With or without Article XII, if land is truly important to people to keep within their families and to be able to pass down to future generations, they would not sell it. For that matter, they might not even lease it – or they might be more discriminating about who they lease it to, and it might not be the first poker parlor or auto shop that knocks on their door. They would see their land for the asset that it is, live on it, cultivate it, and develop it with care, and they would raise their children to appreciate it as deeply as they do.

If, however, people want to lease or sell property, they will – with or without Article XII. But with Article XII in place, and the economy in decline, their options for potential leasees are fewer and farther between, their options for selling are limited to the few wealthy individuals and families of Northern Marianas descent who can afford it, and the value of their land is less than what it would be in a free market.

It might help to mitigate the fears that some people have about lifting land alienation restrictions in the CNMI if a land use plan, zoning laws, and environmental protection laws were strictly enforced. These measures would help guide development, improve property values, protect the best aspects of village and residential life, attract and retain long-term investors, and enhance our quality of life overall. Greater public education and honest dialogue about the value of land, the importance of properly managing it, and the potential impacts of changing Article XII versus the impacts of keeping it as it is, would also go a long way towards alleviating the apprehensions that people have about the issue one way or another.

My personal belief is that Article XII will eventually have to be changed – either repealed at once, or gradually phased out as people become more and more comfortable with loosening land alienation restrictions here. But I also know that the future of Article XII is not up to me, or up to any individual for that matter. This is a decision that will have to be made by the entire community, and there should be ample education and dialogue in the coming years so that citizens will be able to make informed decisions according to their conscience and in the best interests of the community when the issue comes up for a vote.

Click here for some other comments that have been made over the past months regarding this issue.

Hey Tina,

I always wonder why our economy is declining very fast. Until few years ago a bright light went on and that was article 12. Leaving in the states almost nine years I realize that big business purchase land instead of leasing it. No business want to lease a land for millions of dollar and at the end did not make any profit out of it! Most business wants to buy the land and when their business goes in trouble they can sell the land and get their money back. I know that article 12 is the key issue of our economy decline and I could be the boom of the economy here too. We the people don’t have to get ride off article 12; instead we put exemption on article 12. For example the distric of garapan can have a exeption to have the option to sell their land or lease it, and everyone out of the garapan article 12 applies. If you confuse let me use that states were they have city limits and county limts. both jurisdiction have different government issues like property tax. If you leave in the city you pay higher property tax, firefighter retierment, city taxes and if you leave in the county you pay less property taxes and don’t have to pay any firefighter retierment, etc… That all I can think of about article 12 and I hope I did not confuse you

There are many ways that Article 12 negatively impacts everyone that for some reason is not clear to many people living here.
For Example:
1. Construction Loans and Mortgage interest rates: Currently construction loans are not availabe through the local banks due to the fact the land is not real collateral to a bank either, and there is no workman’s lien law in place to protect banks. Furthermore, in the few instances when banks are willing to make mortgage loans, they have to charge high interest and fees as these loans are not packageable and sellable.
2. The existence of Article 12 depresses all land values: Large investors are not interested in leases. The property goes on their books as a debit and not an asset and as the lease runs the value decreases. This affects the economy and the overall land value situation.
3. Leasing still available: The elimination of Article 12 does not stop anyone from leasing and not selling their land. This is a transaction between the seller and buyer.

Yes, I do agree that Article XII is not helpful for international businesses in many ways.

Rip mentions that the companies cannot leverage themselves because of this stringent limit on credit. That is indeed true, because companies cannot collaterize their real estate (land and permanent fixtures) for a business loan. However, I want to even further extend the point and state that Article XII puts a glass ceiling on maximum investment in the islands.

When an investor evaluates a project, he or she calculates the net present value of the project, simply the free cash flow of the company discounted to the present value. The discount value is the weighted average capital cost of capital that takes into consideration of beta of equity and debt. Since every project’s terminal value ends at 55 years, whereas project’s payback period can be extended to infinite years with gordon’s growth model for projects in other countries, it really puts a hamper on investment growth in the CNMI. To put it simply, every investment must pay back for itself within 55 years, and this casts a dark ceiling over the maximum amount of investment in CNMI. This drawback puts a significant limit in the dollar amount of investment and denies any long term investment for the economy. And, perhaps this is the reason why CNMI has always suffered from flea market investments, not something long term, stable, and permanent.

