The economics of CNMI’s land market system

Registered voters can make a difference in shaping the CNMI’s economy. They can start off by voting to amend current land ownership rights and allow anyone—regardless of ethnicity—to own land.

According to Article 12 of the CNMI Constitution, the law forbids anyone who is non-indigenous to the CNMI to own land. In other words, you cannot own land if you are not part local (of Chamorro or Carolinian descent). Many individuals are in favor of it because it protects the land for the locals. However, from an economic point of view, having a heavily regulated land market system does not appeal to investors. Let us take a look on what a regulated and less regulated land market system equates to for the CNMI.

In terms of a less regulated land market system such that anyone, regardless of ethnicity, can own land, changes in the island’s economy are bound to occur. It may mean more investors finding the islands more appealing. Land ownership gives investors security by assuring them that whatever they build on that piece of land will eventually stay there and that no one can easily take it away from them.

Currently, the CNMI government has plans of promoting the islands as a “silver city,” attracting Japanese retirees on island by building retirement homes. Are Japanese retirees bound to settle in the CNMI? Will the plan be successful? Let us analyze the situation here for a moment. Since the retirees cannot own land, what are some incentives for them to stay? The CNMI has tropical weather, beautiful beaches, hospitable people, and perfect location for travels back and forth to Japan, but is this enough? Now imagine granting them a little more extra such as the option to own land. The entitlement of land will give the retirees an assurance that their homes will be there for the remainder of years, and they are also free to do whatever they want with it. Which means, happily invest time and money. We both can agree that no retired individual would want to settle in a place where there is no assurance on how long they can stay. There may be lease agreement on the land; however, the retirees are still limited within the compounds of the original owner’s rules and regulations.

In terms of a regulated land market system, the effects can be felt by CNMI-born, third or fourth generation individuals and individuals of non-local descendant parents. First, you have the third or fourth generation offspring who are no longer at least a quarter of local blood. What will happen to the property and/or house that their parents gave them? Does it go back to the government? Are they forced to sell or lease it since they are not legally entitled to own land? Next, you have the CNMI-born to non-local parents group. They face a similar dilemma as well. This group is left with the decision of whether or not they would like to stay in the CNMI after graduating from college or relocate off-island in search of a higher paying job. In economics, this would be referred to as “opportunity cost,” which Wikipedia describes as “the most valuable forgone alternative.” Would they want to settle in the islands, where there is limited job security or opportunity for growth?

This is not to illustrate opposition to current CNMI laws regarding land ownership, but rather to stir toward change that can deeply impact the island’s economy overall. Some individuals are opposed to the idea of selling land to foreigners because they may end up like their neighboring island, Guam, where majority of locals had sold their lands. But is this a good thing or a bad thing? Which economy has more opportunities for providing better paying jobs for their people, the CNMI or Guam? Evidently, Guam has more to offer. They have military bases, big shopping malls, and more recreational, conventional and business establishments. The CNMI’s economy can prosper the way Guam has if it puts fewer restrictions on land ownership. Opening the doors to foreign investors and individuals for landownership will definitely lead to an increase in the CNMI’s infrastructure and job opportunities in the private sector.

In closing, the economic benefits from landownership should be reconsidered and that the CNMI would be better off with a less regulated land market.

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[I]Randy P. Mendoza is a junior Economics student at the George Mason University. Princeton Review ranks George Mason University as most diverse institution in the United States. The institution also features two Economic professors who won the Nobel Prize in Economics. This article was an extra credit assignment for an Economics class.[/I]