Conservation Policy: Farmland and Grazing Land Protection Programs

Conservation Policy Briefing Room Background Working-Land Conservation Programs Land Retirement Programs Farmland and Grazing Land Protection Programs Compliance Provisions for Soil and Wetland Conservation

The conversion of farmland to urban uses reduces local agricultural production capacity as well as scenic views, cultural heritage, and other amenities associated with agriculture. Rising conversion rates in some areas have motivated growing public financial support for farmland protection at local, State and Federal levels. Preventing conversions of private grazing lands to cropland, as well as developed uses, has recently emerged as a Federal conservation priority.

Trends in Farm and Grazing Land Losses

Conversion of farmland to urban uses—including residential, commercial, and industrial development—is on the rise. On average, 2.2 million acres per year of farmland were converted to urban uses between 1992 and 2001, versus 1.1 million acres per year during the previous decade. Still, this annual rate represents barely 0.2 percent of the Nation's 1.03 billion acres of cropland, grassland, pasture and range, suggesting little threat to the Nation's capacity to produce food and fiber.

The increase in farmland conversions to urban development since World War II has been fueled primarily by population and economic growth, which have occurred in conjunction with increased automobile ownership, declines in average household size, and larger average residential lot sizes beyond the urban fringe. The movement of urban populations to suburban locations has also increased development pressures. Urban area has more than doubled since 1960, although total land in urban uses accounted for about 3 percent of U.S. land area (excluding Alaska) in 2002. Developed area—which includes urban areas plus large lot development, development in rural areas, and rural roads and transportation—made up about 6 percent of U.S. land in 2002.

Although these same urban forces have recently driven conversions of grassland as well as cropland, grassland conversions have traditionally been fueled mostly by cropland expansion, particularly in years of strong crop demand. Reductions in grazing land resources nationwide (defined here as grasslands, rangelands, and pasture), however, mask regional variability in land-use coverage over time. In marginal cropping areas, conversions to cropland (and reconversions to grassland) may be influenced by relative returns to crop and livestock production and changes in agricultural policies. In some locations, these trends are countered by Federal cropland retirement initiatives that have resulted in increased grassland area that may be grazed under specified conditions.

Thus, land moves into and out of different uses for a variety of reasons—but not all of the movements are permanent. Movements of land into urban uses, however, tend to be permanent because once farmland is developed, it is typically economically infeasible to revert back to farming. In 1982-97, 13.9 million farmland acres were converted to urban uses, including about 5.4 million acres of prime farmland. However, the share of land converted that was prime (22 percent) was very similar to the share of the farmland base that was prime in 1982 (20 percent), so prime farmland was not disproportionately converted.

Regional Trends

The roughly 445 million acres in cropland uses remained nearly constant nationwide between 1945 and 2002, comprising about 23 percent of U.S. land area (excluding Alaska and Hawaii)—even though surplus production, acreage reduction programs, and other Federal policies induced short-term fluctuations in some regions. Other regions have experienced a fairly consistent downward trend in cropland during the period.

The Northeast and Appalachian regions lost 34 percent (20 million acres) of the cropland that existed in 1945, with every state in these regions experiencing a decline.

Together, Southeast and Delta regions lost 27 percent (13 million acres) of their 1945 cropland base. In contrast, cropland area expanded in much of the West. The Pacific and Northern/Southern Plains regions experienced modest increases in cropland of 2 percent (500,000 acres) and 7 percent (10 million acres) respectively. The Mountain region added 43 percent (14 million acres). Losses in the East are likely due to increased urbanization, while gains in other regions are likely due in part to expansion in irrigation.

While remaining the predominant use of land nationwide, grassland pasture and range have declined from 659 million acres (35 percent) in 1945 to about 584 million acres (31 percent) of U.S. land in 2002. As with cropland, grassland is consistently declining in some regions, most notably in the Northeast and Appalachian regions. Losses in these regions exceeded 60 percent (nearly 15 million acres) between 1945-2002. Causes include natural regeneration of forests and losses of grassland to urban development. Losses in the Corn Belt and Lake States were nearly 50 percent (nearly 18 million acres) during the same period, due partly to nonpermanent conversions to cropland. Grassland losses in the Mountain and Pacific regions averaged about 10 percent (36 and 4 million acres, respectively), due in part to Federal range withdrawn for wilderness or lands reclassified as unsuitable for grazing. The Northern and Southern Plains experienced little change, although State-level data reveal the declines in the four states in the Northern Plains were offset by gains in the two Southern Plains states.

