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Neighborhoods in Transition

Many of our neighborhoods in Harris County are going through transition. As more and more of our county's raw land gets developed, it gets scarcer and more expensive. Builders and businesses look to redeveloping existing properties. When redevelopment happens within a neighborhood, we say the neighborhood is in transition. In some neighborhoods, particularly subdivisions whose deed restrictions have expired, businesses begin to move in. A business might convert a house or tear it down and build a commercial building.

Another type of redevelopment tears down old houses and builds modern, often larger homes in their place.

When these things happen, an appraisal concept called "highest and best use" comes into play. Highest and best use is the most profitable, practical use of the property. If the most profitable and practical use of a property is to tear the improvement down and build something else, the highest and best use of the property has changed.

When the highest and best use changes, appraisal theory states that the value associated with the property transfers to the land. This makes logical sense. If the typical buyer would buy a home and tear it down, the buyer isn't paying for the home. They are paying for the land.

When the highest and best use changes in a residential neighborhood, land values frequently increase, and the value allocated to existing buildings often decreases. However, depending on prices being paid, the total value of the property may not change.

State law does provide protection for homeowners if the prevailing use in a neighborhood changes to a non-residential use. If you qualify for a homestead exemption, we'll still appraise your property as if its highest and best use is residential. That's true even if it's the only home left in the neighborhood.

Appraisal is a little different if the highest and best use in a neighborhood remains residential, but buyers are simply replacing older homes with newer and better buildings. In that case, your land value will reflect the prices people are paying for the properties they tear down.

It's a complicated process. It is one of the prices we pay for living in a county that continues to outpace the nation economically.

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