Spencer Heath Archive

Item 1458..

Letter from Heath at 11 Waverly Place, New York City, to Arthur C. Holden, 570 Lexington Avenue, New York 22, New York.

 

See original partial notes for this letter in same notebook as Item 85.

 

August 24, 1949

 

 

 

Dear Mr. Holden:

I was delighted a week or so ago to receive from you the Harper’s Magazine of November, 1931 containing your article on the then critical situation confronting owners of real estate, particularly in New York City. I have long hoped that such clear and sound appraisements as yours would be made and something done about it — something constructive in intent and also practical in operation, — which is to say, the organization of owners to give and provide community protection and services in a broad way and obtaining thereby due recompense and profit from the whole property thus widely and wisely protected and served. Your article is a trenchant diagnosis of the stagnation of what is potentially and is yet to become, under free enterprise and initiative, an enormous regionally organized and capitalized community service organization.

Your diagnosis is keen, both as to the practice of real estate owners individually buying speculative chances, when the bidding is inflated and brisk and then waiting for wind-falls on the one hand and their failure to assemble and organize their properties under productive administra­tion for the sake of sound income on the other hand. Your contrast between real estate and commercial and in­dustrial organization is certainly well drawn.

It is only when particular properties are brought together as a functioning whole and their owners take undivided interests in the whole instead of particular ownerships of separate parts that properties become highly effective for giving services and producing income, their actual values widely known and their certificates of part ownership freely liquid, — as titles to unorganized real estate certainly are not.

Titles to whole and undivided properties, either as single units or as assemblages of lesser units, are naturally less liquid than titles to undivided interests. This is especially true when the assembled properties are skillfully administered for the use and benefit of an occupying or a consuming public and thereby for a wholly legitimate income, profit and appreciation. Such properties, taken as single units or entireties, are far from liquid. The legal or administrative title is single and entire, but where the beneficial or “use” title is not single but held in a multitude of units as single shares then there may be a very wide and active market and all the separate owners enjoy a highly liquid position as you have pointed out.

The modern development of separating the administra­tive title from the use title, the one being single and the other multiple, is what has made possible the enormous production of goods, services, incomes, profit and capital values that has so distinguished the least regulated and relatively free societies of the western world.

Your proposed application and operation of this prin­ciple in the field of real estate holds vast promises for the future. It will enable community-wide assemblages of real estate to function productively for income, as the large organization of other kinds of property has done. It will bring into existence administrative or­ganization adequate for the need of voluntary financing not only of modern community developments designed for individual or exclusive use, such as the housing of pri­vate persons and of particular business organizations. What is even more important, it will open up a field of sound and profitable business operation in all those com­munity improvements, services and facilities that the inhabitants enjoy not separately but in common, such as rights of way and all common facilities and services attached to or incorporated in or supplied through them. For these public properties are no less improvements on the real estate of the community as a whole than is a building an improvement of the particular site on which it stands.

When real estate is assembled and organized for service as other great properties are organized, then its public improvements and services can be likewise vol­untarily financed and administered under the legitimate motivation of income and profit. The non-political com­munity organization will then be performing public ser­vices at a profit. This alone, without any necessary dependence on altruism or public spirit, will be sufficient inducement for it to assume eventually, and still on a self-financing basis, the entire public administration and to create enormous income and capital values thereby. Compulsory taxation will thus be outmoded and abandoned in favor of the productive mode of raising revenue.

Your article approaches the whole subject, it seems, from the standpoint of the poor condition of real estate. It makes sound recommendation for the advancement of organization in that field and it does this with apparently little realization of its profound implications as regards the crisis in civilization that the advancing governmentalization of property and of the functions of society portends.

Within the nineteenth century alone there was, in the Western world at least, a phenomenal development of society, through the free relations and processes of pro­perty and contract, far exceeding the growth of govern­mental usurpation and control. The present-day advance of government against the productive properties and free

processes of society would seem to be due to the failure of free enterprise, so potent in all other fields, to advance, through the organization of real estate, beyond the necessary limitations of private and individual serv­ices into the field of those services that can be provided only en masse for the common participation of the entire population of a community. Until such advance, always potential in society, is hastened or made there would seem to be no alternative to a continuing social relapse towards the monolithic states and slave societies of the entire ancient world.

