Richard England, visiting fellow at the Lincoln Institute, argues that the preferential tax assessment of rural land isn’t as effective for encouraging small farms as its enactors had hoped, and that reform is necessary to prevent misuse of this policy tool.

1. “Current-Use Assessment of Rural
Land in New England: Equity Effects
and Reform Proposals”
Richard W. England
Professor of Economics, University of
New Hampshire
Visiting Fellow, Lincoln Institute of Land Policy
April 8, 2016

2. A Brief Look at Bedford, New Hampshire

3. Property Taxation in Bedford, NH
 Striking differences in 2013 assessments of
undeveloped land zoned for residential use:
 Parcel 1 assessed at $10,047 per acre.
 Parcel 2 assessed at $127 per acre.
 Nearly 13 percent of town’s land area with
average assessment of $155 per acre.
 Discriminatory assessment practices? Not at
all. Parcel 2 enrolled in Granite State’s
current-use assessment program.

4. Use Value Assessment
Use value assessment (UVA) = assessment
of undeveloped land for tax purposes as
though permanently undeveloped.
No recognition of development potential
of parcels by local assessor.
Almost universal adoption of UVA by state
governments during sixties and seventies.

5. Origins of UVA
Rapid suburbanization of U.S. cities
after WWII (interstate highways,
cheap gasoline, mortgage subsidies,
etc.).
Developed area in U.S. grew from 25.5
to 65.5 million acres (1960 - 1997).
Earliest adoption of UVA of
agricultural land by Maryland in 1957.

6. Rationale for UVA Programs?
Rationale for UVA offered by IAAO
(1974):
Assessments below market value
1. To preserve family farmers, and
2. To protect rural landscapes from
urban development.

7. Design Features of UVA Programs (a)
 Simple application process: One page
application common. Little or no
supporting documentation required.
 Eligible land uses: farm or ranch typical,
forested parcel less common, “open
space” rare.
 Modest sales or income from rural use
often required. At least $500 of annual
sales from farming activity in MA.

8. Design Features of UVA Programs (b)
 Small minimum acreage requirement
typical. Only 3 acres in Louisiana! At
least 5 acres of farmland in
Massachusetts. Ten acres in NH.
Minimum of 25 acres in Vermont.
 No development penalty in 21 states.
 Rollback or conveyance tax in 28 states.

10. UVA and Rural Land Protection
 Studies of impact of UVA on preservation of
rural land surveyed in Anderson & England
(2014).
 Morris (1998) on effect of UVA on retention
of farmland in nearly three thousand
counties:
“The policy [resulted in] … 10 percent more
of the land in a county being retained in
farming [after twenty years].”

11. Thoughts About Protecting the
Small Family Farmer
 Property taxes only one reason for leaving
farming. UVA unable to save family
farmer?
 Farms with fewer than 600 acres common
in the early 1980s. Today most cropland is
on farms with at least 1,100 acres (USDA).
 Today’s land-rich farmers deserving of
property tax break?

12. Ten-Acre Farms near Lexington, KY (2016)

13. Thoughts about Preserving
New England Forests
 30 – 40 percent of New England remained
forested in mid-1800s after two centuries of
European settlement.
 80 percent of New England covered by forest or
thick woods today.
 “New England is now the most heavily forested
region in the United States ….” (Boston Globe,
2013)

14. Swift River Valley (MA), 1880’s

15. Swift River Valley (MA), 2010

16. Distributional Effects of UVA (a)
Preferential assessment of rural land 
pressure on local government to raise
property tax rate and/or cut local
expenditures.
Shift in property tax burden from UVA
beneficiaries to other property owners
within taxing jurisdiction.

17. Distributional Effects of UVA (b)
 Early recognition by President’s Council
on Environmental Quality (1976) of “tax
expenditures” associated with adoption
of UVA programs.
 California as unique example of state
government compensating localities for
revenue loss (until 2008).

18. Distributional Effects of UVA (c)
 Anderson and Griffing (2000) on tax
expenditures in two Nebraska counties:
1. Tax expenditure large near CBD and
declines with distance in both
counties.
2. Average tax expenditure = 36 percent
in one county and 75 percent of
revenue in other county.

19. Cities, Suburbs and Current Use in NH
Pct. Acres in
CU (2014)
Average CU
Parcel Size
(Acres)
Bedford 12.6 14.9
Concord 38.2 32.2
Manchester 5.8 26.7
Salem 10.1 13.6

20. Assessed Values in NH and Selected
Counties (2014)
Assessed
Value per
Current Use
Acre (Dollars)
Assessed
Value per
Residential &
Commercial
Acre (Dollars)
New
Hampshire
67.18 37,522
Coos 35.23 15,268
Hillsborough 90.15 49,031
Rockingham 93.87 60,867

21. Academic Criticisms of UVA
 High tax expenditure per acre temporarily
preserved by UVA program. Superiority of
purchase-of-development-rights programs
or outright public acquisition.
 Tax relief granted to all rural land in
eligible categories, not just to ecologically
valuable acres threatened by development.
 Flawed formulas used to estimate use
values of farm and forest parcels.

22. Editorial Cartoon from Kentucky

23. Two Hypothetical UVA Parcels
in New Hampshire
Parcel Description Assessed Use Value Market Value
100 acres of
unproductive (barren)
land at interstate
highway ramp one
hour north of Boston.
$1,000 $2 million
100 acres of white
pine forest adjacent
to White Mountain
National Forest and
not on road.
$15,000 $20,000

24. Some Thoughts about UVA Reform
 Current practice: Biggest tax breaks (per acre) go
to owners of undeveloped parcels with biggest
difference between fair market value and
capitalized net income to parcel owner from
continued rural use.
 Reform proposal: Biggest tax breaks (per acre) go
to owners of parcels with highest capitalized value
of public goods generated annually by
undeveloped parcel.
 Relevance of “ecosystem services” research
literature.

25. Examples of Ecosystem Services
Produced by Rural Parcels
Flood control and water
storage
Filtration of air and water
pollutants
Nitrogen fixation and
nutrient cycles
Carbon sequestration and
climate change
Wildlife habitat (including
pollinators)
Soil erosion prevention
Option value of preserved
genetic codes
Soil formation via rock
weathering and
accumulation of organic
materials
Scenic vistas Etc.

26. Conclusions
Need to evaluate half century of
experience with UVA and to identify
possible reforms that could improve the
effectiveness and fairness of UVA.
Need to balance social benefits of rural
land preservation against social costs of
higher tax bills for all homeowners and
higher prices of land for new housing and
other urban uses.