--- title: rent is a perpetuity canonical_url: https://ensurance.app/guide/rent-is-a-perpetuity markdown_url: https://ensurance.app/guide/rent-is-a-perpetuity.md subtitle: "why land is priced like an income that never ends, and how a parcel leaves that contest" category: philosophy --- # rent is a perpetuity *why land is priced like an income that never ends, and how a parcel leaves that contest* A **perpetuity** is an income with no end date. Its value today is the yearly payment divided by a rate, and land behaves like one. A parcel's price is roughly the rent it can earn, capitalized as if that rent will be paid forever. So owning land is more than collecting the check a tenant writes each year. It is a claim on every check after that, and the claim can be sold. Whoever can pay the most for it decides what the land becomes. The soil, the water it holds, the habitat and the flows that cross the property line exist and yield whether or not anyone collects rent on them. [*Ensurance*](https://ensurance.app/?from=guide) is a way to pay a parcel out of that contest so it can be held for itself. It is not the land, and it is not a better landlord. :::johnson **rent is a perpetuity. entrust pays it out and ends it.** Entrust is the end state where a parcel is paid out and permanently protected. The owner is paid the value of the claim, on a dated path, and the payments stop. This is the design. No parcel has reached entrust yet, and it only ever applies to a parcel brought there. [next: three things called rent →](/guide/three-things-called-rent?from=guide) ::: ## what a perpetuity is, in land terms The arithmetic below is illustrative only and describes no real parcel. A field that rents for $200 an acre a year, capitalized at 4%, is worth $5,000 an acre. Now let a use arrive that can pay $2,000 an acre a year. At the same 4%, the same acre is worth $50,000. Real prices also carry expected growth and the option to convert, but the direction holds: the price follows the highest rent a buyer expects to collect. If you own land, you hold a perpetuity. That is legitimate, and it is why most offers that reach you are for a use that pays more than the one you have. ## three things called rent Arguments about rent go badly because the word covers three different things. | what it is called | what it is | what entrust does to it | |---|---|---| | contract rent | The price of possession and use under a lease: cash rent on a field, a hunting lease, a hall. | Nothing. It is legitimate income, and paid use continues afterward. | | economic rent | What land yields beyond the cost of keeping it: water held, soil built, habitat. | The yield stays. What ends is anyone's power to capitalize it into a saleable claim on the land. That claim is the perpetuity. | | rent-seeking | Chasing income from control of something scarce instead of from making anything. | Nothing in general. It runs through the whole economy. Entrust takes one parcel off the table. | A farm tenant's rent is a fair price for real things, as [what cash rent is already pricing](/guide/what-cash-rent-is-already-pricing?from=guide) shows. It is a price, not rent-seeking. When Adam Smith wrote in 1776 that landlords "love to reap where they never sowed," he was describing the second row: the land's own yield, collected by whoever holds the title. *Ensurance* does not end rent, leases or rent-seeking. [Three things called rent](/guide/three-things-called-rent?from=guide) takes each one in turn. ## the contest that never ends A perpetuity puts every acre in a contest with no last round. A wetland has to out-earn the next use every year. [Every unprotected acre has a buyer](/guide/every-unprotected-acre-has-a-buyer?from=guide) lists the bidders. Much of what gets called nature finance keeps the parcel in that contest. Payments for ecosystem services and credits put a number on nature's side of the ledger, which is real progress. But when the payment lapses, a better offer arrives or the land changes hands, the contest starts again. The tools that end the contest on a parcel are old ones. A land trust that buys the fee, or a perpetual conservation easement that buys the development right, also pays the perpetuity once. Entrust is built from those tools. What the design adds is around them: a dated path so the price need not wait on one donor or grant, the remaining debt and financial claims cleared, and care funded afterward. Reformed leases work on the lease itself, and the terms they write belong in any use agreement worth signing. They change the deal between landlord and tenant, and leave a freehold that can still be sold at its capitalized rent. Community land trusts and purpose trusts are a different thing: they already take land out of speculation, which is the same aim. [A better lease is still a lease](/guide/a-better-lease-is-still-a-lease?from=guide) gives them their due and says what they leave open. ## the way out: pay it once Time value of money, which prices the perpetuity, also offers a way out that takes nothing from anyone. Price the owner's claim and pay it, at once or as an annuity over a dated path. The price has to be one the owner accepts, and it reflects what the land could earn in another use. That is why the payout is large and usually spread over time, and an annuity has an end date. At the end of the path the owner has been paid for what they gave up, nothing more is owed on the land, and it has left the market. That path is not rent-free while it runs. Someone has to make the payments, a lender or cost-side holder may keep title or security until they are done, and it needs a willing owner and a willing payer. [The annuity that ends the perpetuity](/guide/the-annuity-that-ends-the-perpetuity?from=guide) works