[Federal Register: January 10, 2007 (Volume 72, Number 6)]
[Proposed Rules]
[Page 1190-1192]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10ja07-20]
========================================================================
Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
========================================================================
[[Page 1190]]
DEPARTMENT OF AGRICULTURE
Rural Business-Cooperative Service
Rural Utilities Service
7 CFR Part 4200
Heir Property
AGENCY: Rural Business-Cooperative Service, Rural Utilities Service,
Department of Agriculture.
ACTION: Advanced notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: The United States Department of Agriculture, Rural Development
is soliciting public comment and historical information on the heir
property issue as it affects African American farmers and homeowners.
DATES: Comments must be submitted on or before March 1, 2007.
ADDRESSES: Interested persons may submit comments to:
Bethany.Erb@usda.gov Please submit any information you have regarding
heir property including, but not limited to legislative action, prior
studies (both government and private), historical literature, and
personal insight. Please include your position on the matter along with
any supporting material and plausible solutions.
FOR FURTHER INFORMATION CONTACT: USDA Rural Development. Bethany Erb
(202) 720-8570. Bethany.Erb@usda.gov.
SUPPLEMENTARY INFORMATION:
Background
Overview
Broadly defined, heir property is property passed down from one
generation to another. It may be transferred to one heir, subdivided
among many heirs or transferred to many heirs with undivided interest.
When a property owner dies without an estate plan, state law determines
property succession. Typically, properties lacking estate plans are
inherited by heirs with undivided interests thereby creating fractional
interest also known as tenancy in common. The heir property issues that
have elicited concern in the African American farming community arise
from tenancy in common and for the purpose of this Notice the term
``heir property'' will be used to refer to this specific situation.
The ``heir property'' issue includes a cluster of problems arising
when undivided interest in land is passed to multiple heirs. Problems
range from land partition sales to reduced crop yields as a result of
underutilization. The array of problems caused by heir property
contributes to unsuccessful business models which results in land loss
and the deterioration of rural African American communities. It should
be noted, however, that while unclear title contributes to unsuccessful
business models it is not the sole contributor to the land loss issue.
For historical reasons this issue is closely associated with
African American farmers in the South. African American landholdings in
the post-bellum South were generally very small. Access to capital and
competent legal counsel were problematic and there was often distrust
within the African American community regarding the dominant legal and
lending institutions.
For all these reasons, heir property issues emerged as a special
concern of the African American agrarian community and are a priority
of African American farming and land loss prevention organizations
today. A parallel issue, heir housing, also presents a significant
concern. Although not as extensively studied, heir housing also appears
to pose substantial threats to the well being of rural African American
communities.
It should be noted that the heir property issue can and does
occasionally arise in other contexts. It should also be emphasized that
a resolution of the heir property issue, in itself, would not be a
complete solution to the difficulties facing African American small
farmers today. In particular, small farming operations will continue to
face competitive pressures and the need to identify niche markets to
survive.
Therefore, this issue is linked with the broader challenges facing
all small producers in today's agriculture market. Clearing title is
simply one step--though an extremely important one--in allowing small
farmers to develop sustainable market driven business models, which is
the key to ensuring the future viability of African American land
ownership.
Cultural Importance of Land/Homeownership
African American land ownership and retention is of particular
importance because for generations of African American, especially in
the rural south it symbolized a step towards racial equality and self-
sufficiency. It signified status in the wider community. USDA
recognizes this unique historical and cultural component associated
with African American land ownership. This factor is noneconomic, but
the linkage of land and homeownership to healthy community life is
unmistakable. USDA agrees that reversing the land loss trend is an
important objective for rural African American communities.
Land Loss
In 1910 African American land ownership reached its peak of about
15 million acres. Since then land ownership has continually decreased
and by 1992 had declined to 2.3 million acres. Because of the
significant impact heir property has on land loss, African American
land loss prevention organizations consider heir property one of, if
not the most, significant factor contributing to land loss.
Not only does heir property contribute to and exacerbate land loss,
it also inhibits heir property owners from expanding. At this point,
USDA has identified three characteristics that put heir property owners
at a disadvantage and therefore contribute to land loss: partition
sales, barriers to government programs and private lenders, and reduced
incentives to improve the land.
Partition Sales
Partition sales are a court ordered sale of land that results in
the highest bidder becoming the property owner. Heir property partition
sales commonly occur because one or more heirs want to liquidate their
interests in the property. Sometimes another heir is able to buy out
their interests, but it is not uncommon for the land to be sold to
someone outside the family.
