A site legally permits at most 40 units and can physically support 50. Supported comparable analyses find 30 and 40 units financially feasible, with 40 units producing the highest net land value after costs, timing and required return. Which use is maximally productive among these alternatives?
Correct Answer
B) 40 units, because it yields the highest supported net land value
Among legally permissible, physically possible and financially feasible alternatives, select the highest supported net land value on a compatible risk/timing basis. A legal maximum alone does not establish feasibility or productivity; a higher gross rent or percentage return alone would not suffice.
Why This Is the Correct Answer
Option B is correct because 40 units is legally permissible, physically possible and financially feasible, and the supported analyses show it produces the highest net land value after costs, timing and required return. The maximally productive use is the most productive use among the financially feasible uses.
Why the Other Options Are Wrong
Option A: 30 units, since that option carries the least development risk
Option A, 30 units because it carries the least development risk, is wrong because the analyses already account for risk and timing, and 30 units produces a lower net land value than 40 units. Lowest risk alone does not make a use maximally productive.
Option C: 50 units, despite the legal maximum of 40 units on the site
Option C, 50 units despite the legal maximum of 40, is wrong because a use that exceeds the legal maximum fails the legally permissible test. Physical capacity cannot override zoning limits.
Option D: No use at all, because financial feasibility is irrelevant here
Option D, no use at all because financial feasibility is irrelevant, is wrong because financial feasibility is one of the core highest and best use tests, and the facts show two feasible uses.
Legal, Possible, Feasible, Maximal
Run the four tests in order like filters. Only uses that pass the first three compete for the highest land value.
How to use: Use this when a question offers several development options and asks which is highest and best use.
Exam Tip
Eliminate any option that exceeds legal limits first, then compare remaining feasible options by supported land value.
Common Mistakes to Avoid
- -Choosing the physically largest project despite zoning limits
- -Picking the lowest-risk option without comparing land value
- -Treating the legal maximum as automatically maximally productive
Concept Deep Dive
Analysis
This question tests the maximally productive test of highest and best use. First screen out uses that are not legally permissible, physically possible or financially feasible, then pick the remaining use with the highest supported land value. The 50-unit option fails the legal test, and of the feasible options, 40 units gives the highest net land value.
Background Knowledge
Highest and best use is tested in order: legally permissible, physically possible, financially feasible and maximally productive. Among uses that pass the first three tests, the one producing the highest land value is maximally productive.
Real-World Application
A developer asks an appraiser to value a site zoned for up to 40 units. The appraiser models 30- and 40-unit projects with market rents, costs and required returns and concludes that the 40-unit project yields the highest land value.
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