learn the findings and the process of the geographic information system (GIS) aspects of the research, and discussion will continue into the latter years.
Three briefing papers have been provided to a Stakeholder Advisory Group in this year, to keep the group informed and ask for participation in deliverables. This Group consists of 12 members from a range of professions and interests in rural land. The SAG has been briefed on the updates of the research three times during this first year, through papers and meetings, and have contributed their expertise to refining the conceptual framework and participating in a roundtable discussion on land values. An introductory webinar and podcast regarding the project have been recorded.
In the past two years the team have created a methodology for mapping landownership using Registers of Scotland data and have combined this with multiple other data sources to be able to see whether a newly purchased piece of land results in a land use change, and whether the financial flows into this land are changing. A report was published this year, demonstrating the methodology working over a sub-regional level. The Scottish Land Commission are now using this method in their reports on the rural land market.
Interviews with landowners/managers were conducted in four case study areas across Scotland. These are used to find out motivations and behaviours towards land use change - particularly towards achieving net zero. The landowners were also asked about their intentions to invest in their land and how this might help them in the future. The first report from these interviews is due this year and a set of personas will be presented, highlighting key motivations and behaviours of different groups.
In the work package concerned with the value/cost of land, one aspect is understanding the underlying factors that land agents use when they value a plot of land. Two reports have been produced this year in this work package. Firstly, an analysis of interviews conducted with land agents was completed which expanded on the findings of the report in year 1. Considering the rise of natural capital as an incentive for purchasing land, factors that were once highly relevant are becoming less important, for example, estates used to be valued based on their sporting bags, whereas now they are increasingly valued on their potential for tree planting or peatland restoration. Secondly, a report was produced tracking key underlying indicators which are considered important in valuing marginal hill land (for natural capital projects) and arable land, including the price of carbon credits, timber prices, average costs of estates etc. Overcoming challenges of cost, availability, inconsistencies and licenses of landownership data in Scotland, the project team have managed to produce a working methodology and the project remains on track for completion.
As year 1 of the project was largely concerned with the creation of theoretical frameworks and literature reviews, and year 2 being largely data collection, the main impact of the project are due to occur in year 3 onward. The main impacts this year were with the Stakeholder Advisory Group (SAG) who were briefed three times on the progress. During these meetings SAG members provided vital feedback which was incorporated to refine methods and findings. This co-creation has enriched the research and SAG members have reported how findings are relevant and useful for both policy-makers and practitioners. The team have also met with the Land Reform Bill team to discuss findings and answer questions they had. Multiple presentations and talks have been conducted with groups within RESAS, Nature Scot, SEFARI and other stakeholders. The method of mapping landownership which we developed in this project has been adopted by the Scottish Land Commission in their Land Market Data report which has been well-received by policy-makers and industry. This work builds on our close working collaboration with the Scottish Land Commission.
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