Impacts of land-based financial support mechanisms on land values, landownership diversification and land use outcomes (1)

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 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

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.