Perhaps one other point I want to mention (not perhaps, since I am mentioning it), is that Article XII creates an assymetric market of buyers and sellers in the real estate market. What that means is the number of buyers and sellers in the CNMI resident market is much smaller than the open market where there are lessors and lessees. It would be interesting for an economic commission to further undertake a study on whether the price to lease is actually higher than price to own land in the CNMI, as economic model would suggest. The more liquid market with more capital should provide more money for the value of land.

Another interesting thing to assess is the correlation of Asian stock market indices and the CNMI’s economic growth. Does CNMI catch a cold when Asia sneezes? Then, if so, instead of blaming ourselves for the economy, can we perhaps diversify our economic development so that when the Asian economy suffers from a flu, we can still be robust?

Say we have an island that has coconuts and fish. First scenario is when there are alot of coconuts, you catch a lot of fish. The second scenario is when there are few coconuts, you catch alot of fish (and vice versa). Of course, you would want to live in the second island, not the first. That is the crux of diversification, something that Saipan direly needs, in my humble opinion.

while i understand why businesses and others would want to own the land in which they invest in, im not so sure that repealing that provision in art.XII would be for the best interest of the people of the cnmi. the whole intent of the art.XII provision limiting ownership of land in the cnmi was to prevent the marginalization of the islands’ residents, as what has happened to the chamorro of guam and to the native hawaiians, and the preservation of our unique islands and culture.

there had been some debate over this in the local media recently, mostly by those not of nmi descent calling for the repeal of the law. some of the arguments were even demeaning to locals, going so far as to belittle our value of our lands as integral to our culture as being “feudalistic” and “unrealistic”. doing so only heightens the lack of understanding, on their part, about the sensitivities within our culture with respect to our lands. but i believe that those who argued for this provision recognized the uniqueness of the islands’ location and culture and sought to prevent the repeat of the mistakes made with guam and hawaii. they believed that there was a compelling interest to preserve what made our islands and our people unique. (after all, where else could you find taga’s footprints, the latte stones of tinian and rota, the taotao-monas, and other aspects of chamorro culture, not to mention the literal bones of our loved ones lost in wars past?) unlike the many u.s. expats, filipino, chinese, japanese, korean, bangladeshi, etc., there isnt anywhere else in the world in which the people of the islands could go back to to be chamorro if their lands were lost to foreign investors.

so, while i understand the desire for that security in owning the investment, i dont believe that restricting ownership necessarily precludes a business from recouping its cost. that is actually dependent on whether or not they have a marketable product, and whether or not they have access to a customer base willing to spend on their product. i believe that most businesses have their return on investment planned into the first few years their business is in operation. and even if a business doesnt plan to fully recoup it’s investment until much later, that doesnt mean they wont be making a profit in the meantime. remember, they have 40 years or so to recoup their cost! (and just for argument’s sake, that works out to $25k/yr for every million invested. ive left out interest and other factors just for simplicity.)

i know that there are other factors to consider in the debate, such as equality to those born here but not of nmi descent. (this is the main issue in my uncertainty on which position to take.) and i am open to some kind of compromise to address that.

i also concede the points regarding the financial aspects, debt, equity, collateralization, credit leverage, etc. as i said earlier, im not a financial expert.

but to emphasize those points is to miss the more imprtant, overiding point altogether: when it comes to a culture as unique as the chamorro/chamolinian culture, and a land and history as unique as the nmi’s is, sometimes money isn’t the most important thing to consider.

just my humble .02

MANY OF THE NORTHERN MARIANAS CHAMORRO AND NORTHERN MARIANAS CAROLINIAN HAVE INTER-MARRIED INTO OTHER CULTURES AND HAVE CHILDREN WHO ARE OF MULTIPLE CULTURES. SOME OF THESE CHILDREN MAY HAVE LESS THAN ¼ NORTHERN MARIANAS CHAMORRO OR NORTHERN MARIANAS CAROLINIAN BLOOD AND FALL BELOW THE BLOOD REQUIREMENT TO OWN LAND, THESE CHILDREN CANNOT OWN PROPERTY. WITH THE ¼ BLOOD REQUIREMENT TO OWN LAND, ARTICLE 12 IS A SILENT ENFORCER IN DEMANDING THAT A NORTHERN MARIANAS CHAMORRO AND NORTHERN MARIANAS CAROLINIAN MUST MARRY ANOTHER NORTHERN MARIANAS CHAMORRO AND NORTHERN MARIANAS CAROLINIAN IF THEY WANT TO CONTINUE TO OWN PROPERTY. IT IS HIGH TIME TO REMOVE A LAW THAT SILENTLY REGULATES PEOPLES LIVES AND HOLDS THEM HOSTAGE.

