RELATION OF LAND INCOME TO LAND VALUE, 65 
The percentage of tenancy is relatively high in those areas where 
land incomes have heen increasing most rapidly, and relatively low in 
areas where incomes have been increasing less rapidly. The percentage 
of tenancy is considerably greater in Iowa and central Illinois, for 
example, than in Ohio, and from the chart on page 32, it is seen that 
land incomes increased much more rapidly in the last 20 years in the 
former areas than in the latter. 
Rapidly increasing land incomes produce a high percentage of 
tenancy through their effect on land values. At anv given time the 
average increase in income of the preceding years is projected into 
the future and capitalized into the value of the land. In areas, there- 
fore, where incomes have been rapidly increasing, a larger percentage 
of the value is based upon anticipated increases in income than in 
areas where incomes have been rising less rapidly. Thus in group 10 
(western part of Corn Belt) , 56 per cent of the value of the land in 1920 
was based upon expected increases in income, but in group 7 (eastern 
part of Corn Belt) only 42 per cent of the value of the land is thus 
accounted for, and it seems probable from a comparison of the rent 
increases that this difference in the composition of the land values in 
these two areas has obtained for the past 10 to 15 years. 
In such areas as that included in group 10, where a large percent- 
age of the land value was based upon expected increases in income, 
the returns on investment in farm lands were considerably below the 
mortgage rate of interest for a number of years after the purchases 
were made. For those purchasers who had to borrow heavily to pay 
for a farm, the interest payments in these early years were difficult 
to meet. This discouraged many tenants from undertaking to 
become owners, and some of those who did undertake it were prob- 
ably forced to give up their farms through inability to meet interest 
payments in these early years after the purchases were made. 
In the western Corn Belt (group 10), the ratio of net rent to value 
was 2.4 per cent in 1920. In 1910, the ratio was probably only a 
little higher than this. (See Table 7.) Tenants in this area, then, 
who in 1910 faced the problem of deciding whether to remain tenants 
or to purchase land, realized that they had to count on low returns 
on their investment for a considerable number of years after their 
purchases were made. Since a large proportion of such tenants had 
to count upon borrowing heavily at a rate of interest, which was 2 
or 2.5 per cent higher than the rate of return on their land investments 
in these early years, a large number of them were discouraged from 
attempting to make the step to ownership. 
Prospective purchasers in Ohio and Indiana, on the other hand, 
were in a more favorable situation. In these areas the discrepancy 
between the rate of return on investments in farm lands in the early 
years after purchases were made and the mortgage rate of interest 
was not so great. The result was that a larger number of tenants in 
these areas were able to take the step to ownership than in the 
western part of the Corn Belt. 
In general, then, in so far as land values bear a causal relationship 
to tenancy, it is to be found in the composition of the land value 
rather than in their absolute amounts. In other words, it depends 
upon the percentage of the value that is based upon expected increases 
in income. If this percentage is great, the percentage of tenancy will 
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