Highest and Best Use
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Highest and Best Use

A manual for a new model of value creation

Gabriel Townsend Darriau

The real estate market relies on a fundamental principle: that of “highest and best use”. Land is a sponge from which capital extracts every last drop of value. But what happens when land is intentionally occupied to challenge this notion? What happens when other forms of value (like experiential, or emotional value) are prioritized over financial value? Armed with nothing but an ambulant wooden pavilion, Gabriel Townsend-Darriau challenges concepts of private property and our most basic conceptions of real estate development.

Thematic

Professor

Location

Date

Value

Marie-Sophie Banville

Montreal, Qc

May 2020

1. Project Overview

Highest and Best Use is a piece about land value. A light structure (‘the pavilion’) is designed and installed on a variety of private sites across Montreal. The pavilion offers gifts to the public, who are invited to accept these gifts, ask questions, and leave their impressions. These impressions are recorded and then analyzed through an arbitrary method of data manipulation. The result is a monetary value that represents the return on the investment made by the pavilion. In a further developed version of the piece, the results are then communicated to private landowners and public authorities by various methods. 

2. Purpose of the piece

The impetus for this project is a basic desire to unpack the real estate credo of ‘highest and best use’. This curious concept  is a starting point for addressing the following questions:

  • Who decides the highest and best use for land?
  • Is the market the best, or only, judge of value?
  • Do alternative kinds of ‘investment’ create value in a real estate economy?
  • What are the abstract mechanisms for land value extraction?

The act of designing a movable structure that creates non-monetary value (the pavilion) and plopping it on a piece of land, vacant or developed, poses the four questions stated above. 

The piece approaches and plays with several themes from the course Excess and the City

  • It questions the notion of private property by crossing  property lines and arrogantly seeking to create value upon private land. Locke claims that “So much land as a man [...] improves, [...] so much is his property” . If the pavilion creates value on someone else’s land, then whose land is it?
  • It also challenges the hegemony of economic value, as opposed to other forms of value (e.g. social value). It proposes that a so-called ‘improvement’ on land can be non-monetary (a gift). It then sarcastically proposes to translate the value of a gift into monetary terms, highlighting the arbitrary character of land evaluation.
  • Finally, the piece reveals the pettiness of the game of fiscal urbanism. The pavilion strives absurdly to maximize the utility of land, abiding dogmatically by the notion of “highest and best use”, whereby land should always be developed to its maximum economic potential. The piece furthermore offers an opportunity to challenge the culture of fiscal urbanism directly, as a prop for sending re-evaluation requests to the City of Montreal.

The piece is a gross caricature of the land value system, speculation, and the culture of property at large. It is also a reappropriation of the city. Movements like tactical urbanism have attempted such reappropriation before in Montreal, but have yet to make subversive inroads that tackle private property.    

3. Implementation

The project consists of six elements. The elements of the project are best consulted on this Google Site, where I have presented them in the way I would like the eventual real webpage to look. I have placed text, four images, and links to files (Google sheets) and to an interactive element (Google My Maps) from the GSite into this document, as well as into the Drive folder. The elements of the project are:

  • 1. The ‘pavilion’ itself (Sketchup design + text)
  • 2. A ‘guest book’ which records impressions from the public (picture + text)
  • 3. The ‘itinerary’ of sites visited by the pavilion (Google My Maps + text)
  • 4. Explanations on the notion of ‘highest and best use’ (text)
  • 5. A proposed method for manipulating the impressions left by the public (Google Sheets + text)
  • 6. Example of direct communication to public authority relaying data from interventions 
  • Note: Unfortunately, I was unable to prepare this element of the piece in time, but I will continue developing it as the piece evolves beyond this class.
  • (Not numbered) A preamble and a concluding reflection (text)

What follows is the content for the web page, in order of appearance.

4. Content

[Preamble]

Real estate capital roams the city with an appetite for land value. It is highly mobile. Ironically though, its method for extracting land value is to build immovable structures: in other words, to extract value, value must first be produced. This is capital investment. 

In real estate, all land must be valued at its ‘highest and best use’. The notion is fundamental to the model of real estate development. Here, what is 'highest' and 'best' is determined by land's potential to return value on capital investment.

...

In the spring of 2020, a small-time local developer - HBU Immobilier - reflects on the model. They find inefficiencies and lost opportunities in it. They pose questions like: "If someone builds a modest structure on high-value land, how does real estate react? What other kinds of value are there and how does land respond to them? How does a memory or an experience create value in a real estate economy?"

In the summer of 2020, HBU builds a structure. They call it 'the pavilion'. 

  1. The pavilion is mobile: light, with a simple design, easy to build and unbuild - essentially the bare bones of a shed. The pavilion's purpose is to offer gifts to passers-by. 
  2. HBU believes in the principles of effective value capture, and so they set out into the city with the pavilion as their tool to improve under-developed private lands to their highest and best use. They pick out a site, set down the structure and operate it for a brief period. 
  3. As the pavilion makes its offerings to the public, HBU is careful to take note of the value generated, so that they can make informed speculations on the next site to tap.

What follows is a manual for a new model of value creation.

4. Pavilion

HBU and its pavilion haunt the city, seeking to graft their project to valuable land. A sign hanging outside the pavilion advertises a gift: it could be a coffee, a smile, or a story. The gift is served to passers-by:

"Hello. What is this?"

“Hi! We're here activating this space's untapped value. Would you like a free coffee?"

"Sure! But I don't get it."

"We figured that this space has a lot more to give than it currently does. We think the land could benefit from being used to its fuller potential! Basically, we're trying to make something nice for the people who walk by here every day. Take a minute to enjoy the coffee. And let us know your feelings about the project before you leave!"

