Evidence Supporting a Potential 2026 Land-Driven Economic Crisis
Evidence Supporting a Potential 2026 Land-Driven Economic Crisis
Historical Cyclical Patterns
The 18-year real estate cycle theory has shown remarkable consistency throughout modern economic history:
- The 2008 housing crash + 18 years = 2026
- Previous major U.S. real estate crashes occurred in 1989–1990, 1973–1974, 1954, 1935 — showing this pattern holds
- Economist Fred Harrison accurately predicted both the 1990 recession and 2008 crash using this cycle theory
Current Land Value Surge
The Current Data Supporting a 2026 Land Price Crash
The evidence for a potential 2026 economic crisis triggered by land speculation is compelling:
1. Historical Cycle Analysis
- The 18-year real estate cycle theory shows remarkable consistency throughout history
- Previous major crashes occurred in 1989–1990, 1973–1974, 1954, 1935, and 2008
- If we count from the 2008 housing crash + 18 years = 2026
2. Surging Land Values Despite Economic Warning Signs
Land values have increased dramatically since 2020:
- Agricultural land values jumped 5% in 2024 alone, hitting a record $4,170 per acre
- Residential land prices have surged 82% from January 2020 to February 2025 in California
- Home price-to-income ratios have reached record highs, with the national average at 4.7, and states like Hawaii (9.1) and California (8.4) seeing extreme imbalances
3. Credit Conditions Enabling Speculation
- The Federal Reserve cut rates by 1 percentage point in 2024 (from 5.25–5.50% to 4.25–4.50%)
- This loosening of monetary policy is creating conditions similar to previous speculative cycles
- Further cuts are projected through 2025, potentially fueling more land speculation
4. Unaddressed Structural Issue
- The fundamental problem that I will address later on — lack of land value taxation — remains completely unaddressed
- Without this structural reform, there’s nothing stopping the cycle from repeating again
- Current tax policies still encourage land speculation rather than productive use
5. Housing Affordability Crisis
- In 2022, the median home price was 5.6 times higher than median household income — the highest on record
- This ratio has worsened significantly since 2019, when it was just 4.1
- This disconnect between housing costs and incomes is precisely the kind of imbalance that precedes major corrections
My Assessment: Why 2026 Is Likely for a Crash
Looking at all this data together, I believe a 2026 land-driven crash is highly plausible. Here’s why:
1. We’re following the same pattern as previous cycles: The housing market recovered from 2008, entered a growth phase, and is now entering the speculative phase where prices detach from fundamentals.
2. The post-pandemic surge in land values matches historical pre-crash patterns: Just as speculation shifted from land to stocks before the Great Depression, we’re seeing investment capital moving between asset classes now.
3. The price-to-income ratio is flashing warning signs: When housing becomes as disconnected from incomes as it is now, it signals an unsustainable bubble.
4. Monetary policy is enabling speculation: The Fed’s rate cuts, while intended to support the economy, are creating conditions where speculative investment in land becomes more attractive.
5. The structural reform needed to prevent the cycle hasn’t happened: Without land value taxation to capture the unearned value, there’s nothing preventing the same cycle from repeating.
If Henry George’s theory is correct — and the evidence suggests it is — we’re approaching the peak of the land value cycle. The coming year could see further speculation before a significant correction in 2026, absent any major policy intervention.
The fundamental problem: Unaddressed Structural Issue (and its solution)
There is a good deal to be learned by studying how depression triggers aligned in the past. A perfectly good example would be the “Great Depression”.
So, to understand why that event happened in the 1930s, one must look at what occurred during the years building up to the crash.
A significant amount of the credit made available during the 1920s went into land speculation. A good primer on what occurred is found in the book “Only Yesterday” by historian Frederick Lewis Allen. Not only did investors become captured by the frenzy of the Florida land boom, but this same frenzy occurred in many cities in response to population increases that triggered a significant increase in the demand for both commercial and residential land.
An agricultural land boom also occurred during the First World War, during which time farmers borrowed heavily to expand their land holdings and production. A few years were required after the war ended for European farmers to recover, but by the mid-1920s global production exceeded demand, prices fell, farmers defaulted on loans when government guarantees were removed, and rural banks failed by the hundreds.
As the land boom crashed, investors shifted heavily into the stock market, driving up prices well beyond what any fundamentals supported. Thus, by the end of 1929 the U.S. economy was stressed across almost all areas of production as well in the financial markets. To be sure, imprudent bank lending deepened the crash and lengthened its duration, but it was a crash in the making because of the failure to utilize tax policy to tame the credit-fueled, speculation-driven land markets. A few economists (e.g., Harry Gunnison Brown, Scott Nearing and John R. Commons) had argued the case made in the late 19th century by Henry George, who showed that cyclical booms and busts would be tamed only if the full or nearly-full public capture of the potential annual rental value of land and of rents from other sources (e.g., the broadcast spectrum) became public policy.
Harry Gunnison Brown was joined over the succeeding decades by a small group of economics professors who continued to make Henry George’s case. One could argue that recessions that began again following the end of the Second World War would have been even worse if local governments did not capture some land rent via the taxation of real estate. However, as land prices climbed property assessments rarely kept pace. This made speculation in land an even more profitable investment.
Relying on out-of-date assessed valuations rather than current market values created a serious analytical problem for government statisticians. They simply did not understand that any increase in the price of land is inflationary and did not include such increases in their calculation of inflation. Another failure has been to accurately calculate the annual aggregate rent that is privately captured as unearned income (whether imputed or actual). Since the administration of Ronald Reagan, the federal government has not monitored land prices. The figures utilised in the econometric models relied upon by the Congressional Budget Office and the Federal Reserve are around 5 percent of the actual potential rent in the economy (see Joseph Stiglitz or Mason Gaffney on this particular problem).
I offer here a very rough estimate of the rent attached to just one part of the economy, the residential property market. At mid-2020, the median price of a single-family property was around $295,000. There are about 140 million existing housing units in the United States. If we assume a fairly conservative median land-to-total value ratio of 35%, this means that the aggregate residential land value in the U.S. is $103,250 per property, multiplied by 140 million = $14,455,000,000,000 ($14.455 trillion). Economic theory tells us that this aggregate land price occurs because of the capitalization of the net amount of rent that remains in private hands after taxation. If most or all of the rent were captured via taxation there would be nothing to be capitalized and land prices would fall to very close to zero. What the rent fund might be depends on the discount rate. If we assume that investors will invest in land if they can obtain an annual increase of 5%, the the rent fund would be calculated as follows: 5% of $14.455 trillion = $722.75 billion of rent just for the land under existing residential buildings. Add in the number of vacant residential lots around the U.S. and this figure will increase considerably.
Tragically, the public capture of land rent never became public policy, allowing the land market cycle to operate from boom to bust. It is on schedule to crash again in 2026.
