This post answers the question posed by "What is Highest & Best Use (HBU)?" which was posted 10/30 #(209).

HBU is the reasonably probable use of vacant land or improved property that results in the highest value. HBU must meet four (4) criteria:
1. legally permissable
2. physically possible
3. appropriately supported [typically refers to off-site infrastructure]
4. financially feasible
(Appr.Inst. 1992. The Appraisal of Real Estate. Chicago, Appr.Inst., p. 275; Appr.Inst. 1993. Dictionary of Real Esate Appraisal. Chicago, Appr.Inst., p. 171)

Some analysts add an additional criterium:
5. politically possible
(Scribner, David Jr. Ph.D., MAI 1993. Graduate lecture at New York University)

HBU may also be described as the 'maximally productive' use (The Appraisal of Real Estate, p. 282) or the use that produces the '...best economic return when capitalized" (Black, Henry Campbell, 1990. Black's Law Dictionary, 6th Edition. St.Paul, MN, West Publishing Co., p. 728)

The legal and political dimensions limit use to what society allows and imposes constraints on the pure pressure or analysis of 'laizzez-faire' economics. Maybe not enough constraint for Dr.Leary, Kevin or Julian, but appraisers can only estimate what society recognizes or might recognize if that's is what the assignment calls for.

HBU is a consideration in appraisals of Market Value. HBU may not be a consideration in other appraisals. e.g. Value in Use or Insurance Value. (Appr.Fndn. 1998. Uniform Standards of Professional Appraisal Practice. tatement 2-2, a(ix), b(ix) and c(ix).

In any event, HBU is a real estate consideration and determinations of HBU are probably outside the scope of most tree appraisals. HBU is either assumed to be the existing use or is not considered. This supports the posted opinions that tree appraisals consider existing uses.
Tree appraisers may be presented with cases that require an opinion of value under a specified future, higher use. E.g. A wooded site is fully approved for development. The regulatory agency needs to know the value of trees scheduled to remain based on their contribution to the finished landscapes to serve as penalties if tree protection specifications are violated. As long as all assumptions are clearly stated there is nothing wrong with this.
Tree appraisers may need to consider HBU to dispute values based on an unsupported higher use. E.g. A tree is destroyed and the owner's appraiser claims value as if it had been in a high value landscape. The defendant's appraiser points out that current use and HBU is rangeland and that value is limited to that use. (Pulley, Gerry 1997. Case Capsule. ASCA Conference. Orlando, FL) Note that the determination of HBU may require a competent real estate expert.

Reply to post by Scott Cullen, on November 18, 1998 at 10:36:04:

Thank you Scott for offering the textbook definition of HBU. The anticipation alone was probably causing an excessive number of hits on Russ's site. Unfortunately the textbook definition is based upon gross assumptions concerning that elusive definition of "value". So come on; spill the beans - what is the definition of value you were presented with in the standard real estate and economics texts. (I have a suspicion but will leave it up to you).

In the meantime, I do have a practical question concerning HBU. I am currently working on a floodplain ecological restoration project for a metropolitan planning organization. The area in question was residential prior to a devastating flood. FEMA has purchased many of the properties and the future land use plan calls for naturalization of the floodplain. As a function of the forestry plan all existing trees were inventoried and characterized. My question; should the value of these trees reflect their current status as residential entities or their future role as members of a naturally regenerating forest ecosystem? And what of HBU? Has society in the form of the regional and national government usurped the freemarket economy and 'invisible hand" of Adam Smith and deemed forest cover as the "Highest and Best" use of this land? Now doesn't that throw a wrench into our traditional notions concerning "development", property improvement and value? In other areas of geologic or ecological instability homes still command top dollar even though they are in harms way (witness the multi-million dollar homes built on barrier islands).

My point? The discussion of value and HBU is, in itself, of limited value without an examination of the underlying assumptions inherent in the definitions.

Reply to post by Kevin H, on November 18, 1998 at 10:36:04:

Re your practical question(s). Which use to value? What is the purpose and the use of the appraisal? Appraisal is an aid to decision makers. If value is sought to compensate property holders from the converted land then the value type may be specified in law or contract. Takings are generally at market value of existing use I think. But is market value high (e.g. the barrier island house despite risk) or nil (the floodplain stuff is unmarketable and FEMA is rescuing the poor folks from a distressed situation). If value is sought to establish a forest management plan then value would be estimated in light of the plan. What is the intended function of the trees?

Yes, I'd say HBU has by government edict been made naturalized woodland, at least for the impacted lots. The remaining lots may have a different legal status. Same question as above applies. Will the lots still allowed become less valuable or more valuable because of scarcity.

Yes the value of the discussion of value and HBU is based on current assumptions is limited to increasing the understanding of tree appraisers who must function in a societal and legal environment which imposes certain assumptions on them. Appraisers, when they function as appraisers rather than educators or activists or theorists, seldom have the authority to establish new assumptions.