In agricultural lore, the absentee landlord is often a resented figure, an outsider who reaps an income from the labor of the farmer and takes away the profits rather than investing in the local community. The modern-day situation is more nuanced, says a USDA study which finds that, for the most part, “non-operating landlords” (NOLS) live fairly close to their property.
Roughly three of every 10 acres of U.S. farmland in the 48 contiguous states, around 268 million acres, is rented to tenants by an owner who is not actively involved in farming. As part of the 2018 farm law, Congress directed the USDA to study the effects of absentee ownership on land valuation, soil health and the economic stability of rural communities. Only a small portion of farmland is sold each year, so access to rental land is important for newcomers and for operators who wish to expand.
“In 2014, there was a higher percentage of absent landlords in areas with lower farmland rental rates, lower land values, lower income growth and lower employment growth,” said USDA economists. “There was no statistical association between the percentage of absent landlords and the percentage of acres using conservation tillage or no-tillage farming practices in 2017.”
The Economic Research Service cautioned that its report, based on surveys of land tenure and transfer, did not look into causality; that would be a ripe topic for future research, said the authors said in the final paragraph.
“Distance from tenants to their landlords is heavily skewed toward shorter distances,” said the USDA. “A total of 185 million acres is owned by NOLS who live within 50 miles of their rented land (67 percent of all acres rented out by NOLS). The next landlord grouping, those living between 50 and 100 miles away, rent out a little more than 24 million acres.” On average, absentee landlords live 420 miles from their property in North Dakota, and less than 15 miles away in Pennsylvania.
Land rental rates tend to be lower when the owner lives farther away, and in areas where there are higher percentages of absentee owners, said the USDA. There are several possible explanations, ranging from less knowledge among the owners of the earning potential of their land to a preference by investors for lower-cost land. The owners also may have moved away in search of higher income than was possible with less-productive land and, by default, become absentee landlords. “The patterns of association for farmland values are like those for rental rates,” said the report.
The study said there was no statistically significant association at the state level between absentee ownership and per-capita income in 2017, but the growth rate in per-capita income was lower as distance from the owner increased. “While it could be the case that absent landlords contribute to reduced growth or declines per-capita income, it also could be the case that nonlocal investors prefer to buy land in areas with less vibrant economies because of lower financial barriers to entering economically depressed land markets,” wrote the authors, Siraj Bawa and Scott Callahan.
They said the report looked at statistical associations between absentee ownership and measures of agricultural activity. “The methods employed do not allow us to identify any causal link between landlord absenteeism and these measures.”