HAS ARTICLE 12 PROTECTED THOSE OF NORTHERN MARIANAS DESCENT? MANY FAMILIES HAVE SIGNED LEASES FOR OVER 50 YEARS AND HAVE EXHAUSTED ALL THE MONEY GIVEN TO THEM FOR THE LEASE. UP TO TWO GENERATIONS CANNOT TOUCH THEIR FAMILY PROPERTY AND MAY NEVER BENEFIT FROM SUCH PROPERTY. WITH THE MINDSET THAT THE LAND DEAL IS A LEASE AND NOT A SALE, THEY HAVE HANDLED THE TRANSACTION UNWISELY SCARRING UP TO TWO GENERATIONS AFTER THE TRANSACTION. HAD IT BEEN AN OUTRIGHT SALE, PERHAPS THE MONEY MAY HAVE BEEN SPENT WISELY KNOWING THAT THERE WOULD BE NO ADDITIONAL GAIN FROM THE PROPERTY IN THE FUTURE. ALTHOUGH THE PROPERTY EVENTUALLY WILL GO BACK TO FUTURE FAMILY MEMBERS, WHO CAN GUARANTEE THAT THEY WILL HAVE ¼ NORTHERN MARIANAS CHAMORRO OR NORTHERN MARIANAS CAROLINIAN BLOOD.

ADDITIONALLY, THOSE WHO WANT TO SELL LAND ARE LIMITED TO BUYERS OF CNMI DESCENT ONLY. WITH A LIMITED AMOUNT OF BUYERS THE LAND OWNER DOES NOT GET THE APPRAISED VALUE (TRUE VALUE) OF THEIR PROPERTY AND ENDS UP SELLING THEIR PROPERTY AT AN EXTREME DISCOUNT. 1,000 SQUARE METERS GOING FOR $15,000 IS NOT UNHEARD OF.

THERE ARE MANY INDIVIDUALS WHO HAVE MADE THE CNMI THEIR HOME FOR OVER 20 YEARS AND HAVE CONTINUED TO LIVE IN TEMPORARY HOUSING ARRANGEMENTS (RENT/LEASE). MANY OF THESE INDIVIDUALS HAVE HELPED THE ISLAND, HAVE HAD CHILDREN BORN AND RAISED IN THE CNMI, AND HAVE NO OTHER PLACE TO CALL HOME. IN DIFFERENT DEGREES AND LEVELS, SOME EVEN RESPECT AND CARE ABOUT THE CNMI MORE THAN THOSE WHO FALL WITHIN THE ¼ BLOOD REQUIREMENT. IT IS TIME TO OPEN THE DOOR AND GIVE THEM THE OPPORTUNITY TO REALLY CALL THE CNMI HOME BY GIVING THEM THE ABILITY TO OWN A HOME, WHAT MANY INDIVIDUALS DREAM AND HOPE FOR.

FOR INVESTORS ARTICLE 12 HAS CHANGED THE VALUE OF LAND. WHEN AN INVESTOR LEASES PROPERTY, THE PROPERTY DEPRECIATES AS EACH DAY GOES BY. WHEREAS, IF THE INVESTORS HAD THE ABILITY TO OUTRIGHT PURCHASE THE PROPERTY THE PROPERTY HAS THE ABILITY TO APPRECIATE IN ITS VALUE.