Benefits of Retaining Farmland and Grazing Land

Although as a whole the Nation's capacity to produce food and fiber is not at risk given current development patterns, about 16 percent of cropland is located in metropolitan areas, which produces about a third of the value of U.S. agricultural output.

Some crops are particularly exposed to development pressures. For example, 61 percent of U.S. vegetable production is located in areas subject to urban pressure. Also, public support for farmland protection is based in part on the "non-market" goods it produces, including local food security, scenic landscapes, wildlife habitat, cultural heritage and recreational opportunities.

Grazing lands provide essential forage for the U.S. animal sector. In 1997, roughly 57 million animal-units (AUs) were raised, in part, on forage from grazing lands, accounting for more than 60 percent of AU production on U.S. farms. Grazing lands, where properly managed, also provide important ecological functions. They help to maintain habitat and migration corridors for wildlife, supporting a rich biodiversity of plant and animal species. As grazing lands account for large acreages in many U.S. river basins, they are important in hydrologic processes involving stream flow, aquifer recharge, and water filtration. In addition, grazing lands sequester substantial amounts of atmospheric carbon. Potential gains from cropland conversion to grassland have been considered in the context of U.S. policy on climate change mitigation.

Farmland and Grazing land Protection Policies and Tools

Since World War II, local jurisdictions and nonprofit organizations across the country have adopted an expanding array of programs to protect farmland (including cropland, grassland and rangeland) from development. Programs comprise both regulatory and voluntary approaches. Regulatory approaches include agricultural/rural residential zoning, which designates areas for alternative land uses and defines minimum parcel sizes. In some cases, zoning ordinances may include limitations that restrict use to farm-related activities (farm family and labor housing, processing, and marketing). Right-to-farm laws protect farmers from nuisance lawsuits brought by neighbors objecting to normal farm activities, and sometimes against local government-imposed ordinances that unreasonably restrict agricultural activities.

Voluntary approaches include preferential assessment, which allows jurisdictions to assess agricultural land for property tax purposes at its value in current agricultural uses instead of its full market value for potential urban (developed) uses. In some cases, landowners must forgo development for a specified time period. Preferential assessment laws were first enacted at the state level in Maryland in 1956; by 1989 they had been adopted by all 50 States. Other voluntary approaches include: agricultural districts, in which enrolled landowners maintain the land in an agricultural use for a specified term in exchange for property tax relief, insulation from nuisance complaints and other benefits; Purchase of Development Rights (PDR) programs, in which landowners sell the rights to develop the land; and Transfer of Development Rights (TDR) programs, in which landowners in locally designated "sending areas" privately negotiate to sell development rights to developers who use them to develop at higher densities in locally designated "receiving areas." Use of these incentive-based mechanisms avoids the property rights issues that have hampered regulatory programs.

State Trends in Farmland Protection

State and local governments spend millions of dollars annually on programs to protect all types of farmland from development. For example, ERS estimated that costs incurred through use value assessment programs (a "tax expenditure") range from about $25,000 annually in Wyoming to $218 million annually in California.

Another major outlay is State and county PDR programs. Nineteen States have State-level PDR programs, and at least 41 local jurisdictions operate separate programs in 11 States (AFT, 2004a; AFT, 2004b). The average easement cost in State PDR programs was about $1,400 per acre, and nearly $2,000 per acre in local PDR programs. However, PDR expenditures are one-time expenditures to restrict development over the long term (or permanently).

The most active State and local PDR programs exist in the Northeast. Maryland, Massachusetts, New Jersey, and Pennsylvania account for 76 percent of State-level PDR expenditures to date and 58 percent of the acres preserved to date in State programs. Especially active programs elsewhere include county-level programs in Sonoma County, CA, and King County, Washington.

Nationally, ERS estimates total expenditures across all State PDR programs to average $123 million annually. On a cumulative basis, State PDR programs have preserved nearly 1 million acres of farmland at a cost of nearly $1.4 billion since the late 1970s.

