Agricultural Land Reserve - Friend OR Foe

Whereas, the government of British Columbia has through the application of legislation effected a circumstance that has farmland inflating in price due to speculation and yet precludes ownership from taking advantage of the perceived opportunities that drive inflation of land values and whereas, government legislation impairs the full spectrum of land use thus effecting a reduction in opportunities and by extension lost revenue, the government is responsible to provide expanded opportunity OR to reimburse for opportunity forgone by the affected parties.

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First Principles

Any discussion regarding state encroachment on the use and deployment of private assets needs to be considered from first principles.  The state needs strong rationale to encroach on the choices of ownership, a clear public good must be being served. While “land rights” or “property rights” are excluded from the Charter of Rights and Freedoms, the document was drafted with a longstanding Westminster or Common Law tradition as its backdrop, a tradition that has held private property paramount in the execution of the law. One can assert quite comfortably that the vast majority of court business flows from, or results in the actuation, or transfer of an asset.Land is an asset that holds stronger importance than other assets, particularly in the Anglo economic tradition where land travels from one generation to the other.

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The Agricultural Land RESERVE has been put in place so that the land is held in reserve to satisfy a perceived common good. The common good summarized as; in the event of disturbance in trade or a calamitous event we have in RESERVE the land resources to provide food for our population, to hold land in RESERVE to provide for ongoing support of an agricultural industry and its benefits to our economy and ongoing food security, to hold land in reserve to protect against development for industrial and residential uses and to protect the athletics of the British Columbian countryside.  When Land fell into the ALR it affected ownership by limiting the options of ownership for its use in the interest of a widely held belief in a common good.


It is inherent in the right to liberty in the context of the Common Law tradition and by extension in the Charter of Rights and Freedoms, is that assets that have been accumulated by an individual or relatives, assets held in ownership, can be deployed in a manner that said individual sees as most favorable to their interests and values. This is a widely held understanding and it must be respected. When the state or collective perceives a common good justifies that, all or a portion, of an individual’s private assets, must be forfeited for a common good, this is an act of expropriation. 

The reason why government avoided expropriation under the advice of legal experts was to circumvent exposure to a requirement to reimburse landowners for the opportunity forgone. There was opportunity forgone at the implementation of the ALR and in the administration of the act there is still opportunity forgone. It is incumbent upon the government to remediate or mitigate the loss in this case. 

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Excerpt from BC Land Act.

"expropriate" means the taking of land by an expropriating authority under an enactment without the consent of the owner, but does not include the exercise by the government of any interest, right, privilege or title referred to in section 50 of the Land Act;

The value in land stems from its value as a tradable asset in the context of the law, there are “spiritual” elements to land ownership that are intrinsic in nature, which is why state encroachment on land ownership choice is so sensitive. It is readily apparent that a state action directed at a common good, that reduces the value of land or curtails the lands actuation in a manner that is seen as most favourable for the ownership is a de facto expropriation when there is a resulting reduction in income generation or degradation in asset value. This assertion is supported to some degree by the fact that when settling around the expropriation of rights of ways, the courts recognize more than just the value of raw land, they also recognize the cost to ownership that impediments make – operational considerations fall under judgement.

When the Agricultural Land Reserve (ALR) was implemented there was callous disregard for this reality, I believe one can use the term RIGHT safely.  Throughout the history of the ALR to this day and with the contemporary issues with respect to operational choices of ownership, this issue is given to little wait. In review the literature, there is a near arrogance in the tone of discourse I find most offensive, I believe this is true of many landowners as well.

Contemplations on the Degree of State Encroachment on Land Ownership

Given the argument above, one needs to find justification for the present degree of state encroachment on land ownership.  State encroachment on ownership has gone well beyond the intent of the act, briefly summarized as preserving farmland, people are advocating the Agricultural Land Commission (ALC) actually assess proportional income and limit income from “non-farming” activities to a percentage of total income. This is more than an affront of all things wholly with respect to private asset management in the context of common law, it can be easily be demonstrated to contravene the intent of the act – income supports ownership by provision income against the cost of ownership, thereby, supporting land stewardship. This degree of micromanagement by the ALC is indicative of mission creep and the unnecessary expansion of state influence over private land. One understands that in the administration of an act that the need to enforce does at times challenge first principles, it is the writer’s observation that there is undue encroachment here.

