IDEAS home Printed from https://ideas.repec.org/a/jre/issued/v5n11990p17-32.html
   My bibliography  Save this article

Highest and Best Use: The Evolving Paradigm

Author

Abstract

Highest and Best Use is often identified as the key concept supporting real estate use and value decisions. However, at best the concept has received ambiguous if not conflicting consideration as to its relevance in the literature of economics, finance, real estate, appraisal, and other areas of study concerned with land use decisions and valuation. This paper addresses this ambiguity and identifies the theoretical premises of Highest and Best Use as employed in the various land use disciplines. The theoretical foundations as they are synthesized form the basis of a formal constrained optimization model for land use decisions. The model's logic identifies the need to include the cost of capital and location along with the physical, legal, infrastructure, and market parameters discussed in the bulk of the economic and appraisal literature (including courses and professional practice). The financial and locational variables are needed in order to advance the use paradigm to fit current context of problems facing real estate decisionmakers.

Suggested Citation

  • Mark G. Dotzour & Terry V. Grissom & Crocker H. Liu & Thomas Pearson, 1990. "Highest and Best Use: The Evolving Paradigm," Journal of Real Estate Research, American Real Estate Society, vol. 5(1), pages 17-32.
    • Handle: RePEc:jre:issued:v:5:n:1:1990:p:17-32
    as