THERE IS GREAT WORRY WITH THE ELIMINATION OF ARTICLE 12 THAT EVERY NORTHERN MARIANAS CHAMORRO AND NORTHERN MARIANAS CAROLINIAN WILL SELL OFF THEIR PROPERTY TO SO CALLED “OUTSIDERS.” ARTICLE 12 SERVED ITS PURPOSE IN THE DAYS WHEN PEOPLE WERE NOT VERY EDUCATED ABOUT PROPERTY VALUE AND PROPERTY TRANSACTIONS. AT PRESENT, THE LARGE MAJORITY OF NORTHERN MARIANAS CHAMORRO’S AND NORTHERN MARIANAS CAROLINIAN’S ARE EDUCATED AND ARE EXPOSED TO RESOURCES THAT ASSIST IN PROPERTY VALUATION AND PROPERTY TRANSACTIONS.
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WE NEED TO BE ABLE TO DECIDE HOW WE WILL HANDLE OUR OWN PROPERTY. SURE WE MAY FIND A FEW AMONGST US WHO WILL SELL EVERYTHING UNDER THEIR FEET, BUT THE MAJORITY SHOULD NOT BE RESTRICTED BECAUSE OTHERS CANNOT THINK FOR THEMSELVES.

TIME FOR CHANGE. LETS BEGIN BY ELIMINATING ARTICLE 12 (ARTICLE XII).

Just because you CAN sell your land does not mean you HAVE to.

Just because you CAN sell your land does not mean you CAN’T lease it.

If a family is need of money or is moving away or has excess land they can right now opt to sell it. Many people who owned land have sold it off. The only thing article XII has done is limit who they have been able to sell their land to and lowered the value at which they have sold their land. How is this a good thing for land owners in the CNMI. How does this protect the land for their children? I don’t understand the logic.

I have mixed feelings about Article XII–I’m not sure I would want to see it repealed because I do believe that indigenous control of the land is essential to maintaining the culture, and money and investment can’t substitute for that.

But I have to say that land titles and ownership is something of a mess with all of the 40 and 55 year leases. Generations down the line don’t know they own a reversionary interest after the lease expires. And investors end up dealing with subsequent generations of heirs, not a single owner. It’s already getting very tangled.

Saipan Writer,

I am aware of several transactions where land owners sell their reversionary interests to other NMDs.

The big problem we are going to be faced with is that many have relatives who have children who are below the 1/4 percent blood requirement and cannot inherit their parents property should something happen to their parents.. As a diverse community with inter-marriage existing with both the Carolinians and Chamorros, 2011 would be a good time to address Article XII to protect the children of these marriages.. I for one would hate to have to tell my children that they have to marry indigenous in order to retain family property..

i agree with all of you on the blood lineage requirement. i know that it will, scratch that, has already become a huge dilema for those who have not married an NMD.

but the notion that allowing people to sell their land outright will somehow inspire them to spend their money more wisely is far fetched. to paraphrase forrest gump, “unwise is as unwise does.” at least with the restiriction on foreign ownership in place, there is a guarantee that leased lands will return to the family and the heirs. sold land to other NMDs and heirs not of 1/4 blood are another story altogether.

my primary concern, john, and im assuming here that you are one of the lucky few who has more land than they can use, is with those of us unlike yourself, who do not have any land yet. many have and continue to wait for years for some sort of homestead allocation that will probably never come. our public lands continue to be leased out by our government without any input from the public as to its use. all the while, there are those of us who wait for their turn to get land, not knowing if we ever will.

now, as i said earlier, i aknowledge that there are shortcomings with the present system. but that system goes a long way to helping ensure that our chamorro people don’t wind up heading the way of many of hawaii’s native hawaiians, forced to leave their native lands due to unaffordable land prices.

you guys have valid points as to why art.XII should be revisited, and i believe that i also have valid points as to why it should remain in place. but perhaps a compromise could be found to appease both sides. maybe we could open all private lands to be bought and sold freely to any investors regardless of blood lineage, and require that all public land be reserved for current and future homestead allocation. that way, people like yourself john, will be free to sell-off any land you feel you dont need, and those of NMD currently without any land will still have an opportunity to get some land to build a house on and raise their family. what do you think?

Yes, if one is not free to do with his land as he pleases, then does he truely own that land?

If Article XII continues, might there not come a time when all CNMI lands will be owned by individuals from a few rich, influential local families? Wouldn’t it be surprising if these same individuals then used their influence to insure that Article XII is repealed, enabling them to sell that land at ten times what they paid for it?

The few rich influential families have it already, and are buying up more on the cheap. Wall Street couldn’t come up with a better scam than this because Wall Street can’t upend the law of supply and demand. They will have a virtual arbitrage once they end this disastrous law.

I think Article 12 is a local issue that should be decided by our voting population.

