Page images


cost of $625,000,000. Until the present depression almost none of the Irish land purchasers were in arrears on their payments, and many of the earlier buyers had become full and complete owners, • free of debt. The policy has literally rejuvenated the rural life of Ireland.

About the beginning of this century the Danish Government began a program of buying large estates and reselling them after subdivision into smaller holdings to farm laborers and tenants. The program has been instrumental in creating a large proportion of the Danish small holdings. The action of Denmark was the forerunner of somewhat similar action on the part of such countries as Rumania, Czechoslovakia, Finland, Jugoslavia, and other European countries. In most cases this action has been taken in order to transform the large estates which prevailed prior to the World War into a democratic system of land tenancy. Since the World War the German Government has aided in the creation of more than 55,000 independent farms through the subdivision of large estates and through the improving of waste lands.

The third method of dealing with the tenant problem-I mentioned first, England, which leaves them tenants and tries to regulate

Senator BANKHEAD. They do have a program, do they not?

Mr. Gray. England has a small-holdings program. They began back in the eighties of the last century, a program administered

by the county authorities. In the World War, as with many countries, and also this country, they tried to devise some projects for returning veterans. Some of those were not so happy in their consequences.

Senator BANKHEAD. I notice in the table contained in this report of the committee Secretary Roper was on, it showed that England had a plan of 4-percent interest, 50-year period of amortization, to aid tenants to buy farms.

Mr. GRAY. That is right.
Senator POPE. Did they purchase the land ?
Senator BANKHEAD. Yes.

Mr. Gray. The earlier English small-holdings acts didn't try to make them into owners, but it was simply a program of creating small holdings. Of course, that was in a country where most of the land was owned in large blocks and not accessible to the small man. Most of the English tenants, as you know, are fairly large farmers. That is the traditional system in England. They are not small holders but large commercial farmers, hiring laborers. One of the great weaknesses of the English system is that while they have developed more or less equitable relationships between tenant and landlord, the system rests on extremely poorly paid laborers.

I was going to speak of the third method, and that is State tenancy, under which the government owns the land and rents it to the tenant. In some instances, notably during the earlier stages of the Russian revolution, such holdings have been granted on the basis of use-tenancy, that is, the holder is not under obligation to pay for the capital value of the land and is not permitted to dispose of the holding by sale, although it may pass to his heirs under certain restrictions and regulations provided for by the Government. The

holding may be subject, however, to the payment of taxes and this may, or may not, approximate the character of rent.

The policy embodied in the Bankhead bill follows, in the main, the second of these two lines of procedure, and the one which has been followed by the majority of foreign countries. Instead of accepting tenancy and attempting to modify its character, the bill provides for giving tenants the status of owners in line with the ideals of the homestead system and the traditional attitude of the American people which favors land ownership by farmers.

It is possible under the bill for a tenant to acquire a farm with only a very small down payment. Consequently, many tenants may, financially speaking, not be owners at all. Nevertheless, they will have the security of owners as long as they exert themselves to maintain the payments.

Senator MURPHY. What is the percentage of down payment provided ?

Mr. GRAY. The bill doesn't provide any. That is left to the discretion of the administration. I think properly so, because many of these details, if set down in the bill, might be a source of embarrassment-might not work out well.

Senator BANKHEAD. My view is that it ought to be as flexible as possible to fit varying conditions in different sections of the country.

Mr. GRAY. Nevertheless the owner will have security of ownership. The bill makes it possible for the payments to be probably as small as the ordinary run of payments, perhaps even smaller in some cases. The holder will, therefore, be justified in gradually improving his holding, subject, of course, to the necessary safeguard that the improvements are of a reasonable character, and fully assured that when he makes such improvements they can be disposed of in case he wishes to sell the property.

The bill provides that the tenant may be given a contract of sale, with the title held by the Federal Government until the tenant has acquired sufficient equity to justify his being given a fee simple title to the property. This has a great advantage in that it will facilitate the transfer of the property to another holder in case of failure to make payments, without the heavy expense and delay of foreclosure and also without the heavy expenses ordinarily attendant upon the transfer of real property. I think that will be an advantage to the tenant as well as to the Government in administering this act.

It is probable that the question will be asked why this type of legislation is necessary in view of the existence of the farm-credit system. The answer is that the farm-credit system has never functioned adequately to enable tenants to become farm owners because of the extremely small margin of credit allowed under the system. It is my understanding that amendments proposed to the Farm Credit Act would provide for the extension of the so-called “ Commissioners' loans "to permit a maximum credit of 75 percent of the appraised value of the property to be used for the purchase of farm real estate. Undoubtedly, the passage of this amendment will greatly liberalize the farm-credit system

Senator BANKHEAD. My recollection is that they can lend 60 percent of the value.

