One of the biggest government programs in the US is the land deed welfare program. Under this program, the government gives people the privilege to use the police to violently exclude everyone else from specific pieces of land denominated on pieces of paper called deeds. Through the operation of this guaranteed police violence, deed-holders are afforded a private and infinite right to the value that flows from the deeded land. They are also promised that the rent they must pay for this flow will forever be capped at $0/year.

As with most rent control regimes, the land deed welfare program is susceptible to severe growth-destroying distortions. Because the annual rent of the land is capped at $0, the deed holders are not required to employ any of the value of the land to “make rent” (if you will). The net effect of this is that land is often under-utilized.

A deed holder may simply let the land lie dormant, perhaps speculating that its rental value will go up over time, allowing them to make easy money by selling off the rental stream that the state gives them for free. A deed holder might also under-build on the land, for instance by maintaining their single family home on it rather than putting a multi-unit apartment complex on it. Since they do not have to pay out the economic costs of such under-utilization (because of the free rent they are given by the government welfare program), there is nothing that would force them to do otherwise.

To be sure, when gaps between potential land utilization and actual land utilization open up, bidders might come knocking to try to convince the deed holder to sell away the deed, thereby calling off the police violence that prevents the would-be developers from coming in and utilizing the land. This sort of arrangement can be highly lucrative to the deed holder, but that doesn’t necessarily mean that they will go for it. In family homes, for instance, the deed holders seem often to want to stay on the under-utilized land, perhaps passing it along to family members in death or only selling it many years down the line when they are ready.

For every year that they continue to occupy that rent-free under-utilized land, the economy suffers. Buildings that should be built aren’t. Capital investment is lower. And overall utility is not maximized. As the Land Value Tax advocates point out, the only way to solve this ongoing economic catastrophe is to blow up at least certain substantive provisions of the land deed welfare program. After such a reform, “owners” (if that is still an apt term) would be required to pay land rent every year rather than having their rent controlled at $0. By internalizing the cost of under-utilization on the “owners,” this will ensure a more efficient allocation of resources, more investment, and more growth.

It’s time to get big government out of the way and to end the land deed welfare program.