Your proposal of self-organization for the relief of real estate goes much further than that. It points the way in which society can perform for itself and by its own free processes those public and common services which alone have seemed to afford any ground of necessity for the violence of taxation (the aim and goal of all conquest and aggression) in an otherwise free society. The outlook today is not encouraging, but thinking such as yours is fundamental and creative. Once it takes form in community affairs the institutions of property and contract, of human freedom and abundance, may be depended on to go forward on a phenomenal scale. And it is likely to take place with such rapidity as to parallel the very recent conquest of the air and many similar advances in the natural and physical world. For in all these advances, the voluntary and flexible organization of property has been the practical, sufficient and only enduring means of social availability and of popular instead of privi­leged and exclusive participation in them.

Let us think of the nature of property, of its true nature. When we think of it apart from its social conno­tations, as mere possession, we must think of it as an individual relationship subsisting between a man and a thing to the exclusion of or even inimical to all other men. But when we think of it in its social context we find that ownership implies an acknowledged title — a social authority by common consent, an entitlement, not to exclude but to include others in its benefit or use and to do this by the non-political, wholly social and non-coercive process of distribution, with due recompense for doing so, that is called contract — the only process in which men are related not arbitrarily but rationally and in mutual freedom from aggression one upon another. But this relationship cannot be practiced without refer­ence to some subject-matter and whatever is the subject-matter of contract that is thereby property as between the parties. /Sentence? check original/ Property therefore is the prime essential to all free and productive, all service or exchange rela­tionships among men; and the functional organization of property in higher and higher administrative units is the method of true and enduring social progress and pros­perity. Government cannot forever prevail against this, for freedom alone gives men lifeward growth and advancing length of days.

The possibilities of income from real estate when organized as you have proposed baffle the imagination. Economic tax researchers in New York City since many years ago have found reason to believe that the amount of public capital devoted to community purposes (out of private cap­ital formation) is in all communities about equal to the amount of capital privately engaged in non-community affairs. Yet the net income to bare land, apart from any private improvements upon it, is the only revenue that land owners realize out of this vast capital expenditure for the public improvement of their total properties.

 

The reason for this meager and precarious income is that in their present unorganized condition land owners cannot engage themselves in the general administration of their public improvements as community capital but must rest content with what they receive as mere distribu­tors of any net community advantages (if and when there are any above the disadvantages) that arise from the present irresponsible political administration of the great public capital that is taken forcibly out of pri­vate production. Yet were it not for this essential pub­lic service of distribution sites and resources could have no exchange values at all, and possession or use of them would rest wholly upon political privilege and permission, favor and discrimination.

But when organized real estate assumes further public services, primarily the protection of private capital, then the vast public capital will become self-supporting and highly profitable to real estate through the resulting increased private demand for and utilization of the pub­licly improved sites and resources through which its public will be served.

Private capital being so prospered and the public capital thus made productive and self-supporting, taxation will naturally fall into disuse. The private economy thereby freed of its political burden and bonds will ex­pand doubtless manyfold, and the public economy, organized real estate, administering productively a like amount of public capital, will similarly expand. In these two great systems, each serving and being served by the other through the contractual or proprietary and thereby productive adminis­tration of properties assembled and organized as working capital, private and public, both under concentrated administration but with their units of ownership and voting control widely, perhaps universally dispersed, mankind may yet enjoy the peace and abundance it has for long ages dreamed and the high self-achievements towards which it has as yet only vaguely aspired.

After reading and reflecting on your article in Harper’s I had my article in the Appraisal Journal for July, 1939, copied at the Library. Upon returning your magazine a few days ago in the envelope in which you mailed it to me I enclosed this article of mine, “Why Valuable Land Lies Idle,” and also a further article entitled, “Why Land Value Should not be Taxed,” which was requested but never published.

At the same time I discovered by accident that your covering letter of August 12th had remained stuck in the envelop unknown to me until then. Hence the very consid­erable delay of my reply.

I look forward eagerly to much company and discussion with you and hope that together we may bring some of the ideas and understanding that we have so similarly developed to the attention of some other persons capable of grasping their workable practicality, even if not their ultimate social significance.

 

Sincerely yours,