An examination of some investment decisions under crown renewable lease tenure

Abstract

New Zealand has a total area of 66.4 million acres, of which 44 million are classified as occupied farm land. More than 40 per cent of this latter area is held under leasehold tenure. The Crown is the landlord of 14.9 million acres which are let under several forms of leasing arrangement.

In recent years there have been marked increases in land prices throughout New Zealand. A result of this has been a substantial increase in rents, which has caused many farmers to become disaffected with leasehold tenure. The Committee of Investigation into Rentals and Freeholding of Crown Leases (1968), convened by the Minister of Lands, studied this problem and has forwarded to Parliament recommendations for an amendment to the 1948 Land Act.

The subject of this study is Crown Renewable lease tenure and its effect on farm investment. It falls naturally into three parts: firstly, a descriptive section providing a resume of the history of land tenure in New Zealand, and defining the terms of Crown Renewable lease tenure. The second part investigates the micro-economic aspects of this form of tenancy. This section takes as given the terms of the lease and investigates various courses of action at the farm level. A case study approach is used to explore the economics of alternative investment opportunities open to an individual lessee. In the third part, macro-economic aspects of Crown Renewable lease tenure are investigated. This section examines whether or not this form of tenure promotes efficient resource allocation, and is concerned with the community's point of view rather than that of the individual.