Daily Mail explains how the community's response to events dictate land values

People seem to assume that land is somehow 'capital' and that it has intrinsic value, which by implication belongs to, or was even created by, whoever owns it at the time. The physical land itself is of course just there, and has little intrinsic value: the real value is the rental value of particular locations, which are of course created by 'the community' and how they respond to circumstances.

This concept is best illustrated when there are extreme events, such as Hurricane Sandy. Here are a few snippets from the Daily Mail:

Exhibit One

Profiteering hotels and landlords make a quick buck from Sandy charging $700 a night for a single room in New York.

Exhibit Two

Police make arrests as frenzy for free gas proves too much for thousands of desperate drivers in New York's outer boroughs. Police had their hands full in the Crown Heights neighbourhood of Brooklyn as the promise of $10 in free FEMA gas caused line jumpers to clash with the police leading to arrests.

Many gas stations still closed from lack of fuel. New York Gov Andrew Cuomo announced today that 28 million gallons of fuel will be delivered to stricken tri-state region in next few days.

Exhibit Three:

Misery for 2.5 million STILL without power after six days as lawlessness and fear take over New York's outer boroughs. Residents claim they are the 'forgotten victims' of Sandy. Also say that lack of power and law enforcement means more looting and violent crime.

Those in stricken areas stockpiling weapons like kitchen knives, machetes, and bats to protect themselves. Coney Island residents say they are forced to 'scavenge for food like animals'. Power unlikely to be returned to Brooklyn, Queen's and Staten Island until sometime next week.

Exhibit Four:

'The light of our lives!' Video captures the ecstatic moment New Yorkers discover their power has been turned back on. Electricity returned to customers in the East Village, West Village, Lower East Side, Soho, Madison Network and Chelsea...

Thousands of residents in Brooklyn, Queens, the Bronx and Staten Island were also rejoicing as Con Edison restored their power on Friday evening

The first example shows how all land rent is pure ransom value. The lucky hotel owners in the least affected areas made some handsome short term gains simply because bad luck hit 'everybody else'. Once everything is sorted out, the rents they can charge will go down again, and that potential rental value will be shared by land owners in the affected areas again.

Then ask yourself, what would happen to land values if the electricity stayed off; the water and sewerage systems stopped working; the petrol pumps ran dry; the tube and vehicle tunnels remained flooded; and law and order broke down?

Nobody would want to live there any more, and without all these services and without people being prepared to respect each other and each other's property, land values would quickly fall to nil.

Now, out of all these things which need to happen to get New York and New Jersey back on track, what part do land owners play (in their capacity as landowners)?

Whether they are owner-occupiers or absentee landlords living thousands of miles away, there is nothing they can do (or will do). They just have to sit back and keep their fingers crossed that everybody else sorts things out, and then they can start collecting rent again, or sell their homes for vastly more than the rebuild cost/value of their actual bricks and mortar.