FARE-talk is to provide an enduring conversation about contemporary topics relevant to food, agricultural, and resource economics.
"Beyond the Indian Act": Examining the Potential Role of Fee-Simple Ownership - December 17th, 2012
Brady Deaton Jr.: Welcome to FARE-talk where we set out to provide enduring discussions on contemporary topics relevant to our economy with particular emphasis on food, agriculture, and the environment. My name is Brady Deaton, Jr. Of the Department of Food, Agriculture and Resource Economics at the University of Guelph. I'll be your host.
Tom it's my pleasure to welcome you to FARE-talk. Tom Flanagan is professor of political science at the University of Calgary. He is the author of numerous books, many of which have won prizes. The book that we'll be discussing today he co-authored and the title of that book is Beyond the Indian Act, restoring aboriginal property rights. Tom, welcome to FARE-talk.
Tom Flanagan: [inaudible 00:00:53] good to be here.
Brady Deaton Jr: I should also for those people who will be listening to this podcast, this is a bit of an experiment. We're doing this podcast with Tom over video in a classroom setting where students from Land Economics will be participating in the podcast discussion.
Tom, just to get the ball rolling, give us a bit of a background of property rights on First Nations and the consequences that have motivated your interest in this area.
Tom Flanagan: Yeah. Well I think many of the problems that people point to that First Nations have - low incomes, bad housing conditions, various social pathologies, high rates of alcoholism and drug abuse and family breakdown and so on - a lot of these things have deeper causes in the absence of property rights. To give an example today is National Housing Day and Shawn Atleo the grand chief of the Assembly of First Nations published an editorial in the National Post this morning talking about the sad state of First Nations housing.
He says there's a shortage of 85,000 homes for First Nations people on reserves. He also cites the Statistics Canada figure that 42% of existing housing is in need of repair. Now that's an astonishing figure, over 40% of housing is, and we're not just talking about a new coat of paint. Statistics Canada talks about needing repair they're talking about more serious structural features.
Well, why is that? Well surely one of the main reason is that all the land on the Indian Reserves is owned by the government. Indians don't own the land, either collectively or individually. They can own a house but most don't. The houses are mostly provided for them by [banned 00:02:53] governments. There's never enough supply of housing and what there is, is not well maintained, in contrast to the larger society where shortage of housing is sometimes an issue, but pretty much a marginal issue. There's maybe 1% of the Canadian population at large that don't have safe, warm housing.
So you can talk about housing as a problem, but the underlying problem is an absence of property rights which would enable a housing market to operate. It's housing markets that give us owner occupied or rental housing in the rest of the country, but those housing markets don't operate on reserves. So there's one example of how standard of living is impacted in a very real way by an absence of property rights.
Brady Deaton Jr: So, if we were to look at the lay of the land on First Nations reserve areas today, what would we see in terms of those underlying property rights? There's leases, what other ...
Tom Flanagan: Well there are some, there are sort of quasi property rights. There's very little of free holder or fee simple land of the kind that is the main property right off reserve in Canada. Fee simple does exist in a few special cases like on the [Iska 00:04:08] Reserve. But it's pretty marginal. So there are three types of existing property rights. One is customary rights which are widespread, but nobody really knows how widespread. Nobody keeps a complete record of them. But these are just based on occupation of land, often for generations, by families who may have houses or may have farmed it. But it's never been approved in any formal way by Band Council or the Minister. It's not enforceable in court. It may be recorded. Some bands keep registries of land, but if it hasn't ever been legally approved, it's not enforceable in court. Nonetheless, there's a lot of it and many people lives are based on it.
Second form is the certificate of possession, which is formally approved by the Band Council and the Minister. There are about 44,000 certificates of possession in operation now on reserves. So that's a lot. And some reserves are almost entirely certificated like the First Nations, Six Nations Reserve close to, not that far from your university. And certificates are enforceable in courts. So they are a pretty strong form of title. The main limitation on them is that they can only be sold to another member of the same band. So there's virtually no market for certificates of possession.