States expend far more through use value assessment: States forgo about $1.1 billion in annual tax receipts through these programs. When capitalized at 4 percent, the present value of U.S. public expenditures on use value assessment is estimated to be $27 billion.

The amount of land preserved through PDR programs represents less than 1 percent of cropland that ERS estimates to be subject to some degree of development pressure (fig. 8). The total cost of preserving cropland subject to development pressure could be as much as $130 billion.

To help counter urban development pressures on farmland, States have begun to implement "smart growth" strategies. Smart growth is a catchall phrase to describe a number of land use policies for influencing the pattern and density of new development. Without prohibiting development outside designated areas, smart growth policies use incentives and disincentives to direct new development to existing urban areas with appropriate infrastructure. PDR programs are one tool used to meet these goals. The effectiveness of smart growth will depend on how the incentive effects of new policies differ from pre-existing policies.

The high costs of permanently preserving farmland through government funded easement programs have generated support for locally sponsored TDR programs, at least where urban development pressures are the major driver in land use change. While the sponsoring jurisdiction faces fewer costs, garnering taxpayer support in areas targeted to receive the urban densities being transferred is difficult, as is balancing the supply of and demand for development rights. Fifty local jurisdictions have passed TDR ordinances, but only 15 TDR programs have individually preserved more than 100 acres.

Many land trusts exist to preserve farmland. These private, nonprofit organizations accept donations of conservation easements on farmland and environmentally sensitive land. The donations benefit landowners in the form of Federal and State (in 10 States) income tax deductions. In Colorado, South Carolina and Virginia, formal markets are developing that allow a landowner who donates an easement but cannot use the State tax credit to sell the unused credit to a third party (Conservation Fund, 2002). In addition, private land trusts often assist in administering public and private funding for land easement acquisition.

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Federal Trends

Despite State and local prerogatives in land use management, the Federal Government is increasingly partnering with local/State agencies and non-profit organizations to protect farmland. Federal efforts to protect farmland began with the Agriculture and Food Act of 1981, which required Federal agencies to evaluate the impact of federally funded programs that converted farmland to nonagricultural uses and to consider alternative actions that would lessen the adverse impacts. Direct Federal involvement in permanent farmland protection did not begin until 1996, when the Federal Farmland Protection Program (FPP) was established to help State, local, and tribal governments purchase agricultural conservation easements to protect prime topsoil. The FPP distributed approximately $50 million during 1996-2001 in matching funds.

The 2002 Farm Security and Rural Investment Act reauthorized the FPP, which was renamed the Farm and Ranch Land Protection Program (FRPP) through Executive rulemaking. FRPP provides up to 50 percent of easement costs on qualified, privately owned agricultural land. It also expanded the set of entities eligible to apply for funding to include nongovernmental organizations (primarily land trusts). Authorized funding increased to approximately $100 million per year for the 6 years beginning in 2002. With this increase, FRPP is now authorized to spend almost as much annually as all State PDR programs combined.

The 2002 Act also authorized the Grassland Reserve Program (GRP), which targets preservation of grazing operations on private grasslands. The program is designed to preserve grasslands for livestock grazing and other uses from conversions to cropland and urban uses. Participating landowners voluntarily sell cropping and/or development rights under permanent or long-term (30-year) easements with a single upfront payment, or via long-term rental agreements (10, 15, and 30 years) with annual payments. An approved grassland resource management plan is required for all enrolled lands, with compensation for the use of approved practices. Program funding averaging 42 million annually ($254 million in total) is authorized over FY 2002-07, with a total enrollment cap of 2 million acres nationwide.

Issues in Farmland and Grazing Land Protection

Whether the benefits of farmland and grazing land protection programs exceed program costs depends heavily on local conditions. Making this determination is complicated by the fact that the public benefits that are lost when these lands are converted to other uses cannot be readily measured in monetary terms. Instead, the benefits can be estimated based on what people are willing to pay to avoid losses associated with farmland conversions—such as the loss of rural amenities when farmland is converted to urban uses. No studies have examined how much people will pay to prevent the conversion of grazing land to cropland, but estimates do exist for willingness to pay for protecting all types of farmland from development. Variation in local conditions leads to a wide range in estimates—from a fraction of a penny to more than a nickel per acre annually—to prevent the development of farmland. One analysis suggests this willingness to pay may exceed $1 billion annually for the U.S.

