We can look northeast to New Brunswick, Canada, to examine a brilliant model of public support for new farmers. For four decades, the New Brunswick New Land Purchase Program has been improving farmers’ prospects for accessing high-quality farms and farmland. The New Brunswick Department of Agriculture acts as a holding company: when farmers identify a farm or area of land that they hope to acquire, the province of New Brunswick will purchase the property and lease it back to the farmer (assuming certain eligibility criteria are met). The program and the farmer enter into a lease-to-own arrangement where 100% ownership interest is transferred to the farmer over a 1-6 year period.
This unique program provides two primary benefits for beginning farmers. It helps farmers, unable to purchase farmland at fair market value, to gradually build sufficient equity to collateralize financing for eventual purchase. It also grants farmers whose situations are tenuous the assurance that farm tenure will be secure so that investments made in infrastructure, soil fertility improvements or other operational efficiencies will be worthwhile over the long term of the farm business.
This assurance is critical in early stages of establishing.
Another added benefit is that New Land Purchase Program is a buffer against property value appreciation. The farmer at the end of a six year lease-to-own period gets to purchase the property for the original price that the government of New Brunswick acquired it for at the start of the period.
Farmers enrolled in the New Land Purchase Program are allowed to defer their lease payments for the first two years of tenure. Beginning the third year, the farmer pays annual lease payments that are credited towards the purchase price. These payments are fixed as a percentage of the initial purchase price. The rate is based on the provincial lending rate; it was 4% at the time of this writing. The farmer agrees to purchase the land in full from the government of New Brunswick by the end of six years.
Lands can only be enrolled if they have not been in production in the 2 years prior to the program. According to Richard Larin, Director of Industry Development Programs at the New Brunswick Department of Agriculture, the original focus of the program was on developing unproductive farmland. (For details about the New Brunswick New Land Purchase Program, see the legislation that created it: Regulation 84-295 within the New Brunswick Agricultural Development Act.)
A parcel of prime farmland at its “critical moment,” the time of transfer when it can be converted to other uses. Programs like the New Brunswick New Land Purchase Program can help support a parcel’s full agricultural “development” potential. (Photo from http://www.rte50.com)
Over the forty year lifespan of the New Land Purchase Program, almost 50% of New Brunswick’s farmers have acquired land through it, according to Larin. The New Brunswick Department of Agriculture continues to re-examine whether or not this or other financing programs are relevant. “We did an extensive year-long review of our programs last year…we ended up with a significant number of changes and modernized our programs,” says Larin. “We’d like to review on an annual basis to make sure that we are meeting the needs of farmers and filling any financial gaps between what is offered by conventional lenders and what is required by farmers.”
Could such a successful model be replicated in Vermont?
New Brunswick is remarkably similar to Vermont. The province (just on the other side of Maine) is about 80% forested, like Vermont. 750,000 people reside there, only a few more than Vermont. The state has a rich mix of mountains, highlands and river/lake valley topography, like Vermont. The agricultural scenes are similar as well. Dairy farming has a prominent presence in the agricultural economies of both places, and more and more success stories of diversified operations are emerging. The average age of farmers in both New Brunswick and in Vermont is on the rise, and land acquisition in both places remains a main challenge for the majority of new entrants into farming.
The Vermont Land Trust (VLT) has already been exploring the “land holding company” model. It currently owns or has a part ownership stake in several properties throughout VT that will be transferred gradually to farmers over the next decade while conservation easements are put into place. In a similar example, VLT recently acquired a farm in Jeffersonville, VT that it plans to hold for the long term and provide secure tenure to new farmers through an incubator program.
Still, more support will be needed to augment this portion of VLT’s Farmland Access Program or other initiatives that mirror the New Brunswick New Land Purchase Program.
The recently published Executive Summary of the Farm to Plate report has identified (p 42) one of the “highest priority financing strategies” for improving the VT food system to be “…Create or leverage an existing intermediary that would raise private investment funds, purchase farmland, and create flexible lease-to-own contracts with farmers. Such contracts would allow farmers’ lease payments to go toward building more equity each year, tie payments to annual farm performance or income…”
Farm to Plate also recommends (p 38, Executive Summary of Strategic Plan) to, “…establish a revolving loan fund in collaboration with the Vermont Land Trust, the Vermont Housing and Conservation Board, and other farmland conservation partners for the purpose of fee purchases of strategic farmland parcels to be conserved (i.e., conservation easements applied), resold to farmers, and/or held as leased incubator farms or for other farming activities.”
Both private and public sectors can lead the way. Regardless of the road forward, Vermont has a lot to learn from our neighbors to the northeast in New Brunswick, Canada.
Special Thanks to Richard Larin, Director, and Gary Stephens, Project Executive, of the Industry Development Programs Branch, with the New Brunswick provincial Department of Agriculture, Aquaculture and Fisheries for providing the bulk of information in this article.