So that means that if you're on a reserve where certificates are accepted, you can get one and you can perhaps build a home on that piece of land, and you might even be able to get a mortgage if you can get the Band Council or some other third party to guarantee the mortgage. But the home doesn't become a savings vehicle. It's a place to live and you can leave it to your heirs. And that's good but it's - for most of us the home is the best investment we'll ever make because your wealth grows in it as the price of housing increases. But that doesn't happen where there is no housing market.
And then the third form of property right is the lease. And the Indian Act has several provisions that underlie leasing arrangements. Certificates of possession can be leased and that's the basis of the prosperity of the Westbank Band in British Columbia is leasing of certificated land by individuals. Or the band can lease band land for major projects. There's lots of examples of that in Canada. It could be to casinos or hotels for golf courses, shopping centers, industrial parks, or residential housing developments. The lease is in some ways the strongest form of property, because once it's signed it's tradable in the market. It can be sold. And so there is a re-sale market for leases, so they don't have the weakness of certificates of possession. However the weakness of the lease is by definition it's time limited, 39 years, 49 years, 99 years, whatever. It's not as strong in that sense as fee simple ownership. The best guess is that under good conditions a 99-year lease might be worth about 80-90% of the value of fee simple ownership. But conditions aren't always that good. Some leases are written only for 39 or 49 years and they are worth quite a bit less than the fee simple value of the land would be.
So anyway, these are the three existing forms of property rights on First Nations land. So the suggestion of our book is that the fee simple ownership should become a fourth option. Nobody would be forced to adopt it but ought to be possible for First Nations who want to, to have that chance.
Brady Deaton Jr: Just for some of the listeners who might be listening in. When you think about fee simple, how do you define that or what's the kind of lay version of what you mean by that?
Tom Flanagan: Well, fee simple ownership like any form of ownership is the right to use the land, have the right to exclude others from use of it and the right to dispose of it through sale or gift or lease or whatever. So it's a complete ownership restricted only by the laws of general application such as zoning laws or environmental laws, nuisance laws and things like that. That's the normal form of ownership of land in the rest of Canada so all the students I'm looking at probably - You're probably too young, most of you to own your own home but I suspect in most cases your parents own homes. And that would be fee simple ownership.
And so it hasn't been available to people on First Nations land up to this point. So we would like to make that available as an option because it's a more flexible form of ownership. It's a better store of value. It appreciates over time because you can have a resale market for it. You can get a mortgage based on it. You can build a home on a reserve if you have a customary right or a certificate of possession but the bank won't give you a mortgage to do it unless some third party guarantees the mortgage because they can't seize the land because no outsider can own the land. But if the fee simple regime were introduced a bank would be able to seize land for non-payment of a mortgage as it would for anybody else because under that regime an outsider would be able to own land on an Indian reserve, which is presently impossible.
Brady Deaton Jr: Alright. I'm going to turn it over to students for questions in a minute. But before I do that let me just ask you to maybe state the essential elements of the reforms that you and your co-authors are suggesting.
Tom Flanagan: Well, the first step would be to pass legislation and that legislation is currently being drafted. It's called the First Nations Property Ownership Act. At one time we were hopeful that it might be introduced by the end of 2012. Now I think probably early 2013 is more likely. But anyway, the government is working on it.
Once the legislation was passes that would make it possible for First Nations to opt into that regime. And that would mean opting out of the Indian Act with respect to the various land provisions in the Indian Act, which is a big part of the act, not the whole thing but it's a big part of it. So First Nations could choose to come under the new legislation.
If they did that the first thing that would happen is that they would get a collective fee simple ownership to all of their reserve land, which at the present time is owned by the crown and held for the use and benefit of the people who live on it. This would make it possible for the First Nations as a collective entity to own the land on which it's lived.
First Nations already do own some fee simple land collectively. For example, there was a piece in the news yesterday about the Musqueam Band in Vancouver what wants to do a land development project on what used to be University of British Columbia trust land. The Musqueam Band owns that piece of land in fee simple because it was given to it by the province as part of a land claim settlement. So there is some collective ownership, not a lot but there is some already collective ownership by First Nations of lands in fee simple.