I think also that reviewing the justification for encroachment is a worthy exercise at this point. The entrenchment of the ALR / ALC is understood, but in reviewing its mission in the context of modern knowledge and technological advancement one can perhaps begin to get a clearer view of the ALC mission and perhaps its augmentation or retraction. The writer offers the following dialog as a point of contemplation, an opportunity for reflection as a means to forge a future that sees to the collective values at stake and yet provisions for either the right to maximize income for ownership as the market dictates OR for the state, in the interests of curtailing Faustian effects to reimburse owners for opportunities forgone.

In reviewing some of the historical documentation related to the creation of the ALR many of the assertions there are almost laughable in retrospect. There were assertions made with respect to the “world food shortage” as a justification to “protect land for food security”.  The document making the assertions was written in 1973, I would invite any rational person to review history from that point until now and state that the ALR is justified on the basis of food security – that is to say that during the period from 1973 until now, there has never been any threat to the provinces food security that would justify the expropriation of lands. The “threat” to food security was ill-conceived then, history has shown this to be true – it is justifiable to ask is the concern misplaced in the future.  The fact is that food is more abundant now than it has ever been, in the world context and the distribution of food is more efficient than it has ever been – modern agriculture is a miracle that we enjoy every day.

It was with the wisdom of the time that the British Government planted Oak forests to ensure a ready supply of wood to build ships, post-1800 metal became the material of choice – the forests still stand, they have other values perhaps, however, the original purpose was overtaken by events.   To some extent, one can argue this is true of the ALR. There are technologies at play now that render the necessity for farmland defunct for food production, there is economic and environmental value and viability in farm buildings erected in densely populated urban areas.  Both the economic and engineering modelling is favourable for “high-rise” built “farms” – this is in no way “futuristic” it is occurring now at the margins in the form of urban rooftop farms and the like. This is offered to challenge one of the strongest underlying “values” supporting the ALR and the resulting state encroachment on land ownership and now to a greater extent the actual management choices of ownership.

The Court’s Interpretation of Permanent Alteration of the Land

Excerpt Provide from Discussion Paper – Court Decision Reasons

[51] The Regulation also requires that an agri-tourism use be temporary and seasonal. A golf course requires alteration of the land in the form of particular landscaping, sand traps, water hazards etc. Photographs that were put into evidence show changes of precisely that kind to the petitioners’ property. Those changes must remain in place as long as the operation of the golf course continues and cannot reasonably be described as temporary.

Taking this expert as it stands; the Justice is passing judgement on the duration of action against the backdrop of reclamation from a recreational use back to a strictly agricultural use. If food security is the value for preservation, the court rejected temporary in the case of the golf course, with undue consideration to permanence.  What is relevant to state values and the subsequent intrusion on choice is the cost of reclamation to farming in the event the land is required for food production and the timeliness of response to reclaim. The justification for state intrusion here needs clarity; on what basis has the judge determined that golfing and related alterations to the land to be permanent – when they are clearly in no way permeant.  In the event of a calamitous event, war or world famine, the demand for food would elevate prices substantially and the result is a cost benefit assessment for reclamation to farming greatly altered from now. The calamitous event would render either reclamation viable or, more likely, another solution would be deployed.  The impetus for action as is determined by real events should determine land use as opposed to government officials trying to anticipate the future or arbitrarily impose “state values”; so long as the state imposed value can be readily reclaimed or met in some other fashion.

The assumption that a golf course is a permanent impediment to agricultural use is certainly wrong. The use of farms as venues for weddings or other gatherings offers no impediment to agricultural use and offers the opportunity to diversify income, clearly, this should be encouraged.  The assertion that farms offer unfair competition to other venues is in no way a valid argument. In government policy we seek to gain a regional advantage in any way we can, we should make policy that lets the market work and where regulation offers an arbitrage we should support the most efficient model as opposed to propping up the less efficient model.