    Download full text from publisher

    File URL: http://pages.jh.edu/jrer/papers/pdf/past/vol05n01/v05p017.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jerome Dasso & Lynn Woodward, 1980. "Real Estate Education: Past, Present and Future—The Search for a Discipline," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 8(4), pages 404-416, December.
    2. Solow, Robert M. & Vickrey, William S., 1971. "Land use in a long narrow city," Journal of Economic Theory, Elsevier, vol. 3(4), pages 430-447, December.
    3. Terry V. Grissom & David Hartzell & Crocker H. Liu, 1987. "An Approach to Industrial Real Estate Market Segmentation and Valuation Using the Arbitrage Pricing Paradigm," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 15(3), pages 199-219, September.
    4. Krumm, Ronald J., 1980. "Neighborhood amenities: An economic analysis," Journal of Urban Economics, Elsevier, vol. 7(2), pages 208-224, March.
    5. Wang, Ko & Grissom, Terry V. & Webb, James R. & Spellman, Lewis, 1991. "The impact of rental properties on the value of single-family residences," Journal of Urban Economics, Elsevier, vol. 30(2), pages 152-166, September.
    6. Smith, Barton A., 1978. "Measuring the value of urban amenities," Journal of Urban Economics, Elsevier, vol. 5(3), pages 370-387, July.
    7. Donald C. Guy & John L. Hysom & Stephen R. Ruth, 1985. "The Effect of Subsidized Housing on Values of Adjacent Housing," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 13(4), pages 378-387, December.
    8. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64(5), pages 416-416.
    9. Douglas B. Diamond, Jr., 1980. "The Relationship between Amenities and Urban Land Prices," Land Economics, University of Wisconsin Press, vol. 56(1), pages 21-32.
    10. Dennis R. Capozza, 1976. "Forecasting Long‐Run Land use Patterns with an Aggregative Model of Urban Housing and Transportation: The Case of Los Angeles," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 4(1), pages 23-39, March.
    11. Roger E. Alcaly, 1976. "Transportation and Urban Land Values: A Review of the Theoretical Literature," Land Economics, University of Wisconsin Press, vol. 52(1), pages 42-53.
    12. Terry V. Grissom & Ko Wang & James R. Webb, 1992. "The Spatial Equilibrium of Intra-Regional Rates of Return and the Implications for Real Estate Portfolio Diversification," Journal of Real Estate Research, American Real Estate Society, vol. 7(1), pages 59-72.
    13. C. F. Sirmans, 1976. "An Econometric Analysis of Urban Travel Behavior Between Residence and Work Site," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 4(2), pages 19-31, June.
    14. Paul J. Schwind, 1977. "The Evaluation of Land Use Alternatives: A Case Study of the Metropolitan Fringe of Honolulu, Hawaii," Land Economics, University of Wisconsin Press, vol. 53(4), pages 410-422.
    15. C. F. Sirmans & Arnold L. Redman, 1979. "apital-Land Substitution and the Price Elasticity of Demand for Urban Residential Land," Land Economics, University of Wisconsin Press, vol. 54(2), pages 167-176.
    16. Mingche M. Li & H. James Brown, 1980. "Micro-Neighborhood Externalities and Hedonic Housing Prices," Land Economics, University of Wisconsin Press, vol. 56(2), pages 125-141.
    17. James R. Markusen, 1979. "Elements of Real Asset Pricing: A Theoretical Analysis with Special Reference to Urban Land Prices," Land Economics, University of Wisconsin Press, vol. 54(2), pages 153-166.
    18. Grieson, Ronald E, 1973. "The Supply of Rental Housing: Comment," American Economic Review, American Economic Association, vol. 63(3), pages 433-436, June.
    19. Winger, Alan R, 1969. "Regional Growth Disparities and the Mortgage Market," Journal of Finance, American Finance Association, vol. 24(4), pages 659-662, September.
    20. Homer Hoyt, 1964. "Recent Distortions of the Classical Models of Urban Structure," Land Economics, University of Wisconsin Press, vol. 40(2), pages 199-212.
    21. Ohls, James C. & Weisberg, Richard Chadbourn & White, Michelle J., 1974. "The effect of zoning on land value," Journal of Urban Economics, Elsevier, vol. 1(4), pages 428-444, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. David Geltner & Anil Kumar & Alex M. Van de Minne, 2020. "Riskiness of Real Estate Development: A Perspective from Urban Economics and Option Value Theory," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 48(2), pages 406-445, June.
    2. Maria Rosaria Guarini & Pierluigi Morano & Alessandro Micheli & Francesco Sica, 2021. "Public-Private Negotiation of the Increase in Land or Property Value by Urban Variant: An Analytical Approach Tested on a Case of Real Estate Development," Sustainability, MDPI, vol. 13(19), pages 1-30, October.
    3. Jeffrey D. Fisher & George H. Lentz & K.S. Maurice Tse, 1992. "Valuation of the Effects of Asbestos on Commercial Real Estate," Journal of Real Estate Research, American Real Estate Society, vol. 7(3), pages 331-350.
    4. Serena Artese & Manuela De Ruggiero & Francesca Salvo & Raffaele Zinno, 2021. "Economic Convenience Judgments among Seismic Risk Mitigation Measures and Regulatory and Fiscal Provisions: The Italian Case," Sustainability, MDPI, vol. 13(6), pages 1-25, March.
