1. Land markets and regulations in Europe Presentation prepared for the Meeting regarding the exchange of views on the access and use of farmland 7 February 2017
Prof. Dr. Ir. Liesbet Vranken
Department of Earth and Environmental Sciences
KU Leuven, Belgium
Based on joint work with Kristine Van Herck and Jo Swinnen
(Swinnen, J., Van Herck, K. and L. Vranken, 2016, “The diversity of land markets and regulations in Europe, and (some of) Its causes”, The Journal of Development Studies, 52 (2), )

2. Land Ownership and Use Land Sales and Rental markets
For a long time, land policy recommendations focused on land ownership and land sales
However, both sales and rental markets have benefits and problems
Sales (a) transfer full rights to the new user; (b) increase access to credit, as owned land can be used for collateral; and (c) increase investment by providing permanent security of rights
Rental: (a) more flexible adjustments; (b) require only a limited capital outlay, more liquidity available for productive investments rather than locking it all up in land; (c) easy reallocation of land towards more efficient users than the current owners; and (d) to provide a stepping stone towards land ownership by the landless

3. Land Ownership and Use Land Sales and Rental markets
For a long time, land policy recommendations focused on land ownership and land sales
However, both sales and rental markets have benefits and problems
Land renting is fully consistent with modern agricultural practices and is widespread in developed market economies
Many modern farms opt for a mix of ownership and rental

4. Land Markets
Large differences in the nature of land markets both over time and across countries

5. Land Markets
Large differences in the nature of land markets both over time and across countries
Differences are not correlated with geographic location or large geo-institutional history (e.g. West – East; Old – New)

6. Land Regulations Large differences in regulations for land exchanges
Several categories of land market regulations can be identified
Measures to protect the tenant
Measures to protect the owner-cultivator
Mearsures to protect the non-farm owner
Prevent fragmentation of agricultural land

7. Explanations/Hypotheses for institutional differences- WE
Different strategies to Provide Tenure Security in Western Europe
Improve rental conditions through regulations
e.g. France, Netherlands, Belgium
Help tenant to become owners
e.g. Ireland and Denmark

8. Consequences of Land Policies for Farmers’ Access to Land in WE
For long time: very effective in ensuring access to land
Now: Perverse effects of strong tenancy regulations in Western Europe
In the Netherlands: land rental has fallen from more than 60% in 1950s to around 25% today
In Belgium: decline in UAA, increasing horsification and gardenification of agricultural land
 Owners are more reluctant to rent out land, farmers have difficulties to access land through rental

9. Consequences of Land Policies for Farmers’ Access to Land in WE
For long time: Very effective in ensuring access to land
Now: Perverse effects of strong tenancy regulations in Western Europe.
Socio-economic conditions and power relations changed
More empowered farmers: literate, educated, farmer unions
Share of agriculture in employment
High demand for other non-agricultural services from land. Land owners weight benefits from non-agricultural services with benefits from renting

10. Explanations/Hypotheses for institutional differences- CEE
The Legacy of the Communist and Post-Communist Reforms in Eastern Europe
Differences in privatization and land reform choices
Differences in technology and initial conditions
Differences in the role of agriculture in employment and the economy
Different Patterns in Land Market Developments

11. Explanations/Hypotheses
The Legacy of the Communist and Post-Communist Reforms in Eastern Europe
Different Patterns of Land Market Developments

12. Consequences for Farmers’ Access to Land - CEE
In CEE, small land owners and highly fragmented land ownership
Land concentration through rental allows to increase efficiency and equity
Rental provides access to land to those who are productive but own little or no land
Rental markets reduce inequality of access to land by transferring land from households with high land endowments to those with low land endowments.
Older and less educated households can rent out land for additional income
Rental requires only a limited capital outlay, thereby leaving more liquidity available for productive investments rather than locking it all up in land;

13. Consequences for Farmers’ Access to Land - CEE
In CEE, small land owners and highly fragmented land ownership  Land use concentration through rental allows to increase efficiency and equity However, where corporate farms strongly dominate the land rental market, the positive equity and efficiency effects of land rental can be very different. e.g. they pay lower rental prices, have longer rental contracts – thus locking in land, use power to influence policies that shift effective land property rights in their favour, have lower productivity

14. Consequences for Land Use, Farmers’ Access to Land and Environment
In new EU Member Sates, a high share of land used by corporate farms and extreme land use consolidation is observed if
High fragmentation of land ownership
Land markets are characterized by high transaction costs due to
Imperfect competition
Property right imperfections (unknown ownership, co-ownership)
High withdrawal cost

15. Conclusions & Discussion
Large variations in the nature of land markets
Large variations in the regulation of land exchanges
Remarkable institutional diversity in countries with similar economic development, geographical proximity and with integrated economies
One should not only focus on land ownership and sales. Modern agricultural system can thrive in a land tenure system when a large part of the land is used by farmers who do not own the land. Security of operation can be secured through tenancy regulations

16. Conclusions & Discussion
Power balance and tenure security is very different in environments where small tenants are renting from large landlords than where large farms are renting thousands of hectares from families, each renting out small plots of land
 Impact of regulations will be different
 It is difficult to apply the experience from Western Europe or other regions of the world to Central and Eastern Europe where small land owners are renting out to corporate farms

17. Conclusions & Discussion
However, some general principles apply
Secure property rights is a condition for the efficient operation of both land sales and land rental markets
Reducing transaction costs, enhancing transparency and access to information will stimulate the development land rental markets

18. Conclusions & Discussion
Regarding restrictions/concerns on foreign ownership (cfr derogations in NMS after EU accession): good combination of liberalisation and regulation may address both political sensitivities and allow much of the economic benefits (e.g. injection of capital, technological change, …) to occur. E.g. example by imposing maximal ownership by foreigners and allowing secure rental agreements

19. Thank you for your attention. Questions?

20. References
Swinnen, J., Van Herck, K. and L. Vranken, 2016, “The diversity of land markets and regulations in Europe, and (some of) Its causes”, The Journal of Development Studies, 52 (2),