Why Managing Operational Income is Harmful & Inappropriate

The government's only valid concern is stewardship as related to agricultural land in the context of the ALC mandate. ALC has no mandate to determine where income comes from; their attempts to limit "non-farm" income are grossly off the mark and well outside ALC mandate.

Please see attached several business model concepts I view as works in progress; Mid Frazer Agro was rejected by the supply management complex in British Columbia, one hopes that opportunity will be offered to resurrect the project. The Winer / Brewery/tourism operation requires capital and one awaits word on the land in question. The Crofter model has farm viability at its heart. They all draw on vertical integration and or companion enterprise, land use rarely offers income at parity with the operations it supports.

The ALC is part of a complex of regulators that introduces complexity to pursuing opportunities like these; government needs to move from obstacle to facilitator.  In the case of the ALC, there are steps that can be taken to firm ALR inclusion and arrest uncertainty and better serve the mandate of the organization.

Relevant Links

Real Estate Industry Perspective

Multi Story Condominium Complex - Kamloops

Mid Frazer Agro - Land, Dairy & Beverage Company

Mission 153 - Ranch, Real Estate & Timber

Brazil Ranching, Dairy, Crops, Real Estate

Clover Farms - Cattle, Dairy, Ethanol, Real Estate

Douglas Lake - Cattle, Timber, Land Development & Real Estate

Vineyard & Tourism Operation - Crofters - go to documents at bottom of page
Link to Relevant Documents 

The aforementioned models capitalize on companion enterprise and or vertical integration to bring viability to a given land base.  It is critical that when integrating primary production with secondary processing or when seeking to occupy as much of the supply chain as possible, that appropriate scale is accessed. Scale plays a role in market access, that is to say, there needs to be adequate product volume to occupy “shelf space” to have critical mass in the market. The retail aspects of any product chain have greater margins or income than the primary production elements of the product supply chain (Normally True).  So trying to assign income levels to various production strata is errant, what is of the essence is whether the land is being unitized and whether the enterprise, in general, is supporting the ownership of land.

A building, regardless of its use, so long as it generates income supports the ownership of the land and can finance stewardship of the land – what is relevant with respect to the building is the extent to which it encroaches on land in the ALR slated for preservation – it is conceivable that the farm has areas that are unsuitable for agriculture due to the presence of some geophysical reality, a pocket of land that is within the ALR in an errant fashion. That land should be permitted to be utilized to its full potential.  It is almost always the case on any site that there are places like this.

If the foregoing fails to challenge the ALC commission in its entirety, it certainly challenges the prospect of further encroachment on the landowner – I believe it justifies a degree of retraction. The ALC, as it the case with all government “departments”, is finding reasons to extend its reach – perhaps it is time, as a matter of government policy, to exercise some containment on expansion.

Conclusion

I think it is a widely held view in society that the ALR has value; it holds value to the writer. I love the countryside, I have an attachment to the land – farms and humanities interface with the land is a thing of beauty. Value, at the society level, or personal level, has no obligation to be found in reason – but when the collective encroaches on people's right to manage private assets, especially when there is a cost to those affected; the government has a responsibility to mitigate loss.

This is an excerpt from a document written in 1973 lamenting that speculation was inflating land values. The challenge with “land speculation” and land values persists to this day. The ALR has in no way constrained speculation, and the ALR having put up impediments to non-agricultural development has restricted the supply of land for development – hence increasing the price of land and exacerbating the influences of speculation on land value. I have studied land values in British Columbia and can find very little relationship between the price of agricultural land and the land's ability to generate income when directed toward an agricultural enterprise.  There are cultural propensities and speculative realities driving inflated agricultural land values. The only way to curtail inflated agricultural land values due to speculation is to make the land in the ALR permanent; if the value of that land is real, then we need to make the commitment to preserve it. To stop speculation on development revenue we need to say there will never be development done on ALR land. When we do that, the people holding title to ALR lands will incur a loss, as people did when the ALR was implemented. When through government action people incur loss – the government must reimburse people for their loss. It is extremely unfair to circumvent the responsibility to land ownership to repay for loss in the face of actuation of policy for a perceived common good. 

