Study: Oregon farmland value increased despite development restrictions

A report by a Portland land-use advocacy group suggests Oregon farmland might be the best investment of the past 50 years.

The American Land Institute (ALI) says the growth of farmland market value out-performed the stock market from 1964 through 2012, increasing 5.5 percent above the Standard & Poor’s 500 index.

Overall, Oregon farmland market value increased 1,770 percent, while the S&P increased 1,567.

In addition, farmers since 1974 have benefited from $5.75 billion in reduced property taxes, according to the ALI report.

The report, “Farm Zoning and Fairness in Oregon 1964-2014,” is intended as a defense of Oregon’s statewide land-use planning system, which has survived decades of criticism that it is restrictive and infringes on property rights. The report updates the institute’s 2007 study on the same topic.

Jim Johnson, the Oregon Department of Agriculture’s land-use specialist, planned to share the report with state ag board members at their next meeting.

Johnson said he’s amazed that farmland value outperformed the stock market over a nearly 50-year span.

“It really goes to show the strength of Oregon agriculture as an economic element of the state,” Johnson said. “During the last recession it was one of the few bright spots in the Oregon economy.”

Johnson said the increase in farmland value gives farmers greater borrowing power, just as home value can be used to leverage loans.

The report authors, Henry Richmond and Timothy Houchen, maintain Oregon’s system has done what it was intended to do: Preserve large blocks of agricultural land and prevent cities from sprawling onto prime farm and forest land.

The findings are significant because the enduring complaint about Oregon’s land-use system is that it unfairly limits development options in rural areas.

The primary goal of Senate Bills 100 and 101, passed in 1973, was to stop cities from sprawling onto productive resource land. The laws mandated that cities adopt urban growth boundaries — lines beyond which most development isn’t allowed — and zoned large blocks of land for exclusive farm use. That meant subdivisions couldn’t spring up in the middle of agricultural land.

Legislators adopted a “carrot and stick” approach. In return for limited development options, farm and forest property is taxed at a reduced rate.

“So, yes, farmers live with continuing restrictions on the use of their land. And, yes, urban and suburban taxpayers pay imperceptibly higher property taxes,” Richmond said in a news release accompanying the updated report.

But farmers benefit from the tax laws and all Oregonians benefit “from the nearby beauty and profitability of Oregon’s magnificent working rural landscape,” he said.

Richmond was the founder and first director of 1000 Friends of Oregon, and is ALI’s executive director. Houchen is ALI’s economist and land use policy analyst.

Oregon voters have defeated seven attempts to repeal and land-use law.

Johnson, of the state ag department, said he has a couple key concerns about the continued viability of farmland.

Cities are filling up their urban growth boundaries, he said, and are looking to expand. He said the state also must be wary of the cumulative impact of allowing non-farm uses on ag land, including production lost to such things as wetlands mitigation and aggregate mining.