The Rental Rate on Land, Revision Frequency and Inflation Available to Purchase

Land rents are sometimes set at a fixed percentage of land value called the ground rental rate, with the land value periodically revised. Intuitively the frequency of revision should affect the appropriate rental rate. This paper derives the relationship between the rental rate and the frequency of revision. Depending upon discount rales and the expected growth rale in land value, the relationship may be positive or negative. In addition the revision frequency governs the extent to which inflation driven increases in interest rates induce changes in the rental rate. The latter changes range from virtually nothing to changes in tandem with interest rates.