For myself and my family, I should be in favor of the status quo regarding land because I have long termed leased four properties recently that could not have been touched for what I acquired them for, except for the protectionist laws regarding land ownership. Barring a change, that situation will worsen. An auction is generally an accurate way to determine supply – demand in terms of value. Local auctions for a fully concrete home with ocean view currently bring something less than 25k. I say something less than, because those properties seldom attract open bids due to lack of financing. Specifically, I have acquired a 4k sq ft 6 bedroom, 4 bath home with ocean view for 55k, a 15 unit Beach Road building for 53k, a ANAKS condo for 55k, and 2 plus acres of superb western ocean view property for 5 bucks per meter.

Changing article 12 will not bring instant prosperity, but over time, it will fuel long-term economic development in the commonwealth, and that is why I think the subject should be put before the people.

For politicians to put gaming on the ballot instead of land, means they do not have their hand on the pulse of the people.

There are several things that I would like to contribute to the discussion on Article XII.

1.) That opportunity cost runs both ways.

It has come to my attention that the indigenous people are worried about what would happen once Article XII is lifted. One scenario has been that the local people will immediately squander all of their proceeds and go broke. Poverty has been a key concern for the opponents against universal and equal rights in land ownership at CNMI. And truly, if rampant poverty among the indigenous were to become a reality, it would be a sore scene, undermining the very intentions of Article XII and to a greater extent, the Covenant between the United States and NMI.

However, let us take a step back and ask the opposite question. What are the indigenous people forgoing because they cannot sell their land?

First is the opportunity to earn an average S&P 500 return, and at the least, the risk free market rate of 4.5% in treasury bonds. If the indigenous person who sold the land were to immediately invest all of the proceeds in the stock market, she would have earned roughly 10.95% annual return from the stock market (figure based on average return from Jan. 1 of 1950 to Dec. 31 of 2006). The double digit return sounds like a poor choice if the CNMI real estate market outperformed the S&P 500 over the last decade. But, did it?

Did the CNMI real estate market grow by 10.95% per year? You tell me.

All we know is that opportunity costs run both ways.

2.) That diversification rocks.

Since real estate in CNMI is illiquid, not easily transferable to another buyer, indigenous people can and do tend to suffer from lack of diversification in their asset portfolio. Simply put, the current plight is forcing locals to over-invest in land, whereas if land were bought and sold freely, it would have been easier to hold different mixtures of assets.

To illustrate this point, say that the current land owner holds $10 million dollars in land. As the real estate market in CNMI has been taking a dive in recent years, their net wealth position has also dunked to somewhere around $5 million, assuming conservative 50% percent downturn in last 10 years. This huge swing could have been normalized and calibrated had the law allowed the investor to sell off half of her land and diversified by investing elsewhere. Her portfolio would have had $5 million dollars of land and $5 million dollars in stocks. Now, when the land prices plummet in similar manner to the previous scenario, the shock is reduced to 2.5 million dollars (50 percent of 5 million net position in R/E). So, at the least, she would have had a net wealth position of 7.5 million dollars, ceteris paribus. If his stocks performed better (and as we know, it did), she could have even improved her position.

In essence, diversification rocks.

3.) That collusive market behavior will worsen.

Someone in the discussion thread pointed out that few of the people own most of the land in CNMI, in spite of homestead. I believe that the situation is happening because of the characteristics of CNMI R/E market, which is a closed market of few buyers and sellers. One of the key characteristics of R/E market in CNMI is that the clearing market price is different from what it would have been in a free market due to collusion. What is happening is that few people have colluded to buy low and sell high. The market isn’t monopolistic, monopoly, monopsonistic, etc. The market is operating like a cartel.

What’s happening? The rich indigenous people have fished for poor indigenous people who are in dire need of money. Since land is very illiquid, the person in the liquidity trap with nothing but land (a concept mentioned above leading to higher opportunity cost), tend to accept lower than fair market value of the land. Over time, the number of land holders decline as some land holders perform well and others do not, and the ones who perform well purchase the land of those who did not perform well. In the end, when fewer people own land, they can collude to tease out the land held by others by depressing market price and such. This process is being expedited from the fact that the local population is decreasing through intermarriage, shrinking the market even faster.

I can only see the cartel like symptoms of the market becoming more apparent down the road.

(This article has been posted on pbae.blogspot.com as well.)

