Comments on "Highest and Best Use: the von Thunen Connection".
In the article, the author analyzes the effect that variation of each of the parameters in the equations can have on the outcome. That is, he analyzes all but one, the land capitalization rate, [R.sub.L]. If we extend the author's example, allowing crop 1 and crop 2 to symbolize two similar but different uses, it is not difficult to envision a scenario in which the risk associated with each of those uses is different, leading to different capitalization rates. Thus, even though the calculated land rent (the numerator of the right side of the value equation) for one use might be the greater amount, if the associated capitalization rate is also greater, the value could be the lower of the two. That is, crop 1 could warrant the higher land rent while crop 2 resulted in the higher land value.
The definition of highest and best use should therefore be restricted to reference to value only. Terms such as "land rent" or "return to the land" only confuse the issue and should be avoided. As I had suggested in my letter regarding an earlier article in The Appraisal Journal (see Letters to the Editor,
The Appraisal Journal (Spring 2004): 186.), the following definition will never lead to an inconsistency:
The probable use of land or improved property that is adequately supported and results in the highest value.
Walter M. Kane, MAI
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|Title Annotation:||letters to the editor|
|Author:||Kane, Walter M.|
|Article Type:||Letter to the Editor|
|Date:||Jan 1, 2005|
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