the arithmetic. **Entrust** is the name for the end state: the parcel permanently protected under real-property law, free of the owner's perpetuity, of debt and of private claims on the land. Property tax, any earlier easements and a funded care plan remain. No parcel is at entrust yet, and legal permanence at scale is still to be proven. [Permanent protection has to survive us](/guide/permanent-protection-has-to-survive-us?from=guide) covers what the documents must show. None of this is legal advice. ## after the payout Entrusted land is meant to stay in use. A farmer can farm it or a visitor walk it under an ordinary use agreement or lease, for a term. The place's own governance grants use by application, need or merit. If it sets a fee, that is contract rent paid to the place. The old word for the arrangement is **usufruct**: use and fruits, with the substance kept. In civil-law countries usufruct is a codified right. In most US states it is not, so we use it as a concept built from existing legal instruments. It is not a product, and nobody can sign one today. [Usufruct: the use is given, the land is held](/guide/usufruct-land-access-without-debt?from=guide) sets out the rules. The holder can be BASIN Foundation (the nonprofit that receives land), a local land trust, a group of stewards, or the land itself. That last one is the vision in [sovereign nature](/guide/sovereign-nature?from=guide). The legal route to it is a holder or wrapper with the place as beneficiary, or legal personhood where a jurisdiction grants it. An onchain account does not hold title by being named. [Held for itself, used by many](/guide/held-for-itself-used-by-many?from=guide) covers who holds, who uses and who keeps the holder honest. ## "you moved the perpetuity to the certificate" This objection is partly right. *Ensurance* certificates fund named places. In the design, holders can receive distributions: a share of what the place and the protocol earn. After entrust those are meant to continue in most cases, depending on the asset, the place and its governance. That is deliberate: distributions are part of why people hold a certificate, and holders are how the payout gets funded. None has been paid yet. Ecological claims on a certificate are meant to end some time after entrust, and how long after is not decided. So we do not claim that perpetual income ends. The perpetuity on the land ends. The land's perpetuity did its damage by carrying control, not by lasting. Its holder could sell the parcel, borrow against it, lose it to a lender, or hand its use to whoever paid most. A certificate carries none of that. It has no claim on the land and no say in its use. What users pay is set by the place's governance, within what the place can carry, not by holders. A certificate is not a use right either: one could be built into an instrument, but none is today, and [one token can't be your home, your vote and your visit](/guide/one-token-cant-be-your-home-your-vote-and-your-visit?from=guide) explains why those rights stay separate. By design, care is paid before holders are, and anyone can buy a certificate. ## frequently asked questions ### what is a perpetuity? A perpetuity is a stream of payments with no end date. Its present value is the payment divided by a rate. Buyers price land as if its rent will be paid forever, so the highest-paying use sets the price. ### does ensurance end rent? No. Contract rent stays, including on entrusted land. Economic rent stays, because land keeps yielding. Rent-seeking stays. What ends, on a parcel brought to entrust, is the saleable private claim on the land's income. ### is any land at entrust today? No. Entrust is the designed end state of a policy on a titled parcel, and no parcel has reached it. You can [see the natural assets](/natural-assets?from=guide) that policies are written on. ## read next Start with [three things called rent](/guide/three-things-called-rent?from=guide). Or [explore the places](/explore?from=guide) this is built for. ## sources [Adam Smith, *An Inquiry into the Nature and Causes of the Wealth of Nations* (1776), Book I, Chapter VI, "Of the Component Parts of the Price of Commodities"](https://www.marxists.org/reference/archive/smith-adam/works/wealth-of-nations/book01/ch06.htm) — "love to reap where they never sowed", in the paragraph on rent that begins "As soon as the land of any country has all become private property" [OpenStax, *Principles of Finance*, section 8.1, "Perpetuities"](https://openstax.org/books/principles-finance/pages/8-1-perpetuities) — definition of a perpetuity, and present value of a constant perpetuity as payment divided by required rate of return ## the series 1. [rent is a perpetuity](/guide/rent-is-a-perpetuity?from=guide) — **Read first:** why land is priced like an income that never ends, and how a parcel leaves that contest 2. [three things called rent](/guide/three-things-called-rent?from=guide) — Contract rent, economic rent and rent-seeking, and which one entrust ends 3. [a better lease is still a lease](/guide/a-better-lease-is-still-a-lease?from=guide) — What reformed leases fix, and what community land trusts and purpose trusts already do 4. [the annuity that ends the perpetuity](/guide/the-annuity-that-ends-the-perpetuity?from=guide) — Time value of money as a way out that takes nothing from anyone 5. [usufruct: the use is given, the land is held](/guide/usufruct-land-access-without-debt?from=guide) — An old idea rebuilt: use and fruits, the substance kept, the land never for sale 6. [held for itself, used by many](/guide/held-for-itself-used-by-many?from=guide) — Who holds entrusted land, who uses it, and who keeps the holder honest