RELATION OF LAND INCOME TO LAND VALUE. 67 
terest to prospective buyers, economists have been quick to point 
out that such a policy would most likely defeat its aim by lowering 
the rate of capitalization and increasing land values. Is there any 
kind of credit policy which will be effective in facilitating land owner- 
ship on the part of deserving tenants ? 
As a general proposition it can be stated that in framing any credit 
policy which will be effective in attaining: this end, the relation of 
land income to land value must be taken into account. It must be 
considered whether land incomes are rising rapidly or slowly and 
whether they are likely to continue upward for any considerable time 
at the same rate of increase that has obtained in the past. If land 
incomes are rising slowly one type of credit policy will be effective, 
but if they are rising rapidly another type of policy will be required 
if the desired result is to be brought about. 
What type of credit policy would be effective in increasing owner- 
ship when land incomes are about constant or are rising very slowly X 
Under conditions of slowly rising land incomes the percentage of 
tenancy would not be as great as under rapidly rising land incomes, 
and if land incomes move upward in this manner for the next decade 
the percentage of tenancy may fairly be expected to decline. But 
the decline may be hastened by the right type of credit policy. 
It is the belief of the writer that it is possible to lower the rate of 
interest on mortgage loans to buyers of land who buy for the purpose 
of becoming farm operators without increasing land values and thus 
nullifying the benefit of the lower rate. It must be remembered that 
the mortgage rate of interest is approximately the rate of capitaliza- 
tion and that it is so because of the action of retiring farmers and 
landlords. If the rate of interest were lowered to a selected class of 
buyers of land, there would be a tendency for them to bid up the 
price of land. 
If land were on a 5 per cent basis, for instance, and these buyers 
could borrow from the Federal farm loan banks at 4.5 per cent, they 
would tend to bid up the price of land. But if the alternative invest- 
ment opportunities of the retiring farmers and landlords continued 
to be one that yielded 5 per cent, they would sell if buyers were will- 
ing to offer such a price for land that it was no longer on a 5 per cent 
basis. This would increase the number of farms for sale, relative 
to demand for farms, and tend to hold their price down to a 5 per 
cent basis. If, however, the rate to this selected class of buyers 
were held effectively at 0.5 per cent below the general market rate. 
many of the purchasers who would otherwise borrow from the sellers 
would borrow from the Federal land banks, thus cutting off part 
of the investment alternatives of the retiring farmers and landlords. 
But it would still leave a large field for them to lend to other farmers 
who borrow money for shorter periods and for other purposes than 
that of land purchase. But if the Federal land banks made it a 
part of their policy to market a considerable part of their bonds in 
tnese farm communities, none of the alternative investments would 
be taken away from that class of sellers of land who are of such 
strategic importance in controlling the price of land. 
In carrying out such a credit policy a set of regulations would have 
to be adopted to prevent investors in laud, as distinguished from op- 
erators, from taking advantage of it. Unless this were done, retired 
and retiring farmers, as well as city investors, would borrow 4.5 per 
