“Private property was the original source of freedom. It still is its main bulwark.” ~Walter Lippman
We’ve spent many chapters talking about housing expenses, renting, home ownership, and then took a deep dive into the rental market. Before going any further, it’s important to understand what real estate and housing really are. The basis of real estate is the land on our planet and the subject of land ownership.
Our planet has land surface and as a global society, we’ve endowed other humans to commoditize and own that land. These ruling class humans sell the land to other humans, usually for a profit, and/or amass greater quantities of land. We’ve also given power to governments which can also own land. Throughout history, civilizations and governments have taken over the land of other civilizations and governments. The victors take over the land and establish a society and government, and then promote land ownership.
Governments then create borders around the land it believes it owns, and then as a global society, we accept this fact. The land is named, and its people now belong to the continent, country, federal government, state, city, and community. Owning land is perhaps ingrained in us through our animal instincts—with a strong connection to group territoriality. In many cultures, owning land is a source of power and a public display of one’s wealth.
Federal, state, and local governments then zone the land and decide which parts of the land should be used for residential, commercial, or industrial purposes. Zoning is actually quite complicated and the government can decide specific requirements as to the type of buildings allowed, location of utility lines, restrictions on accessory buildings, building setbacks from the streets and other boundaries, size and height of buildings, and even the number of rooms.
Like we mentioned in the previous chapter, this whole process is called commoditization. Land is piece and parceled and then sold and owned. The land owner gets the property zoned and then keeps it intact or builds on it. If it’s residential property, typically a home or apartment building is built and then an owner can buy that specific lot of land where the house and building are located.
The government also owns land for its federal agencies and for national parks through the Department of Interior or a foreign government’s equivalent. Except for federally-owned land, land owners pay property taxes to state governments. The property taxes are normally used for road construction and maintenance, local government staff salaries, police, fire fighters, and local public works. For effectively-ran states, property taxes stay local, but some states centralize the funding at the state level. This can sometimes lead to local communities not being maintained properly according to the property taxes paid.
Some people own a lot of land. In the United States, John Malone owns the most land with a staggering 2.2 million acres. You can see a list of the people who own the most land in the US here. (https://www.msn.com/en-us/money/realestate/these-people-own-most-of-americas-lands/ss-AAzDXvk) Globally, the Catholic Church owns the most land, more than the size of France, 71.6 million hectares. A hectare is the size of two football fields (not the stadium) side by side.
Why is land ownership important? If you remember from Chapter 19, I said you are important to the Financial Genome. We’ve established imaginary borders, with individual languages, cultures, and socioeconomic systems. You can own a piece of this world, and our society and its laws, recognize and support your ownership. Through ownership, you can exert influence on others. We all believe in the system of land ownership and abide by it. How does one person own 2.2 million acres of land? We, as a society, accept it and enforce private property laws to support his ownership.
Civilization, society, and power are only thinly kept together. We see small slivers of humanity quickly collapse regularly. On a small scale, there are hundreds of videos of animal-like behavior during Black Friday shopping. People getting injured and killed for some arbitrary product.
On a larger scale, Americans experienced the carnage of the Hurricane Katrina aftermath. Days after the deadly hurricane, humans had to worry about other humans looting, raping, and killing each other. The rule of law no longer applied even after the hurricane had passed.
What would happen to the belief of land ownership during an apocalyptic event? Would we still accept the Catholic Church’s or Mr. Malone’s property ownership? Would the borders of a country matter anymore? If the show The Walking Dead came true, would zombies know about borders? Are animals born in the United States “American” or does this apply to humans only?
Barring a Black Friday event on your property, a natural disaster, or an apocalyptic event, one of the key tenants of a solid personal financial plan is to own things. In most developed countries, housing and land tend to appreciate over time. These assets can be passed onto your children when you pass away, creating a financial legacy. You can be a part of a Homeowner’s Association (HOA) and vote on the future of your neighborhood.
In reality, banks own most of the property in the world. Property and real estate are mostly owned through financing in which the bank actually owns the property until the loan is paid off in full. You may have equity in the property, but the banks still owns it. That being said, you still have all the responsibility for maintaining the property and securing it. In a more somber reality, the government actually owns all the land in its borders and can exercise eminent domain. This is the authority for a government to seize private property for public use, with “compensation.” I put compensation in quotes, because historically, governments have not provided fair compensation, and sometimes the compensation is your life. We’ll discuss this in greater detail in future chapters.
I find the whole system surrounding the belief of land ownership fascinating, and an important break in our articles. At any time, you are occupying a part of land owned by a person or entity. I imagine for those that don’t own any property, this idea is overwhelming and enslaving. I imagine the opposite is true for those that own property; the idea is freeing and empowering. I own a house on a small parcel of land, and it is indeed freeing and empowering.