If rebuild doesn't permit SFR, would that automatically disqualify SFR as HBU? I get confused over HBU as vacant and HBU as improved. Which applies when?
Not necessarily.
Highest and Best Use Analysis:
The four tests used for H&BU analysis are (a) legally permissible, (b) physically possible, (c) financially feasible, and (d) maximally productive. The following analysis describes the zoning, and then each of the four tests will be applied to determine the as-vacant and the as-improved highest and best use.
Zoning- Located in the C2 (Community Commercial) District. The purpose of this district is to provide a full range of retail and service establishments to communities. This district has many permitted uses (allowed by right) and several uses which would require either a Minor or a Major Use Permit. Single family residential is not among any of these uses unless the residential use is in conjunction or combination with a commercial use. Development standards include a minimum lot size of 8,000 square feet (when public water and sewer are available) with an average lot width of 80 feet for interior lots and 100 feet for corner lots. The subject has a corner lot and is 1,920 square feet. The subject property does not meet either requirement but assuming it was a legal lot of record at the time current zoning regulations were implemented the use as a single family residence can continue until that use is changed. If the property is abandoned for more than two years the use would revert to a commercial use. Additionally, the exceptions to the ordinance will allow for the sub-standard size lot to be developed with a conforming commercial use to the extent allowed by development standards.
Therefore, the improvement is legal, non-conforming (grandfathered). The residential use may continue, but if the site were vacant, a residential improvement would not be allowed and any improvement would need to conform to the commercial/retail/service uses allowed by the zoning. The County Planning Department has issued a “rebuild letter” confirming that the improvements can be rebuilt if destroyed.
As Vacant-
Legally permissible: Primary residential use is not an allowable use. Residential use is allowed in conjunction with or in combination with a commercial use. Therefore, commercial or mixed-use (commercial/residential) is legally permissible.
Physically possible: The site can support an improvement as evidenced by the existing improvement. The lot size is substandard but would qualify for development under the exception clause noted and described above. Therefore, development of an improvement is physically possible.
Financially feasible: Given the recent fire disaster and the adverse economic impact such an event is expected to have in the community, it is not likely that there will be demand for new commercial space in the near or mid-term; rebuilding will occur on damaged sites, and there may be some relocation of existing business to communities not affected by the fire. This implies no marginal demand for new commercial space; as such, it is not reasonable to presume the cost of new construction would be recaptured in the market.
Therefore, the as-vacant H&BU conclusion is: H&BU is to hold for future, commercial/mixed-use development. The timing of such development would reasonably be expected to be no sooner than 2-3 years.
As Improved-
Legally permissible: While a new residence is not allowed, the existing residence is grandfathered. Therefore, residential use is a legally permissible use. As noted, if the residential use is abandoned for more than two years, the use would change to commercial.
Physically possible: A residence exists, and it functions as a home. Therefore, the residential use is physically possible.
Financially feasible: The site, as improved, is worth more than the site, as-vacant. The improvements contribute value to the site and have remaining economic life to continue to contribute value. Therefore, the current improvement should be retained.
Maximally productive: An analysis of both residential and commercial sales data indicates that a small single family residence (grandfathered) or a small commercial property such as an office building (which is among the permitted uses in the C2 district) are competitive and with no one use being significantly more valuable than the other. While the current improvement can support both uses, the improvement is configured as a functional residential home; no changes need be made to continue this use. Alternatively, as a small commercial office, there would be some anticipated costs; although not necessarily significant, they would be real nonetheless. In the formal “maximally productive test”, if both small residential and small office/commercial spaces are valued equally, but the existing configuration is as a residence with a cost associated to convert the use to commercial or mixed-use, then the maximally productive use is to retain as a single family residence.
Based on all of the above, the highest and best use, as improved, is as-is: retain and use as a single family residence. As noted, conversion to a commercial/mixed-use property is a potential and an individual buyer may make that decision, but the data does not indicate that likely buyer would convert to commercial. Therefore, the residential use of the improvement is the highest and best use.
The likely buyer for the subject is an owner-user. The likely buyer would purchase the property and update some components, and correct any deferred maintenance. Given the size of the lot and the size of the home, significant remodeling or upgrading is unlikely.
