What's All the Land in America Worth?

Dec. 20 2013 4:06 PM

What's All the Land in America Worth?

After yesterday's post on the aggregate value of all the housing in America, a couple of correspondents noted to me that for recent decades you can actually compute the value of all the land in America from the Federal Reserve's Flow of Funds report (PDF). The short answer is that all the privately owned land in America is worth about \$14.488 trillion—which is a lot.

Here's how the math works. Table B.100 "Balance Sheet of Households and Nonprofit Organizations" has a line for real estate in its nonfinancial assets section. It tells us that households and nonprofits own \$21.61 trillion in real estate. Then at the bottom on line 45 it tells us that the replacement cost of all the structures owned by households and nonprofits is \$13.8 trillion. So all you need to do is subtract the replacement cost of the structures from the total value of the real estate to reach the conclusion that a little bit over one-third of the total real-estate value—about \$7.812 trillion—is land.

Then you repeat the procedure for B.102 "Balance Sheet of Nonfinancial Corporate Business." Here we learn that corporate America owns \$9.867 trillion of real estate and that the replacement value of the structures on it is about \$8.109 trillion. Subtract and we conclude that there's \$1.758 trillion* worth of land in the corporate sector.

Last we turn to noncorporate business, which owns \$9.704 trillion in real estate and has a replacement cost of structures of \$4.786 trillion, giving us \$4.918 trillion in land.

Add it all up and you get \$14.488 trillion in land value.*

Now how good is the Fed's data on this? I don't know. Certainly estimating the replacement cost of structures can be hard. But this is what's on the books. And when David Albouy and Gabriel Ehrlich tried to estimate the total value of residential land through an independent method (PDF) they came to the conclusion that "approximately one-third of housing costs are due to land, with an increasing share in higher-value areas, implying an elasticity of substitution between land and other inputs of about one-half." That's very similar to the residential piece of the Flow of Funds.

So who cares? Well, you should care. This number is high enough that it tends to confirm that view that taxation of land and other natural resources, supplemented by pollution fees and things like congestion charges could replace all taxes on labor and investment and still fund an ample welfare state and public sector.

* Correction, Dec. 20, 2013: This post originally contained two mathematical errors, one stating that the value of corporate land is \$1.762 and another stating that the aggregate value of all land is \$16.42 trillion.

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