    5. Steven C. Bourassa, 1993. "The Rent Gap Debunked," Urban Studies, Urban Studies Journal Limited, vol. 30(10), pages 1731-1744, December.
    6. Dunning, Richard J. & Moore, Tom & Watkins, Craig, 2021. "The use of public land for house building in England: Understanding the challenges and policy implications," Land Use Policy, Elsevier, vol. 105(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pedro de Araujo & Kate Cheng, 2017. "Do Preferences For Amenities Differ Among Home Buyers? A Hedonic Price Approach," Review of Urban & Regional Development Studies, Wiley Blackwell, vol. 29(3), pages 165-184, November.
    2. Chugunov, D., 2013. "Impact of School Quality and Neighborhoods on Housing Prices in Moscow," Journal of the New Economic Association, New Economic Association, vol. 17(1), pages 87-112.
    3. David Agrawal & William H. Hoyt, 2014. "State Tax Differentials, Cross-Border Commuting, and Commuting Times in Multi-State Metropolitan Areas," CESifo Working Paper Series 4852, CESifo.
    4. Geoffrey Turnbull & Velma Zahirovic-Herbert, 2012. "The Transitory and Legacy Effects of the Rental Externality on House Price and Liquidity," The Journal of Real Estate Finance and Economics, Springer, vol. 44(3), pages 275-297, April.
    5. Su Han Chan & Shin-Hering Michelle Chu & George H. Lentz & Ko Wang, 1998. "Intra-Project Externality and Layout Variables in Residential Condominium Appraisals," Journal of Real Estate Research, American Real Estate Society, vol. 15(2), pages 131-146.
    6. Janmaat, John A, 2007. "Factors Affecting Residential Property Values in a Small Historic Canadian University Town," MPRA Paper 6145, University Library of Munich, Germany.
    7. Li Yin, 2009. "The Dynamics of Residential Segregation in Buffalo: An Agent-based Simulation," Urban Studies, Urban Studies Journal Limited, vol. 46(13), pages 2749-2770, December.
    8. Yadavalli, Anita P. & Florax, Raymond J.G.M., 2013. "The Effect of School Quality on House Prices: A Meta-Regression Analysis," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 151291, Agricultural and Applied Economics Association.
    9. Shihe Fu, 2005. "What Has Been Capitalized into Property Values: Human Capital, Social Capital, or Cultural Capital?," Working Papers 05-25, Center for Economic Studies, U.S. Census Bureau.
    10. Alex Anas & Richard Arnott & Kenneth A. Small, 1998. "Urban Spatial Structure," Journal of Economic Literature, American Economic Association, vol. 36(3), pages 1426-1464, September.
    11. Sanghoon Lee & Jeffrey Lin, 2018. "Natural Amenities, Neighbourhood Dynamics, and Persistence in the Spatial Distribution of Income," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 85(1), pages 663-694.
    12. Kiel, Katherine A. & Zabel, Jeffrey E., 2008. "Location, location, location: The 3L Approach to house price determination," Journal of Housing Economics, Elsevier, vol. 17(2), pages 175-190, June.
    13. Woei-Chyuan Wong & Adilah Azhari & Nur Adiana Hiau Abdullah & Chee Yin Yip, 2019. "Estimating the impact of crime risk on housing prices in Malaysia," International Journal of Housing Markets and Analysis, Emerald Group Publishing Limited, vol. 13(5), pages 769-789, November.
    14. Leggett, Christopher G. & Bockstael, Nancy E., 2000. "Evidence of the Effects of Water Quality on Residential Land Prices," Journal of Environmental Economics and Management, Elsevier, vol. 39(2), pages 121-144, March.
    15. repec:grm:ecoyun:202103 is not listed on IDEAS
    16. Verhoef, Erik T. & Nijkamp, Peter, 2002. "Externalities in urban sustainability: Environmental versus localization-type agglomeration externalities in a general spatial equilibrium model of a single-sector monocentric industrial city," Ecological Economics, Elsevier, vol. 40(2), pages 157-179, February.
    17. Burnes, Daria & Neumark, David & White, Michelle J., 2012. "Fiscal Zoning, Sales Taxes, and Employment: Do Higher Sales Taxes Lead to More Jobs in Retailing and Fewer Jobs in Manufacturing?," IZA Discussion Papers 6383, Institute of Labor Economics (IZA).
    18. George H. Lentz & Ko Wang, 1998. "Residential Appraisal and the Lending Process: A Survey of Issues," Journal of Real Estate Research, American Real Estate Society, vol. 15(1), pages 11-40.
    19. Yang, Linchuan & Chau, K.W. & Wang, Xu, 2019. "Are low-end housing purchasers more willing to pay for access to basic public services? Evidence from China," Research in Transportation Economics, Elsevier, vol. 76(C).
    20. Daria Burnes & David Neumark & Michelle J. White, 2014. "Fiscal Zoning and Sales Taxes: Do Higher Sales Taxes Lead to More Retailing and Less Manufacturing?," National Tax Journal, National Tax Association;National Tax Journal, vol. 67(1), pages 7-50, March.
    21. Sandler, Todd & Tschirhart, John T, 1980. "The Economic Theory of Clubs: An Evaluative Survey," Journal of Economic Literature, American Economic Association, vol. 18(4), pages 1481-1521, December.

    More about this item

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:jre:issued:v:5:n:1:1990:p:17-32. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: JRER Graduate Assistant/Webmaster (email available below). General contact details of provider: http://www.aresnet.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.