Impacts of land-based financial support mechanisms on land values, landownership diversification and land use outcomes (2)

Challenges

Land-based financial support mechanisms, such as farm payments, 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, like low turnover of larger holdings. We do not know enough about how public funding for land use impacts land values, ownership, and investment decisions, and the 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. Scope, therefore, exists for a data-driven assessment of how land-based financial support mechanisms align or conflict with each other concerning Land Reform and Land Use Policy. The Scottish Land Commission is currently working on proposals to enable more of the publicly created increases in land values to be used to support community development. This may include fiscal measures to address concentrated land ownership. Further work is 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.

Questions

Solutions

This project is increasing our understanding of the impacts of land-based public funding mechanisms on land values and related outcomes for landownership diversification and land use. It is providing 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 developing a conceptual framework for assessing land reform and land use outcomes

This project is performing a rapid evidence assessment on rural land values and linkages with land-based support mechanisms and natural capital markets. This is informing the development of a conceptual framework of factors affecting land values and owner investment and sales decisions and related land reform outcomes.

In parallel, a rapid evidence assessment of international examples to identify joined-up approaches to integrated land use and support mechanisms for influencing land use change. The insights from this review are informing a parallel conceptual framework of factors affecting land use change and land use decision-making. The framework covers the socio-economic drivers which can impact land use change including:

• Land-based financial support mechanisms.
• Markets
• Landowner motivations and decision-making relating to land use change.

Case study interviews on landowner, manager and investment decision-making behaviours

We are interviewing landowners and managers to identify their behaviours, motivations and decision-making processes relating to investment, ownership change and land-use change. The approach utilises a behavioural economics framing and considers behavioural intervention pathways and the potential role of ‘nudges’ concerning landowner investment and ownership change decisions. These insights are being used in unison with spatial analysis of existing data to show how behaviours relate to outcomes ‘on the ground’ over time through an assessment of ownership change and land use change within the same regions through mixed methods, case study-based approach.

Landowner survey on decision-making and land-use trajectories

We are surveying landowners to assess land agent perspectives on current and future factors for rural land value formulation and current influences on landowner investment decision-making. The survey focuses on drivers for landowner and manager decision-making relating to land use change, in addition to capturing data relating to investment decision-making and ownership change behaviours. Survey findings are being used to support the development of a typology of owners based on their investment and land sale and acquisition characteristics, and to assess their decision pathways for land use and ownership change and potential key intervention points.

Stakeholder participatory research on land value formulation

Land agents and other key stakeholders (including Registers of Scotland) are being researched to identify key factors used for valuing land and how these have changed over time/may change in the future, relative to changes in public funding and other factors. This also includes an analysis of secondary data on land values/sales acquired from land agencies and other sources. Interviews are collating evidence on:

• Landholding sale values over time.
• Agent perceptions of key determinants of land values and whether these have changed over time, including demand, and shifting basis for valuation.
• Key factors influencing decisions around the acquisition, sale and retention of land, and how these decisions and land values relate to scale.
• The influence of agricultural tenancies/crofts on land values and related owner/manager investment behaviours.

Mapping land values and landownership change

We are mapping land values and landownership change within three rural land use partnership regions, and categorising landowners according to owner type and scale of ownership. We are working with partners to select specific case study sites and identify constraints and opportunities for acquiring (multi-year) spatial data for the selected areas. This approach includes mapping agricultural tenancies, crofts and common grazings. In addition, an analysis of land values and ownership change is being done within the selected areas to assess change in ownership and values over time. To complement this work, we are also utilizing the spatial data on land use funding mechanisms to assess how payments are distributed concerning the ownership typology. We are working with the Scottish Government, Scottish Land Commission and Registers of Scotland to acquire data on funding mechanisms and landownership change.

Synthesis and modelling

We are synthesising our case-study-based findings to identify areas of divergence and convergence between the sites and apparent links between funding mechanisms, land values and landownership change outcomes. In addition, the wider findings from land values and land agent components are being synthesized to identify key findings relating to current and future land value formulation. We are also developing a modelling approach for assessing the potential impacts of alternative support mechanisms. This explores the potential outcomes of alternative support mechanisms concerning land value and land ownership diversification outcomes.