Pueblo chieftain., 1922-01-02
CASH TENANT FARMS
RETURN 31.2 PCT.
Two Per Cent Annual In
crease In Price Largely
Makes Up For Low Rent
Return

A gross return of 3.54 per cent on
the valuation OF land and improves
ments was received by farm owners
renting their land to cash tenants in
1919, according to a study of the re.
lation of cash rental to farm land
valuations Just completed by the
United States Department of Asricul-
ture. The new census schedules OF
15S,O00 farms. or about one-third OF
all the farms rented for cash, were
examined. These farms had an aver
age value OF $16.950, or $153,67 per
acre, and the average rcnt per acre
was $5.45. The gross rent in q single
year was one twenty-eighth OF the
valuation.
This investigation was made by c.
o. Chambers. of the Division OF
Land Economics, to discover a basis
for making scientific appraisals of
farm land values, and to learn the
ratio of cash rent to land value. Tho
investigator points out that the de-
cline in the prices OF farm products
this year may result in a. lower rate
of return until land prices have de-
clined to the Same extent as rents.
The low rate of return from rents
In 1919 was offset to some extent,
the Investigator points out. by tho in
crease in acreage aero value OF farm
land. which. for the United States.
has been at the rate of per cent
compounded annually since 1850.
This advance in land prices. from
which deductions should be made for
ficient to Justify owners holding
lands with small cash rents
Some striking variations are found
in studying the returns from different
sections of the country. Cash-tcnant
farms in selected north-centrai coun-
ln, H.. Atsy~, 80
per cent: Pacific counties. 4.es per
cent: New England and Middle At
lantic counties. 40 per cent; noun
tain counties. e.34 per cent; and
southern counties. s7.2s per cent.
States showing the highest averages
were Arkansas. 10.sS per cent: Miss
issippi. 1000 per cent: Arizona. 8.S7
per cent; while those showing the low
est were North Dakota, 2.f7 per cent;
South Dakota, 2.52 per cent; and Ne
braska, 2.59 per cent.
On the whole it appears that
American farm property has been
capitalized at a moderate rate COM
pared to the rates investors receive
on Government bonds, farm mortgage
loans, and good securities in general.
In many sections the only justification
for the low rate of return on farm
property appears to have been the ex-
pccta,ion OF further advances in land
prices.
The low rent returns in certain SEC
tions probably tend to promote farm
tenancy. since tenants are not likely
to buy land at $153 per acre which,
they can rent at an annual cost OF
only $5.45 per acre. which is less
than the mortgage rate This may
account In part for the large pro-
portion of land operated by tenants
insections of tho country where the
cash return is comparatively low.
The Investigator discovered sisni-
hcant variations in rent returns for
different groups of tenants White
tenants paid lower cash rent than
Negroes. Japanese. Chinese, or IN
dians in the same regions. Negroes
paid rents two-fifths higher than
white tenants on farms Of the same
value. This may be accounted for.
however. by differences in the kinds
OF farms which they operate.
New and -year-old contracts re-
turned cash rentals about one-eixth
higher than those that run on longer
than one year. Tho contracts which
were over ono year old showed re-
turns of 3.e7 per cent as compared
with AS per cent on new ones. This
the fact that one-year contracts arc
especially common in high rent locali-
ties.
The survey also showed that tenants
related to their landlords paid only
2.T6 per cent In rental, while those
unrelated paid 3.43 per cent. This
difference might be due either to
over-valued farms or to reduced rents
because of kinship.
Tho economists OF the Department
of Agriculture are cndeavoring TO
reach n basis for scientific appraisais
OF American farm lands. They find
that there IL no apparent constant
relation between rent and value. The
best land in the country returns
high rental az we'll as nigh valuations
The speculative motive of holding
lands for advance in prices IL un-
doubtly an important factor in Lead
ing landlords to accept low rental in
come. The appeal of ownership Of =
farm home appears to be another
important consideration.
Tho Importance of land valuation
lies in its application for both taxa
ton and loan purposes. The more
selling value prevailing. IN COM
munity is regarded as An unsound
basis for appraising by these inves-
tigators. Scientific appraisinE. they
say. must give proper attention not
only to selling value but TO the rate
of return received from renting the
property or otherwise ascertainine It's
as