Rising Land Values Threaten Viability Of Canadian Farms, Says Senate Report

Rising Land Values Threaten Viability Of Canadian Farms, Says Senate Report

Written By: Jim Adair
Monday, April 23, 2018

Rising farmland prices are putting the family farm in Canada at risk, as good farmland is being converted for residential and commercial development. A report by the Senate Committee on Agriculture and Forestry says the purchase of farmland by non-agricultural interests, along with environmental issues and policies, demographic pressures and an aging population are combining to drive up farmland values to the point that the family farm is no longer viable.

"Economic conditions are conspiring against farmers, who already encounter more adversity than they need," says Diane Griffin, chair of the committee. "We need the government to help counter the market forces that are stacked against Canadian farmers, which make it harder for them to buy the land they need to run successful farming enterprises."

Nearly seven per cent of Canadas total area -- about 65 million hectares -- is used for farming. The average price of an acre of farmland rose by 10 per cent in 2015, with Alberta, Manitoba and Quebec showing double-digit increases. The growth rate has slowed since then because of a decline in commodity prices, but the committee says this decline in the growth rate does not mean theres been a decline in value.

Several factors are contributing to the increase in values. Farmers told the committee that foreign investors have been competing with farmers for land, along with other non-agricultural interests including financial institutions, pension funds, private investment firms and private companies.

The average age of farmers was estimated to be 54 in 2011. Selling land is a way for farmers nearing retirement to create their own pension plan.

"If youre an entrant farmer, basically land rental is the only way to get in and actually start if you are going to crop farm," Paul Glenn, chair of Canadian Young Farmers Forum, told the committee. An increasing number of retired farmers are hanging on to their land and renting it to their neighbours or a young farmer. Total farmland area rented or leased by private interests increased from two per cent in 1986 to 27 per cent in 2011.

"Stakeholders are concerned about this increase since this type of ownership makes farmers employees rather than owners and exposes them to additional risks because of rising rents," the committee report says. "They are also concerned about potential changes to the production structure resulting from the loss of family farms and the shift to large-scale farms."

The committee says that farmers close to retirement sometimes divide their land to distribute various parcels to their children, reducing the cost of land ownership for the new farmers. "However, this requires good planning and a desire on the part of the younger generation to get into farming. Several witnesses said that this desire is tied to the sectors profitability."

Some organizations such as Ducks Unlimited Canada may also be driving up farmland values by acquiring land for conservation purposes.

The committee heard from the Canadian Federation of Agriculture that other environmental policies, such as provincial regulations on manure management, require farmers to acquire more land to comply with the regulations, putting more pressure on land values.

The provinces have jurisdiction over the ownership of farmland, but the committee says the federal government has a role to play in helping farmers. It is recommending that the lifetime capital gains exemption be increased for farmers to make it easier for new farmers to acquire land. Tax exemption and property tax deferral programs, which are offered in some provinces, should also be considered, it says.

Its also calling for common land-use planning policies to be established. In provinces like B.C., its up to the local municipalities to come up with these policies. Metro Vancouver, for example, is considering a proposal that would restrict house sizes and residential footprints on agricultural land. Both Ontario and British Columbia are currently studying land-use policies >Ontario loses 175 acres of farmland a day, according to the Ontario Farmland Trust OFT, citing Statistics Canada figures from 2016. The trust says, "There is increasing concern that productive agricultural land is being lost to land-grabbing, large-scale development and investor acquisition. These issues disrupt the integrity and viability of agricultural communities, the farm economy and agricultural ecosystems. Land-use planning can do more to protect this critical resource."

For owners who want to make sure their land remains a farm forever, the trust offers an easement agreement. It is a permanent legal contract between the property owner and the OFT. It is registered on the land title in perpetuity and can include provisions to protect the farmland and maintain uses on the property that are compatible with agriculture, says the OFT. Each agreement is tailored to the needs of the farmer and can be applied to the entire property or part of it. The OFT currently has about a dozen such agreements in place.

"The easement agreement ensures that the property owner maintains ownership and the right to sell the land," says the OFT. The easements can impact the property value, so an appraisal is conducted to measure any reduction in market value. If there is a negative impact on land value, the farm owner is compensated with a charitable tax receipt for the difference in value.

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