But this bill would allow a First Nation to own all its land in fee simple, not just sort of add pieces that they have picked up along the way. So they could own all their reserve land in fee simple. And that would mean they could do what they want with it without having to get ministerial approval. If they wanted to enter into a leasing agreement or a development agreement, they could do it on their own without having to get it approved in Ottawa.
And then finally the legislation would also allow a First Nation to create individual titles in fee simple. Again, this would be optional. They wouldn't have to. But they could. And I think those ten or twelve First Nations that are interested in getting into this do want to create individual titles. Not for all of their land by any means, but for a part of it, mainly for housing purposes, perhaps other purposes as times goes on.
And so individuals could then own land on an Indian reserve and they could sell it to whoever. Now there might not be a big resale market at first. I think people would wonder "Well what is it like to be an outsider owning a piece of land on an Indian reserve?" Well, the answer is it's kind of like if I decided to invest in real estate in Guelph. I have to take my chances with Guelph City Council, which can enact zoning by-laws and sets property tax [mill 00:12:30] rates and things like that.
Well First Nations government would have the same kind of powers, local government powers and as an outside owner you'd have to deal with that government. So if the First Nations government can establish a reputation for competence and honesty I think over time external people would be willing to invest in that land, and there's no legal barrier to it in any case. So we can't say how quickly the market would develop. It would depend to a considerable extent on the behavior of the First Nations governments as to whether their behavior encouraged outsiders to buy in or not.
Brady Deaton Jr: Okay. Let me ask students to ask any questions that they might have.
Male Student: I just had a question about how you perceive the implications of an incompleted option of the ownership act in regards to the inconsistency in income disparities that may arise across the different First Nations that participate or not.
Tom Flanagan: Well, if I understand your question correctly, we believe, we don't know because nobody knows the future, but we believe that the adoption of this act would benefit wealth creation for First Nations who adopted it. We think that their land would become more valuable. They could deal with it more expeditiously. They could engage both as a collectivity with Band land and as individuals with individual fee land. They could engage in economic transactions more freely so we think that this would lead to greater prosperity for the bands who adopt it.
We also hope there'd be a demonstration effect so that other First Nations seeing the positive results might want to opt into the legislation also. It might in the short run produce some disparities between bands, you know those already exist because some bands like Westbank have been much more aggressive in using the opportunities that do exist under the Indian Act. These are somewhat limited, but they do exist and Westbank has been very aggressive in making use of those, and consequently has a high level of economic prosperity there - at least for those who own the certificates of possession. Now there is a kind of a disenfranchised group at Westbank that didn't have any certificates to lease.
A lot would depend upon the initial distribution of titles. This would have to be - I haven't seen the legislation - It's still being drafted, but there will be a process for opting in. It will have to be approved by the band in some kind of referendum and I think that there will have to be an approved method for distributing land to make sure that it's not all grabbed by people who are politically influential within the First Nation. You know we don't want chief and council grabbing all the valuable land for themselves. So there would have to be some kind of more broadly approved distribution at the outset, and what happens after that? Well then you get into the market and trades become possible.
Have I answered your question?
Male Student: Yeah. You did. That was good. Thank you.
Tom Flanagan: Okay.
Female Student 2: I wanted to address the fact that some would view communal land and the right to private land ownership as being in direct contradiction of one another. If you believe this to be true, what is the reasoning behind your support of peaceable ownership regimes over supporting the rights of those who wish to share in communal property?