[[Page 1191]]
Barriers to Government Programs and Private Lenders
Ownership validation is important for federal farm loans and
program enrollment. In certain situations, because heir property owners
are not able to produce a clear title to land or a home, they have
difficulty obtaining certain types of federal assistance available to
other farmers. Like government lenders, private lenders are constrained
when applicants cannot use property as collateral. Additionally,
lenders are not able to exercise the option of making a loan against a
crop. In order to do so, the farmer must have recordable interest in
the crop, which cannot be validated by heir property owners.
The long-term effect of ineligibility for government programs and
reduced access to private lenders accentuates land-loss and damages
rural communities by limiting the resources owners need to maintain or
develop their property. This situation also puts these producers at a
disadvantage with regards to other producers.
Reduced Incentive To Improve the Land
Property ownership gives individuals an incentive to reinvest in
their asset and increases the capacity to build wealth over time by
leveraging existing assets. Heir property owners have less incentive to
invest in their property because it is not soundly theirs. As a result,
utilization and productivity are undermined.
Marketability of property is also reduced. Land value is depressed
because property cannot be easily marketed without clear title.
Potential buyers are likely to be deterred by the complications of heir
property. Lease value is depressed for similar reasons. These lower
values further reduce the ability of the heir property owner to improve
the productivity of the land.
Finally, such beneficial property modifications as environmental
enhancements, product diversification, irrigation and home repairs may
be neglected because the incentive to invest is absent for heir
property owners. Consequently, land potential is not maximized, which
further accelerates the land-loss trend.
Heir Property Study
Purpose of Study
The mission of USDA Rural Development is to increase economic
opportunity and improve the quality of life for all rural Americans.
For the African American community in particular, the Rural Development
mission includes working to increase African American land and home
ownership.
Rural Development believes that prosperity in rural America today
depends on economic diversification and flexible adaptation to market
opportunities. However, heir property owners' economic options are
severely restricted. In order to find a way to expand economic options,
USDA began an heir property study in early 2005.
The 2005 USDA heir property study was intended as a follow-up to a
more extensive study conducted in 1984 titled; The Impact of Heir
Property on Black Rural Land Tenure in the Southeastern Region of the
United States, conducted by the Emergency Land Fund Inc. At the onset,
USDA officials identified four fundamental areas that required study.
Areas included:
1. The current status/extent of heir property.
2. What, if any, measures are already in place to prevent and
correct heir properties.
3. Determine how frictional ownership affects the African American
agricultural business model.
4. Determine what options USDA has for assisting property owners in
clearing title.
Data Colletion Procedure
In the early summer of 2005, a researcher was assigned to begin
studying the heir property issue. The preliminary research determined
that heir properties are extremely difficult to monitor or track, and
that there was no means by which to access or compare quantifiable
data. Heir properties are difficult for government land base systems to
track because fractionally-owned lands are not typically enrolled in
government programs.
County property records do list property succession, but this data
is only relevant for probated property or for title that has been
transferred and processed by the courts. These records did prove useful
when evaluating historical trends because the researcher was able to
determine which properties were tenancies in common before sale.
As a result of this preliminary analysis, USDA concluded that the
best way to approach the subject was to select a small area where
information could be verified by local farmers and county officials. A
small county in eastern Arkansas was chosen as a representative test
case.
Current Status
Results of this study confirm that heir property remains a complex
problem for African American farmers and homeowners. In the county
selected for the 2005 review, around 40 percent of the African American
owned lands were heir property. This is not surprising. The 1980 The
Impact of Heir Property on Black Rural Land Tenure in the Southeastern
Region of the United States, found that 80 percent of all African
Americans who owned rural property had not established a will for
property succession.
While this research, completed in 1980, thus suggested that the
share of future African American heir properties could approach 80
percent of the total, the actual ratio appears to be substantially
lower today. USDA believes that partition sales have exacerbated the
land loss trend since 1980. This is the reason today's heir ownership
is significantly lower than the previous study indicated.
Problems facing today's heir property landowners are similar to
those of past generations: partition sales, reduced access to
government programs and private lenders, and reduced incentives for
land improvement relevant. For example, a landowner in Forrest City,
Arkansas was not accepted into the USDA Conservation Security Program
because he was unable to show proof of title, which was essential for
program enrollment.