Of these seven stated desired outcomes I would say in the main the ALR / ALC has helped more than hindered, save one. There is no benchmarking to draw on to know what would have transpired had there been no ALR - one can only speculate that it has been beneficial. There has been no improvement in access to land for farming for young people – in fact the opposite is true – farmers are older now than they ever have been. So in deliberations related to administering the ALR, the ALC must seek to expand opportunity for land use so that there is revenue sufficient to support viability – farms tend of form a gestalt over time and revenues that flow from enhanced associative enterprise will flow to the care of the land; better serving land ownership and the ALC’s mandate.   

Kamloops Real Estate - Market Perspective

FIRST DRAFT

I am presently in the process of initiating the construction of a apartment complex in Kamloops. This is a summary of my general perception of the market for prospective purchasers - marco picture / local picture. If anyone had input as to how they perceive its accuracy I would be most grateful.    

READING TIME: 2 minutes 

Real Estate Market Perspective – Apartment Complex Kamloops

The observations offered here are born of the assessment of the market in the context of the construction and sale of an apartment complex that accesses the upper market decile, with unit prices ranging from $350k to $850k. This complex’s interface with the market is somewhat less affected by the typical influencing factors in the market - employment, interest rates, general economy etc., because it is targeted, in large measure, to a discerning buyer at financial maturity – they are likely to buy a second residence or they are downsizing as a part of the typical life course.  

While this offering is to a degree atypical, there is opportunity to at the upper margins of the “investment market” to incite participation. The proponent senses if the investment market is provisioned for that a favourable outcome will ensue; so long as, the theme of the building is held paramount in terms of ensuring that there is compatibility with occupants and or the strategic allocation of space.

It is the sense of the proponent that we have a stable local market generally, that the local market has recently been trading more or less sideways against stable inventory and the local market is beginning to show some modest growth. The violent undulations of other markets and of the Kamloops market in the past, are less present in the contemporary Kamloops market, due in large measure to a more diversified local economy and perhaps, Kamloops is now becoming a moderate destination for lower mainland and prairie residents accessing the advantages of our market vis-a’-vis larger center’s markets.

This local market perspective is offered against the backdrop of sustained very low interests rates in the near and perhaps midterm, rising employment, a moderately favourable near term economic picture and an anticipated acceleration is to a strong and sustained up cycle in the medium and long term. This perspective is offered on the basis of central bank actions and a perception that, the cycles that were causal in generating the recession are correcting so as to effect a confluence of events to feed a super cycle beginning in and around 2018.

This general market picture bodes well for the proposed development. The larger units targeting to people downsizing from large homes are to a degree “isolated” from the market, given the type and nature of the purchaser. The smaller units targeted to a discerning lateral purchaser or “investor purchaser” land at the about the average home value in Kamloops and the upper end of the apartment market, this narrow market segment (market segment peculiar to this building) will be supported by an historical (20 year average) absorption rate of approximately 7 - 10 units per month, as well as, the favourable local and general market conditions.    

Real Estate - An Industry Perspective

Real property finds harmony with my strongest inclinations in life and business, land ownership sits at the foundations of my cultural mooring. It seems that our culture, that of the European Americans, has ownership in general and especially land ownership as a cultural expression of belonging. There is a propensity in the post modern Canadian culture to minimise ownership, ownership is viewed as a separator from community. My appreciation for the Canadian rural agrarian culture has taught me that community is more effective when composed of a collection of owners, ownership brings with it investiture and as a uniform identifies the person and dictates their role - so does ownership. Ownership by its very nature instills responsible societal conduct, it does because, its retention and value are dependant on society at large. Everyone needs to be an owner, look where you find societal discord, deprivation - they are invariably occurring in the absence of property - oft times because of the absent of property rights. I am most grateful that Canada has as a the keystone of our societal functionality the capacity to own and trade assets, and also grateful for the abundance of real property we have and the opportunity it brings.

The Real Estate industry is a hubbly bub of trends, every sub sector has its own influencing factors, sub sectors are as diverse as the people that inhabit the market. The majority of my contemplation in the real estate space has been; agricultural land or rural land opportunities in general, tourism development land and the full spectrum of residential development. 