Tom Flanagan: Well, we don't want to force anybody to adopt individual property. I would be opposed to that. Something like that was done in the United States in the Dawes Act in the 19th century and I think it turned out to be a big mistake. So our proposal is only for those First Nations that want to adopt a regime of private property to make it possible for them to do so. But I think it's important to recognize, and there is an historical chapter in our book, that prior to contact with Europeans coming to North American there was a wide variety of individual property rights among the native population. Most of the eastern part of North America was farmed - certainly the Southeast and the Atlantic seaboard and the central part up into Ontario, southern Ontario and Quebec, and the American Midwest, and the American southwest - There was high developed agriculture in all these places and with that went forms of - it's not fee simple ownership - it was, we understand that's a British concept, but there were forms of family ownership of farming fields. Similarly, in fishing people of the coast there was family and sometimes even individual ownership of choice fishing stations and spots, shellfish beds and things like that. There were individually or family owned traplines once we get into the era of the fur trade in the northern forests.
So the cultural traditions of First Nations people include lots of forms of individual and family property. It was not all just communal. The closest to a pure communal model would be the buffalo hunting people of the prairies. And it's interesting that the reserves in the three prairie provinces have the smallest number of the certificates of possession I mean it'd be almost none, very few. There is probably a cultural mismatch there. But certificates of possession are very common in British Columbia, southern Ontario and southern Quebec where the way of life was more sedentary and there was a tradition of family ownership of certain real estate assets.
So anyway, we think that there's a cultural, a good cultural fit, for private property for at least some First Nations. So we want to say that those who want to go that way ought to be able to go that way. The trouble with the Indian Act is that it imposes the communal model on everybody.
Female Student 2: Thank you. So the next question is, if First Nations adopt fee simple ownership, what, if any, implications could arise relating to environmental degradation and how can we mitigate against or account for these potential environmental problems?
Tom Flanagan: Well, I don't know. Your question seems to imply that individually owned land is more likely to be environmentally degraded than communally owned land. I don't really think the evidence supports that. If you want to go back to the famous parable of the tragedy of the commons, which I'm sure you've studied in your course, there's a couple of different ways of getting out of that tragedy. One is through collective oversight that we might say government regulation. But another is to privatize the commons and let it be individually owned so that owners have incentives to manage the land to retain its benefit for the future because they'll get the benefit. They're the owners.
So I don't think there's any reasons to that individual ownership is more likely to lead to environmental degradation than communal ownership. But in any case our proposal envisions the existence of a First Nations government. This is a chief difference from the Dawes Act where the Dawes Act didn't provide for tribes in the United States to continue with some form of tribal government. The whole plan of the Dawes Act was to get away from tribal government.
But our proposal recognizes the existence of First Nations governments and those governments would have a variety environmental regulatory powers, including zoning and nuisance legislation and setting environmental standards. They would have all the same powers that local governments have now under provincial legislation. They have the same kinds of powers. Now if they chose not to exercise them, I suppose it's possible that there could be environmental degradation. But they would have the tools.
Fee simple would not take the land out of the control of the First Nations government. Individuals could have ownership just as I own my house in Calgary. But that doesn't mean I can do whatever I want with my land. There's a huge set of Calgary zoning and environmental and nuisance legislation or by-laws which govern what I do with my land. And the same would be true on a First Nations. So individuals might own it but they would still be subject to whatever rules their local government made and there would be - the First Nations would not be tossed into this on their own. The First Nations Tax Commission would be there to help them.
The First Nations Tax Commission has been there now for, what, 25 years to - and it helps the roughly 130 First Nations that have adopted some form of property tax. At the present time property tax is being levied on leaseholds which are mostly owned by people who are not members of the band. But in the future property tax will also be applied to freeholds if freeholds are created. And so the First Nations Tax Commission will be creating, like they have created model tax codes, so they'll be able to create model local by-laws for various purposes that would be required once you get into the era of freehold ownership.
Female Student 2: So in 2010 the Assembly of First Nations spoke against the property ownership act due to enforcement of [inaudible 00:22:28] title and its impact on sacred responsibilities held by bands. In your opinion what is the state's role in protecting against infringements on these rights?
Tom Flanagan: Well the opposition - Let me make one statement and then come back to the last part of your question. I'm not sure I totally understood, but I do want to make one statement about this. Under the current regime the resources of the band, including land and resources connected to the land, like timber or subsurface things like gravel or minerals or oil and gas, these are largely at the disposal of chief and council. Chief and council would have to approve any certificates of possession. It's chief and council who can confiscate customary holdings. It's chief and council who make all the decisions about band land.
