There are many ways that land and/or buildings can fall into a government’s hands. Bequests and tax delinquency are two examples. These windfalls ideally swell a portfolio of wealth that can be converted to cash as needed to pay down government debts or help finance an expensive infrastructure project. Large cities have departments staffed with professional negotiators to squeeze the most juice from these kinds of sale.
Lately, however, a growing worldwide housing affordability crisis has produced another bidder for government-owned land — the government itself, which may be looking for ways to remove both land and housing from the free market. The objective is is to guarantee that housing can be offered at affordable prices, and that the price is not subject to a cheap-today expensive-tomorrow buy-sell roller coaster with costs that change only in one direction, upwards.
The benefits of selling government owned land and/or housing to raise money clashes with holding onto land and/or otherwise using it for stable affordable affordable housing. Intra-government arguments undoubtedly abound over the best use for this particular city, or that particular region.
These days, some cities are deciding to retain land rather than sell it. Or they may adopt some hybrid approach that involves removing at least some land/housing from the free market to create long-term affordable housing. In either case, what happens when sources of windfall land dry up, or more is needed than is available?
Cincinnati provides an example of how to tackle that problem. The city outbids developers, investors, and speculators, purchasing land/houses in bulk at premium prices. Thereafter, unlike the the profit intentions of its competitors for that land, the city will look to deliberately forgo any profits that might be made by ‘flipping’ their purchases to another buyer.
There are potential alternatives to this expensive approach to land acquisition, but outright purchase at market rates is simple, guaranteed, and foolproof1.
Read more about Cincinnati’s land acquisitions at [NEWSNATION]: How Cincinnati is buying homes in bulk to keep them cheap
Footnotes
- One potentially cheaper alternative might be ’eminent domain,’ which allows a government to acquire land for essential infrastructure projects such as road-building and power line construction. The US appears unready to label housing as ‘infrastructure.’ A government invoking eminent domain is required to establish and pay market value for the acquired land. Eminent domain allows governments to choose the parcels of land to be purchased, rather than relying on tax foreclosures, donations and bulk sales.