The costs of protecting farmland include the direct costs of purchasing easements and program administrative costs, as well as the forgone value of urban benefits—and, in the case of grazing land easements, cropping benefits—when land is preserved. Estimates for these opportunity costs are not readily available.

In addition to program and opportunity costs, farmland protection programs have other impacts on government budgets, resident taxpayers, and environmental services. Jurisdictions may save money on public service costs by preserving farmland because agricultural uses require reduced public services relative to residential uses. Nearby residents may benefit, as preserving land guarantees rural scenic views and open space for the length of the easement (which often run into perpetuity). However, farmland preservation may impose costs on potential new residents who may have to live in higher densities elsewhere, face higher land prices, or endure longer commutes if they seek rural land farther from employment centers. In terms of environmental services, agricultural lands under proper management may also provide benefits for habitat, water quality, and groundwater recharge relative to residential uses. How programs are implemented, and the distribution of enrolled lands, will determine the impacts on government budgets, taxpayers, and the environment.

Farmland protection tools vary in their effectiveness at permanently preserving these uses and providing intended benefits. For example, agricultural zoning exemptions allowing higher density residential development are common, and various non-agricultural uses (e.g., schools, utilities, places of worship) may be permitted on agricultural-zoned land, thus limiting the ability to preserve farmland. Agricultural districts may have limited success in areas where landowners commit to not develop only when their land faces little development pressure. Preferential assessment does little to preserve farmland in the long run because the capital gains from developing farmland usually exceed the rollback penalties for conversion. Preferential assessment may even encourage land speculation by reducing developers' costs of holding farmland in inventory.

Because they result in permanent (or at least 30-year) restrictions on nonfarm development, easement programs that purchase development rights (i.e., PDR and TDR programs) are considered to be the most effective in preserving agricultural lands from conversion to urban uses. However, the actual effect of these programs on land development rates and patterns is uncertain. While the number of acres preserved can be counted, these programs may simply shift development pressures elsewhere. Similarly, easements that restrict the conversion of grazing land to cropland have uncertain effects as they may result in increased cropping activity elsewhere. Also, compliance with/enforcement of development or cropping restrictions over the long term may be difficult to monitor.

An often cited argument in support of easement programs is that they help keep farmland in urbanizing areas affordable for new farmers. In theory, once development rights have been sold, the market value of the preserved land will reflect only its value in a farming use, and may be significantly lower than its residential market value. However, a recent study found little evidence that easement restrictions on development significantly lowered preserved farmland prices. It could be that landowners who farm as a recreational pursuit are outbidding "traditional" farmers for the land. No studies have investigated the impact on grazing land prices of easements that restrict both cropping and development rights.

Economic implications and program effectiveness can differ even amongst preservation tools that rely on conservation easements. Some PDR easement programs (due to ranking criteria and agency efforts to minimize costs) yield a pattern of preserved parcels that are widely scattered across the jurisdiction. This raises questions about whether a "critical mass" of remaining farms and grazing land can support farm input suppliers, can encourage the sustainability of remaining farms and thus a continued supply of amenities, and support successful rotational grazing patterns. TDR programs, on the other hand, have often been implemented in conjunction with reductions in allowed housing density (downzoning) of a large area. While many of the parcels in the downzoned area are not technically "preserved," the combination of zoning and TDRs may be effective at preventing widespread conversion of farm and grazing land. It is much more difficult to change zoning on an area-wide basis than on individual parcels. As a consequence, large clusters of "undeveloped" farm or grazing land (the down-zoned area) may be preserved through TDR.

In addition to program design considerations for land preservation, public programs and policies intended to address other issues can influence the effectiveness of easement programs. For example, USDA farm programs have historically supported returns to crop producers through price supports and mitigation of crop risk. Farm support payments have largely been decoupled from production since 1996, but certain payments (such as loan deficiency payments) continue to be linked to crop production. While these payments are not likely to increase farming returns sufficiently to prevent or delay the conversion of land to developed uses in rapidly urbanizing areas, they could have an effect on landowner decisions to convert grassland to crop production. That is, where USDA programs enhance crop returns relative to livestock grazing in marginal cropland areas, program incentives may have the unintended consequence of encouraging grassland conversion to crop production and discouraging reversal to grasslands.