It's not surprising to me that the Assembly of First Nations, which is an organization of chiefs, would be opposed to a democratizing measure. Creating private property is something that benefits individuals and lessens the power of chief and council over the lives of individuals by allowing them to own their own property. So it doesn't really surprise me that the AFN would be skeptical about this. It's kind of in their self-interest to defend the status quo.
Now what was the - you said at the very end of your question, I didn't quite catch that?
Female Student 2: I said that - I was asking what should be the state's role in protecting against infringement on these rights, these sacred responsibilities?
Tom Flanagan: Is what you mean the state's role in protecting infringement against the responsibility of the First Nations government or infringement on the rights of individuals?
Female Student 2: On the First Nations bands.
Tom Flanagan: Yeah. Well First Nations have all kinds of rights now. They're entrenched in the constitution because section 35 of the Constitution Act of 1982. Aboriginal and treaty rights are considered to have constitutional status. They can't be unilaterally abrogated and we have a court system to interpret and enforce them. So First Nations governments have all kinds of protection right now as constitutionalized entities. It's actually First Nations individuals who in my opinion need more protection. I think their governments have lots.
Male Student 2: So you said it's pretty important that they adopt it or opt in.
Tom Flanagan: Yes.
Male Student 2: But what was said in the last bit. How do you think that people in the AFN - will they voluntarily accept it still, or may it need to be imposed?
Tom Flanagan: Well the opting in would require a band council resolution and also some kind of referendum vote, whether it was done through a meeting or a mail ballot, but some kind public approval. So if the leadership of a First Nations is opposed to doing this, it's not going to happen. The legislation is completely optional and right now something like 10 or 12 First Nations have expressed interest in it. They've already passed band council resolutions expressing an interest in it and supporting the concept. So that's 10 or 12 out of 630. So most are not yet ready to go forward. Some others have said they're interested but not quite there yet. But we're talking about a small minority, most of whom are in British Columbia, not all, but most.
And so this will be a very small and gradual thing, which I actually think is right. You know I don't believe in large scale experimentation with people lives if we can avoid it. I believe in slow and incremental change, kind of an experimental approach to see what works and what doesn't. So right now this is a proposal. It's a brainwave, although it's based on a lot of experience with property rights around the world. But it is at the present just an abstract proposal.
So we make it optional. A few bands get into it and if it's not working, they can terminate it. The rest of us will get a chance to see if it actually works in practice. We think - the authors think it will but you know I've seen an awful lot of abstract proposals which don't work out the way they were intended. And that's why I favor a kind of gradual and incremental approach to reform.
Male Student 3: Many of the ideas that are in your proposal - the hoped-for consequences seem to resonate with ideas and objectives of some recent reforms like the First Nations Land Management Act. And when I hear you speak and when I read the book I don't view you as thinking that these are in conflict. Your proposal seems to be thought of as offering another option within the portfolio of options for First Nations. Is that correct or is there ...?
Tom Flanagan: Yes. Oh, yeah. Absolutely. There are ways already for First Nations to capitalize on their assets in land and natural resources - leaseholds, as I mentioned, are widely used. Entering the First Nations Land Management Act makes the process more efficient once your own local land code is approved. Then you don't have to keep going back to the department for approval of everything. So that's a good idea. Other possibilities are self-government agreements as Westbank has. Again, you can get out of the ministerial oversight that way. Negotiating a modern day treaty, you know there's about 200 First Nations of British Columbia that have never signed treaties. And so the Tsawwassen Nation which has signed a treaty has a provision in there for fee simple property. They now, through their treaty, they now own their land in fee simple. And the treaty allows they to create individual titles if the wish. So Tsawwassen has achieved through treaty pretty much what we are proposing in this new piece of legislation.
