By Viktor Weber and Veronika Gruber

According to historian Andro Linklater, private land ownership first emerged in 16th century England and spread through colonialization across the globe. Nowadays, land is not only a commodity that can be traded but also an important cornerstone of our economic system.

Before the industrial revolution, with non-urban decentralised employment structures and fewer humans living on our planet, land ownership had not been an issue. Yet, concomitant with industrialisation, the trend towards urbanisation has arisen and still continues.

Yet, keeping in mind demographic development’s prediction that we will reach a population of 9.7 billion by 2050 and that 70% of this figure might live in urban areas, we are about to face an overwhelming excess demand for urban land in the future. This problem leads to a bold question:

Could it be the case that we need to rethink the concept of land ownership?

The Urbanisation-Effect

One of the main reasons for the trend towards urbanisation is the centralised employment structure, besides other factors such as education, mobility, access to services and leisure activities. This is one important explanatory variable for the rapid growth of cities, which leads to increasing land and property prices as well as housing supply shortages in urban areas. Nevertheless, businesses, governmental institutions and other entities, often tend to cluster in urban areas in order to profit from the existing infrastructure and a number of potential employees. This leads to an amplification of the urbanisation effect.

Thus, it is logical that certain parts of urban society will not be able to afford properties. The non-owning class will increase over time. Hence, we will see a larger dichotomy between owners and non-owners. Non-owners will have an even bigger struggle to build wealth, while owners could easily allocate more simply by holding onto land and property. This development reinforces the already existing inequality.

Hence, we will see a larger dichotomy between owners and non-owners.

Pursuing this thought further, it becomes obvious that the annual income hurdle in financing ownership will increase accordingly. Thus, well-paying jobs might not suffice anymore. Based on this, it can be postulated that such a system will lead to a social, political as well as an economic turmoil.

Thinking Boldly – Hypotheses & Scenarios

Deriving from the information presented above, it is advised to formulate two generic hypotheses:

H0: System will not change until 2050.

H1: System will change until 2050.

Since we assume that the system will change in the next 30+ years, we have developed five scenarios which are relatively controversial and should trigger an open discourse.

S1: Ownership of land is forbidden from a certain day onwards. Previous ownership structures remain untouched.

S2: Ownership of land, exceeding a certain amount of square meters, is forbidden from a certain day onwards. Previous ownership structures remain untouched.

S3: Ownership of land, exceeding a certain amount of square meters is revoked. The remainder is untouched.

S4: Ownership of land, exceeding a certain amount of square meters, is revoked. The remainder is transformed to tenure.

S5: Ownership of land is revoked and transformed to tenure.

Undoubtedly, these scenarios are heavily challenging our current models of capitalism and are crossing the ethical line. The risk is so high that the political regulation of land ownership will open the discussion to general ownership. This could disrupt societies as well as economies. Yet, what is the alternative, if one assumes that ownership is essential?

Alternative – Salvation through Innovation

These were classic ceteris paribus scenarios, which solely incorporated population growth in urban areas in a constant environment. Luckily, at least in our opinion, we have other parameters that might change the game, such as technology, employment, and mobility, which are incorporated in SI, the innovation scenario.

SI: Through innovations such as artificial intelligence, sensor technology, robotics, quantum computing and new ways of rapid data transmission, we would be able to create a decentralised employment system, increase mobility, and revolutionise other relevant services of urban living.

Work from home can solve the problem of moving to urban cities for employment | Photo Courtesy: Unsplash

“Work from home” can solve the problem of moving to urban cities for employment | Photo Courtesy: Unsplash

On the one hand, technology would empower employees to work from home or any other remote place. It would also allow corporations to relocate to cheaper non-urban areas by automating and partly substituting human labour. With the creation of adequate services, ranging from e-government to e-health tools, and means of hypermobility such as rapid transport systems, humans would not have to live in urban areas to have access to the job market, education, services, and leisure activities. Such developments could ease the current pressure on growing cities, making ownership, in high demand areas for reasons other than personal preference or status, redundant. 

This scenario’s likelihood is highly dependent on our collective innovativeness, governmental regulations and perception regarding change, and individual technology adaptation.

Conclusion

Needless to say, there are multiple approaches to solving the issues of urbanisation, extremely high prices and related topics. Some plausible solutions are government subsidies, multi-generational loan structuring, and tax reforms, which were not part of the scenarios, yet could be taken into consideration.

The non-ownership as well as limited ownership scenarios were radical and of varying feasibility from a societal, economic and political viewpoint, which is also the case for the innovation scenario.

However, the innovation scenario appears as a welcome cure, assuring the continuity of our current system.

However, the innovation scenario appears as a welcome cure, assuring the continuity of our current system. Though this might be the case temporarily, if our population continues to develop at this pace and innovations fail to guarantee a certain equilibrium in order to uphold our way of life, we will have to pose the question of ownership at a point in the future.

The only certainty we have is that there is no innovation without a critical question.


Viktor Weber is a pioneering expert and thought leader in technology induced real estate innovation. He is the founder and director of the Future Real Estate Institute.

Veronika Gruber is working in real estate transactions and holds two master’s degrees with distinction from the University of Reading as well as the International Real Estate Business School. 

Featured Image Source: Unsplash

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Posted by The Indian Economist