Land Use, Zoning, Environmental Issues, and Property Valuation
Zoning and land use
Zoning is adopted by Maryland counties, Baltimore City and municipalities, dividing land into use districts with setbacks, height and density limits. A variance relaxes a dimensional standard on a showing of hardship; a special exception or conditional use permits a listed use subject to standards; a nonconforming use predates the ordinance and generally may continue but not expand. Subdivisions require plat approval, and Maryland's Smart Growth framework steers state funding into Priority Funding Areas.
Environmental overlay
The Chesapeake Bay Critical Area Act regulates land within 1,000 feet of tidal waters and imposes a 100-foot buffer measured from mean high water. Also relevant: wetlands, floodplains, lead paint, radon, asbestos, underground storage tanks and mold.
Valuation
- Sales comparison: adjust comparables for their differences from the subject.
- Cost approach: replacement cost less depreciation, plus land value. Depreciation is physical, functional or external.
- Income approach: value equals net operating income divided by the capitalization rate.
- Gross rent multiplier equals price divided by gross rent.
Worked example
A duplex produces $72,000 gross income and $18,000 of operating expenses, so NOI is $54,000. Market cap rates are 6 percent. Value = $54,000 divided by 0.06 = $900,000. Dividing the $72,000 gross income by 6 percent would overstate value by $300,000, a classic distractor.
Traps that cost marks
Dividing gross income by a cap rate; calling a variance a nonconforming use; forgetting the 100-foot Critical Area buffer; folding land value into the building's cost estimate.