Building an Industry: The American Experiment in Mass Land Ownership
This is the first installment of the foundational “Fundamentals of Land Development” series. The series will explore topics ranging from land as a commodity to regulatory disruption to real estate pricing. This historical starting point will allow us to dive deeper into these concepts and facilitate conversations about how land development has shaped and will continue to shape the United States—economically and socially.
“The American Experiment” can apply to more than the country’s democratic republic and outlook. The United States was the first broad experiment in the mass ownership of land by millions of individuals.
While private property is taken for granted today, private ownership by the masses was a new idea in the 1700s during the founding of the U.S. This concept is the fundamental ingredient that created and maintained a real estate development industry and leads to the intersection of private property and public policy to support private property rights.
Exploring the beginnings of land development using a historical lens allows us to see how land development relates directly to infrastructure and legally subdividing property. And why those are vital to the real estate development industry.
The American Experiment in Property Rights
The beginning of the United States coincided with the start of the real estate development industry. The United States was in a position early in its history to turn land ownership upside down by establishing property rights differently than other countries. This change in land ownership model allowed for the existence of the land development profession.
How America diverged from how other countries handled property rights affected the relationship between the individual and the land, making way for mass private ownership.
The concept of “fee simple ownership”—meaning property is owned completely without restriction or limitations—comes from the English term “fiefdom,” which is the ability to transfer land through inheritance.
Most systems, until the founding of the U.S., used the fiefdom model. This restricted and/or limited land ownership to the aristocracy, in the hands of the few. Most people who worked the land did not have the full bundle of rights to land ownership that falls under the “fee simple ownership” model.
There was little in place regarding the actual concept of land ownership during the founding of the U.S. There were few processes that were related to a system for mass ownership of land. Previous systems did not apply to a model where one could buy land and divide up that land.
This change allowed land to be put into the hands of the many, instead of just the few.
Land As a Commodity
Land is a land developer’s commodity. Land is what we trade, and it is what we deal in. We either have a concept and are looking for land, or we have land looking for a concept.
Land is a unique commodity as it cannot be transported. Demand must be convinced to come to the supply.
Other commodities can be moved to places convenient for the demand. A farmer’s commodity is his crop. While that farmer needs land to grow his crop, he can harvest, move and sell the crop elsewhere. He can create value in the many places where there is a demand for this commodity.
Land developers cannot move their commodity as land is permanent. Demand must go to the supply. Because of land’s permanency, two axioms of land development emerge: the ability to subdivide land and the ability to access the land. You must be able to define your land and have a way to get to it.
To subdivide land, developers must be able to uniquely describe each piece of land. As the U.S. was being settled, every piece of land in the country, about 1.8 billion acres of land, had to have a description of what that land looked like.
That large undertaking fell onto the shoulders of early American citizens and landowners.
Stay tuned for the next blog post in the “Fundamentals of Land Development” series that will continue to explore America’s experiment in mass ownership of land.