With a soft economy, there is no question that it is a “buyer’s market” in the CNMI when it comes to the real estate business. Therefore, repealing ART. XII today (when the economy is near rock bottom) would only yield a major transformation of the CNMI into a place similar to Guam or Hawaii due to the displacement of countless families and future generations. Desperate and less fortunate (indigent) people will be selling their properties at ridiculously low, low prices and in the end, who would suffer from these land transactions? The children of these desperate landowners.

The people would decide the matter in the year 2011.

With a soft economy, there is no question that it is a “buyer’s market” in the CNMI when it comes to the real estate business. Therefore, repealing ART. XII today (when the economy is near rock bottom) would only yield a major transformation of the CNMI into a place similar to Guam or Hawaii due to the displacement of countless families and future generations. Desperate and less fortunate (indigent) people will be selling their properties at ridiculously low, low prices and in the end, who would suffer from these land transactions? The children of these desperate landowners.

The people will decide the matter in the year 2011.

My only response to Politrix is that countless impoverished families who hold land are already suffering from very limited number of buyers already. Would it not make sense to allow them to sell it to a bigger pool of people to prevent “ridiculously low, low prices”?

I have mixed thoughts on Article 12. FYI, my sister in Hawaii wanted to buy a 1,500 sq. ft. home in Hawaii Kai. It was on sale for $1.2 million.

Is this what we want for Saipan? Outrageous prices for homes? Should indigenous people of the Marianas become squatters on their own land?

I don’t understand quite clearly how you connected the two dots. Just because a house on Hawaii is going for 1.2 million dollars, does not necessarily make the houses on Saipan to be priced at 1.2 million. The supply and demand, and the characteristics of Saipan R/E the market are completely different from Hawaii’s. Better comparable, I believe is Guam. However, even Guam is different because of its size, demographics, and zoning for military usage.

Hmmm, Peter. I’m not an economist, but I’d bet you my Kia Sorento that if Article 12 were abolished, land value would skyrocket, which would lead to many locals who could no longer afford to buy land. Article 12 was created to protect the people from getting ripped off. Pete, you’re a brilliant young man (I say young because I’m old and not as an insult), but you and I won’t ever see eye to eye on this issue, but I do have a great deal of respect for your opinion.

Hope all is well with you in the States. Don’t study too hard!

Ed,

You say Aricle XII Is a blessing because it keeps land values down at unrealistically low prices. These unrealistically low prices make it possible for “locals” to buy land.

You are spot on in regards to the affect Article XII has on the value of land. These land restrictions do just that. I see how many land owners have been taken advantage of by other NMDs due to this fact. Perhaps they came on hard times, perhaps they had what they believed was too much land, perhaps they just wanted off this rock and decided to sell their property. What has occurred has been that these land owners were forced (because of a restrictive market) to sell well below their value.

Now there are a few wealthier families in the CNMI that have accumulated tons of land under this provision. Many have sold their land and now have none.

You stated that Article XII keeps lands low enough for locals to buy and that this is a good thing and you will not change your stance on the issue. You mention that you have a Kia Sorento. What if you were told by your government that you could never resell that vehicle or any vehicle on Saipan except to NMDs. What do you think the resale value of that car would be? What if the government argued that they were doing that so that the value of cars would drop? They wanted to keep the value low so that “locals” could afford them.

I would venture to guess that at the moment in Saipan alone there are less than 10,000 NMDs over the age of 18. Remember there are only 12,500 cnmi voters (not all of which are NMDs). That is a sever limitation on the market of available land buyers.

And if memory serves me correctly, your future grandchildren could be at risk of not being able to inherit or purchase land in a place the you personally call home. This is more tragic to me than land rates being dictated by a free market and open to all buyers.

Article XII does just that. It tells land owners what they can do and can’t do in regards to their property.

You stated that your sister was unable to afford the land in Hawaii and that was wrong. But the truth is that someone must be able to afford it and is probably willing to pay 1.5mill for it. The value that person set for his property was the amount at which he would be willing to part with it. Maybe the rate is so high because they don’t want to part with it but that is the value that will allow him to make that decision. I believe he will find a buyer at that price or close to it.

Can your sister “buy” land in the CNMI? Can she be upset at the prices in Hawaii and come to Saipan (the place her dad and mom call home) and buy land?Can her children? Can her future grand kids?