The pavilion taps a new kind of value. Land value is created by the market, who first perceives it, then consents to a price to represent it. The pavilion confronts this value encased in the land, extracts it, and, as it offers gifts, transfers value back to the community who originally construed it.

5. Guest Book

But the developer is shrewd and knows the true worth of a gift. In reality, the pavilion generates as much value as it extracts. HBU can’t let this value go uncaptured. Real estate value is estimated according to the price that people are willing to pay. People perceive a property’s value in terms of utility, desirability, and scarcity and then identify a price point that reflects this perception. In the pavilion’s case, where objects of value are given away for free, the developer would have no price point by which to observe value, and thereby evaluate the pavilion’s contribution to the site. However, HBU finds a solution. Once they've enjoyed the gift, visitors are invited to leave a note in a specially prepared 'guest book'. The guest book captures value perception. As records of market perception in a real estate economy, the feedback written in the guest book is the raw data that HBU will use to estimate the value generated on site.

The guest book.

6 Sites

6.A. Any site is under-valued

HBU installs the shed on a vacant lot: other than the pavilion, what else does the land have to give? The pavilion is likely to be the highest and best use that the land has seen in years.

But HBU is set on bigger targets: just because a property is already being used doesn’t mean it’s reached its full potential. After all, the pavilion isn’t strictly about activating undeveloped spaces. It’s about asking the question: what is 'highest and best'? The pavilion can just as well improve already-'improved' land.

This web map details proposed sites for the pavilion’s itinerary through the city.

6.B. Itinerancy

Like the pavilion, many city-dwellers drift, seeking, often with great difficulty, to make roots in a city bursting with value, but increasingly devoid of meaning. HBU shrewdly speculates on this quest for attachment by employing itinerancy itself. They pluck property value out of its static state. They make it flexible, experimental, searching.

7. Highest and best use

Highest and best use is defined by real estate professionals as:

“The reasonable, probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value.” 

In real estate economics, highest and best use is extremely useful for explaining the behaviour of players in the land market. It encapsulates the idea that property investment should always seek the greatest return from the land.

7.A. The Sponge

A piece of land is a sponge: it absorbs and retains value. Capital investment, also known as 'improvement', applies pressure, like a weight, which squeezes value out of the sponge. As more capital is invested, more weight pushes downward, and more value is extracted.

However, the relationship between capital investment and value extraction is non-linear. If the first unit of capital invested squeezes out 5 units value, then the 1 millionth unit of capital may only squeeze out 2 units of value, and the 10 millionth may only squeeze out 0,5 units. There is an equilibrium to be achieved in the game of value extraction. As such, the highest and best use of a piece of land is that which achieves the greatest value for the capital invested.

7.B. The pavilion's response

HBU asks: "Why stop at the point of equilibrium? In the strictest terms, when conventional real estate says 'highest and best', it actually means 'optimal and most economical'... The current understanding of improvement is shallow. What other kinds of investment can pursue value extraction well beyond the point where the building has been built?"

8. Evaluative model

Link to Google sheets 

The collection of entries in the guest book is HBU's database of value perceptions, but it still can’t help them evaluate the pavilion’s worth. HBU needs to know the value in dollars, since this is what will allow them to accurately compare the value created between sites. Since the value of the sites themselves is expressed in monetary terms, the gift value must be converted: HBU needs to develop an evaluation model that allows them to crunch gift value into dollars.

This table presents one possible model. Here, the base metric is positive/negative connotation in linguistic expression.

  1. Each guest's entry in the guest book is broken into clauses.
  2. Each clause is analyzed for positive or negative expression (e.g. "This is good" or "This is bad")
  3. Each clause receives multipliers based on qualifiers present (adjectives or adverbs such as "amazing" or "horribly"). This results in the clause score.
  4. The clause scores are added to get the entry score:  the score that represents the guest's full impression.
  5. The entry score receives multipliers for the number of exclamation marks and other kinds of emphasis used.
  6. The entry score then receives a final multiplier based on the expected number of days that the memory of the experience will last in the guest's mind. This number is calculated from the entry score itself: the higher the score, the longer the staying power.

Under this model, as illustrated in the linked spreadsheet, the value generated for a hypothetical "Site 1" with 5 visitors,  is evaluated at 669,00 CAD.

9. Affect and Improvement

The 6th step in the manipulation of the guest book data is based on a premise: that the memory created for the guest continues to generate value beyond the moment that the gift is offered. Similarly, HBU believes that improved land never stops  creating value. Improvement goes much further, beyond real estate production, in the strictest of monetary terms. Private land is not at its highest and best. No land is off limits.

10. Bibliography

1. “Highest and best use.” Duncan and Brown Real Estate Analysts, n.d., www.duncanbrown.com/highest-and-best-use.

2. Banville, Marie-Sophie. « L’Empire de l’éphémère. » Nouveau projet, 2016, 144-147.

3. Locke, John. “Two Treatises of Government.” 1689.

4. Ozdilek, Unsal. DSR4980 : Éléments d’évaluation. 28 Jan. 2020, Université du Québec à Montréal, Montréal. Class lecture.

5. Ozdilek, Unsal. Fondements pratiques de l’immobilier. Québec, Presses de l’Université du Québec, 2014.



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The Office of Rules and Norms (ORN) is an arts-based transdisciplinary collective that engages with regulations, the rule of law and cultural norms. These engagements reveal, comprehend, play with, subvert, and transcend current ways of understanding and acting in relation to regulatory forces in order to make room for more equitable alternatives. In its attempts to query legal and behavioral urban infrastructures, the ORN specifically deploys art and design practice, culture, and methods along three axes:
Art as Subversion | Intervening in grey areas of regulation
Art as Pedagogy | Making public various forces and forms of influence
Art as Decision-Making | Reorienting modes of knowing and deliberating