There is an exciting arena of participation when one looks at a piece of property, assesses its geophysical values and begins to design the altering of the landscape toward its perceived best use. The land development space puts one in touch with people's interface with environment, each other and how environment can enhance human exchange. There is a propensity in modern society to put people so close they are unable to see each other; how is it, in the modern urban setting we have human densities measured in thousands per acre and people are isolated, and just one generation before, we lived miles apart and were connected - much of the answer lies in the design of our build environment. 

See this links for assessment of rural land opportunity .

http://nthomson2.blogspot.ca/2014/03/the-right-time-of-rural-land-in-bcs.html

http://nthomson2.blogspot.ca/2014/03/real-estate-agriculture-works.html

The rural land space has a number of significant opportunities. If you believe as I do, that the agricultural space with be a place of paced growth for the next thirty years, then you will share my enthusiasm for rural land. If you believe as I do, that urban populations will be seeking the rejuvenation that comes with time in rural / wilderness settings, then you will share my enthusiasm for rural land. I hold a passion for extensive landholdings and their management, they provide a unique lense to the world - one forges their successful management from contemplation of the full spectrum of human enterprise, all the sciences are encountered and human concern is the culmination of effort. 

In the rural land space in my immediate region, there are a number of trends supporting investment. There are a number of properties for sale due to a period of reduced activity in the space, these properties present opportunity as self supporting holdings, as amalgamation opportunities, as developments, as ALR title transfer opportunities, tourism opportunities and as enhanced agricultural enterprises. The assessment, purchase and configuration of viable models for given lands has become a specialty of mine due in large measure, to a real passion I have to own a large land holding. 

Opportunities in the residential development space are abundant, straight subdivision, subdivision and building, multi family, rural acreage, all this space is good, success here weighs heavily on playing the cycles properly. There is a healthy space in several markets for the condominiumization of aged rental apartments, I have found these deals give great margin in the active market and relative to the prevailing new inventory. The time is right for the make ready space due to where we are in the residential real estate cycle, this space really plays nicely with rural land purchase and reconfiguration.   

I am generally optimistic for the real estate categories I am familiar with, there is a lot to be done in this space - and right now is the critical entry point for a lot of them.     

  

    

The Right Time for Rural Land in BC's Interior

There are always junctures that provision an entry point to a market, it maybe that in British Columbia Agricultural land is at that point. There is a large inventory of substantive properties available, this large inventory has suppressed price of late – under 1 % per annum increase in the price since 2008. This flattening of the curve, seemingly at its nadir, has taken place with interest rates at an all-time low. There is a matrix of influencing factors that affects land prices, the ability to buy land and the ability to support that purchase ultimately are the key determinants in price setting.

Agricultural Lands in British Columbia have prices far beyond the ability of agriculture to support, agriculture land quality or capacity affects prices, but in no way accounts for the full value or the floor on land value. In British Columbia only 2.5 percent of the province is arable land, 95% of the province is crown land, couple these realities with the Canadian / Western cultural inclination to want to own land and one realizes that British Columbia ought to be exceeding the national average.

The matrix below indicates the degree to which BC has lagged the balance of the country in property price increases.  

Data - Farm Credit Corp.

The graph below indicates how little agricultural activity affects land prices; only when the orange line is below 1 are fundamental farm factors supporting price, if that is true of US crop land it is likely to be true of BC as well, perhaps more so given this graph focuses on cropping land. 

 Data - USDA

The challenge we face in BC is in having agricultural properties being self-supporting entities. Various farm types are more affected than others, note Beef Cattle operations in the matrix below – it has historically been the case that cattle have failed to carry land ownership cost or to withstand opportunity cost assessment.

Data - Farm Credit Corp.

Presently, throughout the province there is a large inventory of Ranch properties and prices are remaining flat, even, as stated above, in the face of low interest rates.  Throughout the interior, the predominate agricultural activity is ranching and ranching is presently enjoying a relatively good period – improved cattle prices and low interest rates, so one may deduct that the agricultural activity on ranches is less influencing on price than is ancillary factors (as supported by the USDA graph above & FCC quote below). There has been a long evolution in the lumber industry that has reduced labour requirement, thus, stifling local economies, add to that the violent correction in the US housing market (mitigated to some degree by exports to the Chinese market) and the interior has had slow growth for an extended period of time.

