A zoning change increases permitted density from four to eight units per acre. What is the likely effect on site value?
Correct Answer
A) Value rises if the market supports the added units
Added permitted density can increase site value if the extra development is physically possible, financially feasible and valuable after added costs, timing and required return. Density doubling does not imply value doubling. Market evidence must address benefits and any offsetting effects.
Why This Is the Correct Answer
Option A is correct because added permitted density can increase site value when the market supports the extra development after accounting for added costs, timing and required return. The increase depends on market evidence, not on the zoning change alone.
Why the Other Options Are Wrong
Option B: Value doubles in proportion to the density allowed
Option B says value doubles in proportion to the density allowed. Doubling density does not imply doubling value, because added costs, absorption, timing and demand affect how much the extra units are worth.
Option C: Value falls because the site becomes more crowded
Option C says value falls because the site becomes more crowded. Greater permitted density adds development options rather than requiring crowding, and it tends to raise value where the market supports it.
Option D: Value is unchanged, as zoning is not a market factor
Option D says value is unchanged because zoning is not a market factor. Zoning is a major influence on legally permissible use and highest and best use, so it can affect value.
More units, if market pays
Extra density adds value only when buyers will pay for the extra units after the extra costs.
How to use: Use this to judge the value effect of upzoning questions.
Exam Tip
Be cautious of answers that assume value changes in direct proportion to a zoning change.
Common Mistakes to Avoid
- -Assuming value rises in direct proportion to density
- -Ignoring added development costs and absorption time
- -Treating zoning as irrelevant to market value
Concept Deep Dive
Analysis
This question tests how a zoning change affects site value. Higher permitted density can raise value, but only if the added units are physically possible, financially feasible and supported by market demand after costs and required return. Value does not rise in simple proportion to density.
Background Knowledge
Zoning establishes the legally permissible uses and densities for a site, which shape highest and best use. A change that permits more units can increase value if the additional use is financially feasible and in demand. Appraisers support any value effect with market evidence.
Real-World Application
A suburban parcel is upzoned from four to eight units per acre. The appraiser studies sales of land with similar density entitlements and absorption for townhomes to estimate how much of the added density buyers actually pay for.
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Previous Question
Two contiguous parcels under different ownership are worth $240,000 and $160,000 if used separately. Assembled under single ownership for a higher-utility use, the combined site supports a market value of $475,000. What is the indicated plottage value?
Next Question
An appraiser's value indication for a whole property is $2,450,000, and the depreciated contribution of all nonland improvements, including site improvements, is $1,180,000. What land value does the extraction method indicate?