Mr. GRAY. I hadn't followed the recent changes. I didn't know just what the figures were. However, still more liberal credit made possible under S. 1800 could hardly be safely provided without making possible a fuller degree of supervision over the use made of the property than is possible under the farm-credit system. It is obvious that such measures would especially necessary to deal with the situation in the South. While the title to the land in some cases would still be held by the Federal Government pending the accumulation of sufficient equity by the tenant, provision is made so that there will be no serious disturbances of the system of local public revenues, since the Federal Government is authorized to arrange for making payments corresponding approximately to the contributions made by real estate of equivalent value in the community.

It will probably be desirable, although not provided for in the bill, to include in contracts of sale the provision that the corporation may exercise an option to repurchase the property in case the holder should desire to dispose of it. This will provide the necessary safeguard to prevent the property from becoming a football of speculation and also to insure that the obligations of the contract will be incurred by suitable persons. It is obvious that careful selection will be necessary where such favorable conditions of credit are made available. The bill will not only provide a means of substituting a system of land ownership for the existing evils of tenancy, but it will also facilitate the transfer of extensive holdings acquired by creditor agencies through foreclosure into the ownership of those who work on the land.

I would like to point out that the present is an extremely favorable time to inaugurate a plan of this sort. Land values are still extremely low while prices of farm products have been improving.

In conclusion, I should like to emphasize the point that a policy of this sort should not be judged merely from a rigid banker's point of view. The credit provisions of the bill may be much more liberal than the conservative banker would regard as safe when loans are made for the purpose of facilitating a full transfer of title and subject to the heavy expenses and delays of foreclosures. Other countries have found it feasible to provide similarly faborable terms of credit. They have done so in the recognition of the social significance of the policy rather than from the standpoint of financial consideration alone. We have to view this type of measure in the light of our serious problem of relief, our disorganized and disintegrating life, our deteriorating soils and the demoralization of large numbers of our rural population. I would not want to predict that the Federal Government will lose money on this program, the bill does not contemplate that, but even if it should be compelled to incur some loss in the administration of such a measure, the losses might well be considered a cheap price to pay for the constructive results that a policy of this type promises to accomplish.

Senator POPE. Dr. Gray, do you think that the passage of such a bill would tend to increase land values to such an extent that when the Government got ready to buy the land, the value would be conaiderably increased over what it is now!

Mr. GRAY. I think that will depend somewhat upon how the bill is administered. If the Government promiscuously encourages the buy

[ocr errors]


ing of land all over the country, it might have that effect. On the other hand, in the administration of the so-called “submarginal land program ", we have been careful to avoid that in this way. We have gone into communities and developed a project there for land acquisition, and we have appraised and optioned the land. We have told the people, "Now we don't have to stay in this community and buy this land, if you want to hold us up. There are plenty of other places where we can go."

"Of course, if the Federal Government puts itself in the position of allowing itself to be held up, why it might have the effect of stimulating land values.

Senator POPE. One other question : You will recall that many years ago there was considerable support for the single tax idea? Mr. GRAY. Yes, sir.

Senator POPE. That was in connection with Henry George's writings, the discussion of tenancy and land speculation and all that. What would you think the effect would be to put a tax on land only and exempt improvements? What effect would that have upon this question of tenancy which we are discussing? Have you made any study of that matter?

Mr. Gray. Of course, that is a big question.
Senator POPE. I know it is.

Mr. GRAY. A great many things can be said about that. One consideration is the fairness of the thing from the standpoint of the imposition of such a tax, the singling out of a particular class of our citizens to bear an excessive tax while presumably other classes would be exempted. That is only one consideration, of course. Another one is that you would virtually tax all value out of land and it is very much of a question whether a type of property which has little or no value will be very carefully conserved by those who use it.

Senator POPE. Have any of the countries tried that?

Mr. Gray. I know of no country that has imposed the single tax in its extreme form as proposed by Henry George. There have been instances where the principle of taxing land somewhat more heavily than improvements has been instituted. I think most tax experts consider that it is a wise policy for purposes of assessment to separate improvements from land, particularly in cities. New York City did that a number of years ago. It was much in the interest of getting a better type of assessment than anything else.

