New Homestead Act

270 million acres, or 10% of the area in the USA, was settled under the Homestead Act of 1862, one of the most important and revolutionary pieces of legislation in the history of the country. Now there is a bipartisan effort underway to develop a new Homestead Act for areas of the country that have been undergoing an out-migration of citizens. Nate Hill, ED Coordinator for Senator Byron Dorgan filled me in on the details when I was traveling in North Dakota last month. Senator Dorgan was the author of this bill.

President Lincoln signed the original Homestead Act as a way to have the vast areas of the burgeoning nation settled by families that had a vested financial interest in success for themselves and the nation. Up to that point in history, few people owned land. The Homestead Act empowered impoverished east-coast city dwellers and masses of the new European immigrants. Each homesteader had the right to claim 160 acres of land with the stipulation that they had to live on the land, build a home and farm the property for five years before they received title to it. Land settled in this manner was in the states of FL, AL, MS, OH, IN, IL, MI, WI and every state west of the Mississippi River (except TX).

The last person to claim land under the Homestead Act was Kenneth Deardorff, a young Vietnam veteran and native Californian, who filed a homestead claim on 80 acres of land on the Stony River in southwestern Alaska in 1974. He built all of the buildings on the property, fished for salmon and hunted moose for food. His transportation in and out was limited to a boat or a dog team in the winter.

The New Homestead Act would be open in non-metro counties that have experienced net out-migration of 10 percent or more over the past twenty years. A total of 698 counties in 38 states would qualify, representing 22 percent of the nation’s counties. The largest concentration would be in the Plains and upper Midwest.

The Act would:
1. Forgive 50% of college loans for recent graduates who live and work in these counties

2. Provide a tax credit of $5,000 for home purchases

3. Tax incentives for new buildings

4. A federally subsidized $3 billion venture capital fund

5. A tax credit for micro enterprise businesses

6. An Individual Homestead Account, similar to an IRA, to build savings and increase access to credit

All make sense to me, except I’d change the venture capital fund into a tax credit for setting up Angel Investor Networks, like I’m seeing in several states that I’ve traveled in.