So there're many ways to skin the cat. And we're not opposed to any of them. And I would suspect that some of the First Nations which are most advanced would, you know, might not be interested in fee simple because they may think they're doing okay with certificates of possession or leaseholds. So Westbank is not interested right now. Squamish is another band in Vancouver that's had an aggressive property development program. I don't think they would switch over to fee simple because they've got all kinds of plans drawn up on the basis of leasehold.
So this will fit the needs, we think, of some. There clearly are some interested in it. I'll give you a concrete example of how it would be beneficial in the short term. The big proponent of this is Manny Jules former chief of the Kamloops band now chief of the First Nations Tax Commission. And basically what happened to produce this book is that Manny and I joined forces. Andre Le Dressay is the economist who does all the research for Manny and Chris Alcantara is a former grad student of mine. And so we all got together on a common project. A lot of thinking in this really comes from Manny. And what the rest of us have done is to put it into more of an academic form.
But on the Kamloops Reserve there is already a large real estate development of about - I think it's up to about 2000 homes I mean it's not finished yet. So I'm not sure how big it will be when it's completed. But there are a large number of very nice middle class homes there which are for sale on the real estate market. But they're based on 99 year leases. And Manny believes that if this legislation is passed the band could then offer the lease holders the right to buy the fee. And their best guess is comparing it to real estate values in comparable areas of Kamloops that lease holders would probably pay another - oh like another 10% or so, 10 or 15% of what they paid for the lease - they would pay that extra amount in order to have the certainty of fee simple ownership.
And that would add up to millions of dollars that would go straight into the treasury of the band that they could then use for whatever purpose they want, possibly building lower cost housing for their own people. These middle class homes are mostly occupied by non-Indians although in fact there are some members of the band, or other bands, who have bought them as well. They are very nice places to live.
So Kamloops has a concrete incentive to do this. They can see the immediate short term profit of converting leaseholds to fee simple ownership. So they think it will work for them but if other bands don't think it will work for them, well then they don't get into it.
I forgot what the question was I rambled on for so long. I'm not sure what question I ended up answering.
Male Student 4: Hi there, Mr. Flanagan. I was actually just wondering what you thought about the possibilities of this seeming as though it's just one step closer to assimilating the First Nations population into western society and considering that maybe this is part of the reason that they are - well the Assembly of First Nations in particular - so opposed to this issue despite the fact that possible individual First Nations are quite receptive to it?
Tom Flanagan: Well, assimilation in an emotional word. Nobody likes to use it, but you know First Nations people are, you know they're already speaking your English or French, mostly English, some French. They eating the same foods as we do which is too bad actually since we eat a lot of junk. They'd be better off with the diet of moose and wild rice but it's not really feasible anymore for large numbers of people. They attend our schools and our universities. They vote in our elections. They have jobs either working for employers or they're self-employed. I mean, they've already adopted 99% of the practices of western civilization.
Fee simple ownership would allow them to make better use of their assets within that context. So that's how I see it. You go around talking about assimilation, everybody gets their back up. I mean you know what has happened? First Nations people are Canadian. They're Canadian citizens. Their lives are not that much different from the rest of Canadians except that for many of them their lives are not prosperous. They have bad housing and low incomes and poor health. So if a legal change can help them to achieve better lives for themselves I'm all for it.
Brady Deaton Jr: Tom, I think we're about coming to an end. I didn't know if there was any kind of last thoughts that you wanted to leave us with?
Tom Flanagan: Well, I feel privileged to address an economics class. I'm not an economist. But Andre Le Dressay, one of the collaborators in the book, is in fact - has a PhD in economics from UBC and makes his living as a professional economist, runs a consulting firm. So even though I'm only a political scientist there is I think professional economic views represented in the book. So it's great to talk to an economics class and you know that's the kind of audience that we're - in writing the book we're looking for this kind of audience. Politicians aren't going to pass legislation because of the book. That comes about through other processes, but it's also important to have a more - a discussion at a more intellectual level of the basic concepts.
So I'm very grateful that you'd invite me to talk to you today.
Brady Deaton Jr: Well thank you very much.
Tom Flanagan: Okay. Bye-bye then.
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