Senator BANKHEAD. Are there any other questions?
Doctor, we thank you very much.
(Statement referred to is as follows:)


In the last 60 or 70 years many European countries have taken steps to foster the development of small holdings. They have removed legal barriers hampering the breaking up of estates. They have provided for the sale and lease of small farms from State domains. They have enacted measures to regulate tenancy and undertaken to help tenant farmers to become owners.

Ireland has long been in the forefront of this movement. Efforts to improve the contractural relationships between landlord and tenant go back as far as 1870. While these efforts were intended to give the tenant compensation for disturbance and improvements, to establish fair rents and to create greater security of tenure, later measures primarily aimed at helping the tenants to transfer their lease into ownership. A land commission was created in 1881, This commission was empowered to make advances in the form of loans to tenants for the purchase of land. The Ashburne Act of 1885 provided that the

entire purchase money for a holding could be advanced by the land commission if it was satisfied with the security. At least one-fifth of the entire advance, however, had to be retained as a guaranty deposit until a like amount of principal was repaid by the purchasing tenant. The period of repayment was extended to 49 years and the interest rate was made 348 percent. Amortization was fixed at seven-eighths percent annually. In the course of the last 65 years about 425,000 holdings have been assisted in the purchase of land. The advances made to these holdings amounted to almost £125,000,000. Interest rates varied between 312 and 5 percent.

Amortization was between seven-eighths and 112 percent before the war. In the post-war period it amounted to one-half percent, whereas two generations ago the great bulk of the Irish farmers consisted of tenants who had rented their holdings largely from English absentee landlords, Ireland now has a large class of efficient farm owners occupying a greatly improved social and economic status.

Since the eighties of the last century many laws have been passed in England to foster the development of small holdings and to create part-time farms for industrial workers. Provisions were made to purchase large estates and to subdivide them into small units. The Allotments Acts of 1887 and 1890, the Small Holdings Act of 1892, the Small Holdings and Allotments Acts of 1907 and 1926 are some of the major measures in the field of fostering the development of small farms. Besides various acts were adopted to regulate the landlord-tenant relationship. The first statutory attempt to secure compensation for the tenant's improvements was the Agricultural Holdings Act of 1875. During the war England created more than 1,000,000 small part-time allotments with a total acreage of approximately 200,000 acres. Post-war settlement activities led to the creation or enlargement of about 20,000 small holdings.

Scotland is another example. In the lowlands tenancy has been regulated by various agricultural holdings acts. In addition, financial and other assistance has been given to enable small tenants to become landowners. The Croppers' Holdings Act of 1886 brought greater security to the tenants of the whole of the western and northern highlands. The Small Landowners Act of 1911 carried the movement farther ahead and set up machinery for the subdivision of large estates. About 6,200 applicants have been settled from 1912 up to the end of 1933. Out of these, more than two-thirds were settled on new holdings. About 2,000 occupy enlarged holdings.

About 35 years ago, a movement for the creation of small allotments for agricultural workers got under way in the Scandinavian countries. Major legislation took place in 1899 in Denmark and was followed by similar measures in Norway in 1903 and in Sweden in 1904. In later years more emphasis was laid on the creation of small full-time farms. In Denmark the settler may obtain a public loan amounting to nine-tenths of the value of the holding. On the part of the loan granted for the purchase of land, 412 percent interest must be paid annually. Of the part of the loan granted for the erection of buildings one part is free of interest; 412 percent is to be paid on an amount of 8,000 crowns, if the costs have reached the stipulated maximum amount or on an amount proportionately reduced if the cost of building is lower than the maximum amount. During the first 5 years no portion of the loan is to be repaid. Thereafter that part of the building loan which is free of interest is first of all amortized, then the part of the building loan on which interest is to be paid. The loan for buildings having being amortized, the part of the loan granted for the purchase of land is amortized by payment of an annual sum, including interest and amortization, equal to 612 percent of the original amount of the loan. Under the laws of 1899 and 1919 and subsequent amendments about 20,000 small holdings have been created.

In 1918, Holland passed a law providing for financial assistance on the part of the Government in connection with the creation of small allotments for agricultural workers. In Finland, beginning with 1909, efforts were made to improve tenancy conditions through regulation. By an act passed in 1918 steps were taken to assist tenants in the purchase of land. These activities were followed in 1922 by measures for the subdivision of small holdings.

The questions of fostering small holdings, of helping the farm workers climb the agricultural ladder, and of enlarging farms which are too small has also been given much attention in Germany. Special laws to facilitate the purchase of holdings were passed in the early nineties. After the World War the land program was enlarged and pushed forward through the Federal Settlement Act of 1919. In addition, in 1920 the German Reichstag adopted a set of ten

« PreviousContinue »