It is important to remember also that by removing Arcticle XII it does not force a land owner to sell their land. If they are passionate about keeping a hold of it then they can damn well do so. If they want to lease it… go for it. There is no obligation to sell. Perhaps with a realistic value on their land they may be more tempted to sell and that is fine. If I offered you 1.5mill for your sorento I don’t think you would consider anything other than “where do I sign” and there is nothing wrong with that.

The ability to sell your land at higher rates does nto make squatters. Land owners will sell if they need the money no matter what. They are selling today. That will never change. What is happening now is that the law is taking money out of their pockets and the law is jeopardizing their ability to pass on their property to their children and grandchildren.

PP

I don’t know how this debate spun off to Kia Sorento, Plato… but, I will, first and foremost, say that whether we should repeal Article XII should not be based on economics in its entirety. Before proceeding, I will admit to Ed’s point that this piece of legislation was added to take into account of: 1.) cultural values of the indigenous people and 2.)of their long term financial health.

Let me illustrate what is happening to you in the R/E market, expanding on my point #3 on comment #323, which is undermining the twin purposes of A XII.

I think the issue here is that I pointed out first that the closed R/E market is depressing the price so much so that a comparable tract of land is being leased at a higher price than being sold. This is merely a conjecture based on the asymmetric market size between the NMD descent “buy market” versus the global “lease market,” and one which would need real market research. The way we would go about it is to dig into the public title records of various villages and see the net present value of lease prices versus one time purchases. However, the fact that leasing is more expensive than buying does not necessarily mean that Article XII as a whole is bad. As an economist, I merely wanted to point out the costs of the law. There is an disequilibrium in our market, where we pay more to borrow than to own. But, all in all, the ultimate choice should be reservedly sit in the hands of the indigenous people.

Ed responded very well to the above point that perhaps this isn’t a bad thing. When Article XII is destroyed, the buyer’s market price will skyrocket akin to what has happened in Hawaii and no indigenous person would ever be able to purchase land. To this, I first respond with comment #323’s point #1-2. I also respond that Hawaii’s economy is starkly different from CNMI in comment #357. Palau, which offers longer lease term is still suffering from lack of investment and capital expenditure. In the grimmest scenario, opening Article XII may not lead to such level of investment that our optimism points towards, taking into the fact that the Asian economy has been investing closer to home, in Macau and Hainan, trying to keep capital within borders.

However, I want to go beyond that and point out that Article XII is creating a collusive market where the “low price” in the buyer’s market is really enjoyed by the few, the rich, the powerful, not really spreading and promoting the wealth of the indigenous people as the second intent of Article XII (the way I perceive it).

We know that neither non indigenous people nor corporations, institutions can “own” land in the CNMI. Over the past few years, NMD’s have needed cash, sometimes more than what they had on hand, leading to taking out debts both through banks and personally, with land as their collateral. Now, when Northern Marianas Descent (debtor) defaults on these loan payment terms, the recourse of creditors have been limited to auctioning these lands off within certain period of time, limited in market time exposure. Who buys these tracts of land? The rich, the few, the powerful. Not the average Jose.

To expand on this, the situation need not even involve an intermediary financial or credit entity consisting of individuals. It could (and I imagine, has) occurred directly, where the cash strapped Northern Marianas Descent would decide to cash out on his land. In looking for a buyer, a limited number of again, the rich, the few, and the powerful would await to buy. When they collude to buy the land at depressed prices, I often wonder whether any of the twin purposes of Article XII are being upheld.

But that’s just my two cents…

PS: Ed, I’m studying quite hard here (calculating deductions for personal hobby expenses at 2 AM on a Friday night, when everyone’s off to the dance floor).

Peter, get on the dance floor and live a little. All work and no play makes Peter a lonely boy…

On a serious note, I admire your gumption and your dedication to your studies. Perhaps if I were as serious as you I would have finished college in half the time it took me. With the time it took me to complete college, people should be calling me “Doctor.”

Okay, back to the Article 12 thang. Hawaii and Saipan are not as different as you think they are. The biggest difference is that the majority of private land ownership does not belong to Hawaiian descendants, but here in the CNMI, the indigenous Chamorros and Carolinians still own the majority of private land. Peter, I would hate to see Chamorros and Carolinians become a minority in their own home!!

Article 12 is as controversial a topic as they come. Once again, you and I will never see eye-to-eye on this topic, but I do believe you have valid points that should be considered.

