The RSF staff discovered the following note in a letter by Elbert Segelhorst in December 2003. He describes a “back of the envelope” calculation of national economic rent that is about 6 times higher than the official statistics say it is. He got approval from some Columbia University economists for his method. We recommend you talk to some economists in your area about this and report to us your findings.
“I find it useful to explain the very important role of economic rent in the following manner:
a. The average person spends about 1/3 (or more) of his or her personal income on housing (as either owner or renter). On average, 1/3 of the assessed property’s value is that of the unimproved site–the land value.
Consequently, 1/3 x 1/3 = 1/9 of national income is being paid to the owners [or mortgage lenders] of these residential sites.
b. The market value of land in all other uses (e.g., commercial, industrial, transport, government, etc.) is approximately equal to the residential land value, or 1/9 of national income.
c. Combining residential and all other land uses, the total amount spent on site rent is around 2/9 of national income, or 22%. I made this presentation to five fellow Ph.D’s from Columbia University in NYC in June 2003, and my estimate was accepted.”