The factors that have contributed to land loss also had a similar
effect on heir owned homes. For example, heir property homeowners were
unable to receive a Rural Development home loan to complete badly
needed home repairs. In several cases, homes have been abandoned as a
result of unclear title. It is estimated that in certain rural
communities of in eastern Arkansas, up to fifteen percent of homes in
these communities are heir property homes.
Several community based African American farm organizations are
working to address the heir property issue. Much of the assistance they
provide is technical such as legal and financial planning tools. This
assistance covers both prevention and correction mechanisms. For
example, community based organizations teach estate-planning courses,
designed to assist minority farmers with property succession. Some
organizations also have staff attorneys experienced in assisting heir
property owners with land use options. Attorney services appear to be a
widely successful technical assistance tool.
Study results concluded that unclear title had a significant impact
on farmers' overall ability to sustain business. Unclear title
diminishes farm asset returns, access to capital and reduces
participation in several USDA programs.
[[Page 1192]]
The challenge of developing a sustainable, market driven business model
are intensified in heir property situations.
Grants, subsidies, and litigation settlements have failed to
prevent land loss. It cannot be overemphasized that long-term stability
cannot be based on perpetual dependence on subsidy programs; rather it
requires adaptation to market initiatives and the leveraging of assets
to build competitive business models.
Request for Public Comments
The objective of any USDA program would be to reverse the land loss
trend and foster the growth of healthy, sustainable African American
farms and rural communities. USDA is inviting public comment on this
goal. USDA seeks public response on the questions listed below.
However, public comments are not limited to addressing only the seven
bulleted points. Comments on all heir property related issues are
welcomed.
1. Greater Understanding. USDA seeks any materials or personal
insights that would contribute to the overall understanding of the heir
property issue.
2. What has been done, or is being done to alleviate heir
properties. What should be done? USDA would like to learn about any
previous attempts to clear heir property. USDA is interested in why
each attempt succeeded or failed and would like detailed accounts of
the attempts.
3. What should USDA's role be to assist African American land and
homeowners to clear title?
4. What are the risks--to all parties involved--of clearing title?
USDA is mindful of the fact that heir properties are unique and
sometimes fragile. It should also be noted that USDA would not sanction
any program that could potentially take an ownership interest in
farmland.
5. What resources are needed to clear title? The 2005 study proved
that there are several resources being used to clear title. USDA seeks
public comment to determine if those resources are sufficient and if so
is there anything USDA can do to bolster them? If those resources are
insufficient, what additional measures should be taken to improve the
situation?
6. Is clear title in itself sufficient to reverse the land loss
trend? USDA's first objective is the effective resolution of the heir
property issue; however USDA realizes that the African American
community will quickly advance beyond clear title. Therefore, USDA
seeks public comment to determine if clearing title in itself is enough
to reverse the land loss trend. If clear title alone is not enough to
reverse the land loss trend, please indicate what else is needed.
Please illustrate any ideas for initiatives that go beyond clear
title. USDA is particularly interested in any ideas for educational
courses that may help reverse the land loss trend.
7. Role of the Community Based Organizations. Community based
organizations (CBOs) have played a critical role in supporting small
farmers. In the past century, they have made significant progress
advancing civic equality for all minorities. Research suggests that
community based organizations will be an essential part of the heir
property solution.
Currently, USDA seeks a partnership with a community based
organization that has a commitment to local communities and can be a
bridge to the government at the local and national levels while at the
same time building trust between USDA and African American farmers.
USDA seeks public advice on the future role of such a partner. For
example, must a CBO be an agriculture related organization in order to
effectively administer a clear title program? Or could it be an
organization with lesser agriculture credentials, but an equally well-
established community relationship, such as a faith-based organization?
USDA Rural Development is working to ensure all sectors of rural
America are able to participate in the growth and expansion of the
rural economy. The ability of small producers to participate in these
opportunities depends on their ability to become vertical owners in the
agriculture production process and in order to do so they must have
access to capital and innovative business models.
A clear title initiative would be an important contribution of
stabilizing African American land ownership and would lay the
foundation for a more sustainable and diversified pattern of
development for the years ahead.
Dated: November 22, 2006.
Thomas C. Dorr,
Under Secretary for Rural Development.
[FR Doc. E6-22102 Filed 1-9-07; 8:45 am]
BILLING CODE 3410-XY-P