Regards,
Ed

P.S. Get on the dance floor and do the cabbage patch. Girls looove the cabbage patch!

“I would hate to see Chamorros and Carolinians become a minority in their own home!!”

Isn’t this already the case?

The CNMI does already have a ton of Public Land. Perhaps instead of leasing it out so quickly we can start issuing it to indigeneous people for homestaead purposes and closely regulating the use of those homesteads. That program can ensure that indigenous still have land. Regulations can be put in place to ensure that Public Lands can not be sold and issued homestead land can not be sold. Should a homestead owner default on their agreement then the land reverts back into the homestead pool.

Plato,

For your information, those regulations are already in place. I know because I had my homestead taken away from me after I failed to meet the conditions set forth in my homestead permit.

As for selling the property, let us take a closer look at the CNMI’s homestead regulations and other applicable laws.

A homesteader must develop the property within a 3 year span afforded. After words, DPL inspects the lot for compliance. The homesteader is in is issued a quitclaim deed when found in compliance of the conditions provided under the homestead permit. The homesteader, however, must wait an additional 10 years before the title of the property is transferred to his/her name.

Knowing this, I have to agree with you that homesteaders should be barred from selling or leasing their properties because such action certainly defeats the purpose of the Homestead Act.

Plato,

For your information, those regulations are already in place. I know because I had my homestead taken away from me after I failed to meet the conditions set forth in my homestead permit.

As for selling the property, let us take a closer look at the CNMI’s homestead regulations and other applicable laws.

A homesteader must develop the property within a 3 year span afforded. Afterwards, DPL inspects the lot for compliance. The homesteader is in is issued a quitclaim deed when found in compliance of the conditions provided under the homestead permit. The homesteader, however, must wait an additional 10 years before the title of the property is transferred to his/her name.

Knowing this, I have to agree with you that homesteaders should be barred from selling or leasing their properties because such action certainly defeats the purpose of the Homestead Act.

I’ll have to learn the cabbage patch sometime in the future from you, Ed (before the move gets obsolete). But, you see, I’m never lonely with all of my books keeping me company.

Can someone direct me to homestead laws?

See ARTS. XI and XII and PLs 3-103, 6-32, and 10-29, 10-57, 12-33, 12-72, and 15-2. It covers the evolution of DPL and all its services. Visit the CNMI Law Revision and search these Acts. DPL used to have the homestead regs and laws posted at their website: http://www.dpl.gov.mp but not anymore.

See ARTS. XI and XII and PLs 3-103, 6-32, 10-29, 10-57, 12-33, 12-72, and 15-2. It covers the evolution of DPL and all its services. Visit the CNMI Law Revision and search these Acts. DPL used to have the homestead regs and laws posted at their website: http://www.dpl.gov.mp but not anymore.

Thanks!

Economic efficiency will be achieved as long as property rights are fully allocated and that completely free trade of all property rights is possible. It does not matter who owns what initially, but only that everything should be owned by someone. Trade will place resources in their highest-value eventually. This idea is also known as the Coase theorem, which is used to show that a solution to the problem of externalities is the allocation of property rights.

Indeed history has shown that the linchpin of a successful economy depends on the degree of property rights of its citizens. From this vantage point, how does CNMI fair? If you answer this question honestly, you’ll see that part of our ailing economy is due to our government not honoring property rights. This occurs on different levels. Article XII is a law that counters property rights. Imagine that you’re a local and you own lots of land or just a homestead. You raise your daughter and she marries a non-local. Their children will still be able to own land, but suppose their children decide to marry a non-local, and so on. Eventually, you reach a point when the next generation will be alienated from the very home their grandma or great grandma have come to know and love. Is this the future we want for our children? I emphatically say no!

That is why we live it up to that generation to decide the fate of ART. XII and not the present. Again, the value of property has declined and so is the state of the economy. Properties would be selling like “hot cakes” should ART. XII be repealed today since it is a buyer’s market. People are desperate and desperation only leads to hasty decisions. Decisions that many will regret in the future. Biba Article XII!!!

That is why we should leave it up to that generation to decide the fate of ART. XII and not the present. Again, the value of property has declined and so has the state of the economy. Properties would be selling like “hot cakes” should ART. XII be repealed today since it is a buyer’s market. People are desperate and desperation only leads to hasty decisions. Decisions that many will regret in the future. Biba Article XII!!!