Conservation Easements: a Good Investment for the U.S. South
With forests being converted at a rapid pace in the South, conservation easements are one of the most promising approaches to conserve and sustainably manage them. A conservation easement is a voluntary agreement in which a landowner agrees to sell or donate the development rights to his or her land. In contrast to some traditional approaches to forest conservation, conservation easements can prevent forest loss while still allowing landowners to own their land. This has made conservation easements an increasingly popular land conservation tool in the United States. While the use of conservation easements continues to grow nationally, adoption lags behind in the South (Figure 1).
WRI’s new issue brief, “Gaining Ground: Increasing Conservation Easements in the U.S. South,” released today jointly with the American Forest Foundation, aims to increase the use of conservation easements in the South by helping landowners, conservation professionals, and conservation funders understand the unique benefits that conservation easements provide, key barriers to their implementation, and how to best address those barriers.
Benefits of Conservation Easements
Conservation easements are particularly suited for private landowners and provide them with five major benefits:
They allow private landowners to retain ownership of their land. The land, even though conserved, does not become the property of the government or land trust.
They provide flexibility. Agreements are individually negotiated and can be tailored to meet the needs of the landowner while at the same time achieving specific conservation goals.
They do not necessarily “lock up” the land from being used. For example, working forest conservation easements allow landowners to harvest timber from their land if they follow a forest stewardship plan.
They offer financial benefits. Landowners who donate or sell a conservation easement at a bargain rate, meaning lower than market rate, can be entitled to a number of tax benefits.
They open the door for access to revenue from other ecosystem service markets. For instance, landowners can earn money for carbon sequestration that requires a guarantee (known as “permanence”) that land will not be developed.
Funders, like foundations, and conservation organizations can also benefit from conservation easements. For instance, easements offer a cost-effective way to place land into some form of protected status, which is useful to meet particular conservation goals. Furthermore, acre per acre, an easement typically costs 40 percent less than buying the land “fee simple” (through an outright purchase).
How to Increase Conservation Easements in the U.S. South
Despite the advantages, conservation easements have been relatively slow to expand across the South. For instance, although the South constitutes approximately 37 percent of the private land area in the United States, it accounts for only 18 percent of the country’s total conservation easement lands. However, there are several strategies that can help turn this trend around:
1. Increase financial resources and capabilities of land trusts. Land trusts in the South need greater and more timely access to capital and other resources (such as an increase in staff) to be able to more effectively purchase conservation easements. Some steps that would help address these constraints include:
Increase flexible dollars for easement purchase. High net worth individuals, foundations, and other institutions could increase grants or loan capital to land trusts so that the latter could more proactively—and quickly—purchase conservation easements or cover costs to accept donated conservation easements.
Increase the number of conservation-related ballot measures. Conservation groups could continue working to increase the number of state or county conservation easement-related ballot measures, which can be designed to raise funds to purchase conservation easements or cover transaction costs on donated easements. From 1988-2010, conservation-related ballot measures raised approximately $7.5 billion for conservation.
2. Strengthen landowner education to correct misconceptions about conservation easements. Land conservation organizations and other professionals can help improve landowner education about what easements are, their benefits, and their implications. This information is critical for dispelling misconceptions and achieving greater enrollment in conservation easement programs. Some “best practices” for strengthening education include:
Providing direct and personal contact. Although prospective landowners can be reached through a variety of means, most landowners prefer to speak with an individual directly and are most receptive to information that is provided by other landowners or by their local representatives.
Be clear on the benefits of the terms and conditions of the conservation easement.
Flexibility. Emphasize the flexibility associated with conservation easements and that landowners can prioritize terms and conditions most important to them, such as wildlife habitat management or timber management.
Continued land management. Articulate that economic activity on the land, such as sustainable timber harvesting, does not necessarily stop simply because the development rights are sold or retired as part of the conservation easement.
Financial terms. Clearly outline the tax and other financial benefits provided by a conservation easement. Likewise, be clear on how the level of restrictions in the easement can determine the price at which one can sell the development rights.
3. Increase financial benefits and contract length flexibility. Several strategies exist for increasing the financial benefits of placing land under conservation easement, including:
Bridge financing. Revolving loan programs allow land trusts to provide cash advances, low-interest loans, or no-interest loans to help landowners with the costs associated with preparing a conservation easement for sale or donation.
State tax credits. State income tax credits for easements1, sometimes called “conservation credits,” complement federal tax incentives and can provide an additional financial incentive to landowners. To-date only 5 of the 13 southern states have dedicated tax credits for conservation easements: Florida, Georgia, North Carolina, South Carolina, and Virginia.
Transferable tax credits. Transferable tax credits for conservation easements allow landowners who have little or no taxable income to transfer tax credits from a conservation easement to another party (for money) who has more taxable income, and can therefore benefit more from a tax break. Only 3 of the 13 southern states offer a transferrable tax credit program: South Carolina, Georgia, and Virginia.
Conservation easements are one of the most promising approaches for conserving southern forests and ensuring they are managed to provide a variety of ecosystem services, such as erosion control and water flow regulation.
The challenge for conservation organizations and their funders going forward is to address the resource and awareness obstacles that easements face, on both the demand and supply side. By doing so, the South can better realize the potential of conservation easements to conserve forests and other ecosystems.
To access this brief and other issue briefs in the Southern Forests for the Future Incentives Series, and to learn more about southern U.S. forests, visit: www.SeeSouthernForests.org. Developed by WRI with support from Toyota, this interactive site provides a wide range of information about southern forests, including current and historic satellite images that allow users to zoom in on areas of interest, overlay maps showing selected forest features and drivers of change, historic forest photos, and case studies of innovative approaches for sustaining forests in the region. To order free hard copies of this issue brief, and other briefs in the Southern Forests for the Future Incentives Series, please contact us.
A Conservation Credit is an income tax credit available to landowners who voluntarily preserve their land through the donation of a conservation easement and/or fee title. The donation must protect conservation values (as defined by individual states), and must be made to an entity qualified to hold such property interest by the terms of the legislation creating the credit, such as state and local governments or 501 (c) (3) land conservation organizations. Most states in the United States allow both individual and corporate taxpayers to claim tax credits (Pentz 2007). ↩