“Farm Credit - Agricultural Land Value Report October 2010 - British Columbia was the only province to see a decrease in farmland values by an average of 0.9 per cent over the first six months of 2010. Values were unchanged in the previous reporting period and decreased 0.7 per cent in the first half of 2009.In the first six months of 2010, economic factors largely external to agriculture had the greatest influence on farmland values. Economic uncertainty and the high Canadian dollar hindered investment in many sectors. This, in turn, led to lower demand for land and less expansion of existing operations. Overall, the B.C. land market was relatively flat during the first six months of 2010, with slight decreases in the Abbotsford, Clinton and Cloverdale regions. Sales of land for agriculture purposes were limited in some areas of the province.”

It is the sense of the writer that the US housing market will show mild improvement until about 2018 and at that point it should move into a long and strong growth pattern. This prediction is based on the belief that there was a confluence of cycle ends – major economic cycle, business cycle and technology cycle and well as, the resulting the commodity supper cycle correction or slowing – all of which collided with a grotesques financial deepening to create the down turn in 2008 – the real world economic cycles are now, one by one, running their course. One would anticipate that the inverse of 2008 will be true in 2018 – this thesis is shored up to some degree by severe downturns, 1930 etc., normally taking a decade to recover from.

It seems a prudent time to build an inventory of agricultural land, the inventory of ranches for sale is high, there have been recent sales that have effected downward pressure on the market. Anecdotally, one is noticing a larger number of price reductions occurring on listed properties. So with a large inventory and market picture with positive characteristics; the question then remains, which properties  are best positioned to garner increased value.

It has been established quite clearly that agricultural actives, particularly cattle ranching, are a means by which to maintain lands functionality but offer little support to ownership. One then considers ancillary attributes in the selection criteria; proximity to urban centers, timber assets, tourism attributes, companion enterprise opportunities - attributes that can build returns on the land. There are many such properties available now, one needs only to develop operations that carry the land assets with respect to fair returns and the land appreciation is a clear capital gain.  If one observes the first graph for the period starting 2001 through to 2006 exceptional gains were made; there is every reason to believe that we are approaching a similar cycle – starting in and around 2018.

FCC 2013 Land Value Report

FCC - Historical Land Prices

Business – Agriculture is a land play

There is a propensity in the world of high tech and escalating knowledge sector to overlook some of Canada’s mainstay industries; I am eager to draw your attention to agriculture. By way of example, the Cattle industry while experiencing a positive place in the cycle now, has traditionally been a “marginal” business. The cattle is trade heavily commoditized & well supplied, and as such, the prices garnered for cattle at sales hover around the industry wide average cost of production; so the reality is that cattle essentially take care of themselves financially – the people and assets to care for them but not the land base.

The Land associated with Cattle ranching then needs to stand on its own as a holding, and it does – over the course of the past decade it has exceeded inflation by good margins pretty consistently. The demand for agricultural land and the land’s resulting value is in no way related to the ability of the land to produce income through agriculture; if it were, agricultural land for ranching would be worth nothing, given the industries track record. The value for agricultural land comes from the western cultural imperative to own land and / or the speculative value of the land as a real-estate development and / or as a pure holding.

So why have cattle, well because, all the land will do is raise cattle in most cases and cattle provide a means by which to “maintain” ownership, in that, the process of ranching sees to the land asset’s care and wellbeing. So, while cattle-ranching is a more or less breakeven endeavor, with a grand spiritual surplus, it has value. The good news comes in the other opportunities that land base provides for companion enterprise, the cattle and land provide an essentially “free” place for other related businesses to function. Never underestimate the stability and opportunity that comes with accessing one of Canada’s mainstay industries, agriculture was here to get Canada started and it will be with us for a long long time.

Please see link below for past agro enterprise concepts and proposals

https://sites.google.com/site/midfraseragro/