Formally Developing the U.S. with the Amazing U.S. Land Rush
This is the second 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 first article in the series explored the American experiment in mass land ownership and the roots of the real estate development industry.
The Amazing American Land Rush
The grand experiment of land ownership by the masses had begun. While the task to define for ownership 1.8 billion acres of land was monumental, there was general consensus among the founders that private property was fundamental to this new country. The United States started as 13 original colonies that hugged the Atlantic Ocean. This East Coast-centric young country quickly sprawled to touch the Pacific Ocean. From the late 1700s to the late 1800s, the contiguous U.S., or lower 48, was in place. In about 100 years, the early Americans defined over 1.8 billion acres of land in such a fashion that one citizen could distinguish property from another. Unique land descriptions helped tell the difference between 50 acres in Montana and 50 acres in southern California.
A rudimentary system was in place, allowing all involved to agree that words on a piece of paper described one specific plot of land and who owned that piece of land. The system set in motion numerous public policies to transfer land from government authority to private ownership.
A next layer was introduced when landowners wanted to subdivide land to sell or barter. Initially, rural America was being divided into plots with an artificial grid that was then marked by creeks, fallen trees and other natural features that defined property boundaries. Given the lack of permanence of the boundaries, the system had its flaws but was the first step toward individuals being able to own and trade land.
Land under full control of private owners was the primary goal of this endeavor, but another possibly more important outcome emerged. Establishing property boundaries have been fraught with conflict for the known history of the world. Seldom had land been peacefully transferred between entities or individuals. Wars were fought over land and who controlled what land. Great marauders roamed the planet taking land. Placing land into the hands of millions of individuals through specific legal descriptions created a marketplace for peaceful transfer and ownership. Uncertainties and disputes of ownership still arise in this private system, but they can be settled within a legal system instead of on a battlefield. Free individuals operating in free markets can have remarkable outcomes.
Public Policy and Land Development
So, the basics of a system were in place, but then what? The vast majority of land passed through a legal authority such as the federal government, a state, a township, or territory commission. Without historical precedents, the land transfer process was often created on the fly. By doing so, public policy was created. Land and public policy have always been intertwined and remain so as we will explore later in the series.
Various methods of transferring land were underway. There was the Free Soil Movement and the Homestead Act that provided settlers title to land, based upon basic improvements to the property over a time period. Many obtained land grants for military service. And then there were outright sales to individuals that had the financial wherewithal to purchase land. Sometimes these individuals bought for personal use, but the American entrepreneurial spirit was already taking hold and large parcels of land were purchased to divide and sell for profit. Land speculation became a new business.
A private land system offers the ability to trade the “fee simple” title of land just as we trade other commodities owned as individuals. Trade creates a transparent marketplace that puts pricing on land. The concept of pricing emerged in the land market that functioned like modern-day blockchains placing trusted values on land.
Transparency in pricing allows us to buy land from strangers with a certain level of trust. The concept of transparent pricing motivated the buying, selling and trading of land that not only created land speculation but laid the groundwork for the land development industry. Markets, however, need knowledge and communication to facilitate transparency. The relative infancy of land development as an industry created some bumpy roads. Land offered for sale often had little or no access with sellers depending on funds from the sales to provide the access. When sales stalled, the road to the land could not be built with good intentions.
Fee Simple Ownership, Absolute Ownership and Interrupting Nomadicity
The concept of fee simple land ownership—meaning property is owned completely without restriction or limitations—was certainly popular and spreading fast. Individuals had absolute ownership protected by a basic legal system and could buy and sell the commodity. From the right to use and possess, however, also came the right to waste it, dispose of it, plunder it and everything in between. Owning land had risks.
One of the biggest risks was the fundamental transition from our nomadic history. Once the masses were introduced to fee simple land ownership and absolute ownership, we picked our place and we stayed. We settled. This introduced another challenge for landowners: some land is more valuable than others. Folks with rich farmland thrived, while others with less forgiving soil faced challenges. Land located closer to major transportation corridors became increasingly more valuable, while isolated parcels with no access were worth little. When the decision is made to stay, getting there and producing the essentials for life becomes critical. Location, location, location as we might say even today.
Location has always been an influential factor in determining the worth of land, and access to the location is priority one. The amazing U.S. land rush would not have happened without access, and so began another major interface between public policy and land. The provision of infrastructure incentivized by public policy primarily in the form of railroads was underway to open more land for ownership. As more people headed West, so did the railroads. Rivers had been our only major transportation routes but now we also had railroads to transport people, goods, and services. The incentive to entice private railroads to build tracks to uninhabited land became the land itself. They were provided miles of land on either side of the tracks that would increase in value with the access they provided. Not all land along the tracks was granted to railroads, though, some were held by public entities that controlled the land. The return of and return on the investment by the railroad was recouped with the sale of the land, but public entities also benefitted from selling land with increased value. Land development had begun in earnest.
Stay tuned for the next blog post in the “Fundamentals of Land Development” series that will discuss the real estate development axiom of infrastructure and access.