In areas where there are housing shortages, it may also deny housing opportunities to others. However, with around 800,000 leasehold houses in England, and an average annual expenditure per household on structural insurance9 of £168, the potential for exploitation of the current system is large. Guidance on depreciation, if it is necessary in the light of the outcome of those discussions, and guidance on making provision for impairment (which will be necessary whatever the outcome) will be included in the final version.
In considering these, it is important to have regard to the principle of materiality: the amount of effort which it will be appropriate for an authority to devote to valuation must be proportionate to the impact the value of the properties in question will have on the overall valuation of the authority’s stock. Within the context of the valuation task, Tax Depreciation Schedule Calculator are the proposed beacon approach the most effective, or are there better approaches which would be more cost effective?
The Department is anxious to ensure that the guidance will be a useful and practical tool for authorities to use to enable them to carry out the valuation of their stock which will be necessary for keeping accounts on the new basis. The draft guidance at the annex to this paper has been drawn up for the Department by the Valuation Office and has been piloted with three authorities. The Department is consulting on a proposed methodology for calculating the MRA at the same time as consulting on this draft guidance.
The cost of capital will be calculated as a specified rate of return (initially 6%) on the value of the authority’s housing assets. This discretionary power, however, is used less frequently than the duties arising from authorities’ consideration under section 604. For HMOs there is a further criterion of unfitness for the number of occupants under section 352 of the 1985 Act as amended, reflecting the additional safety risks associated with HMOs, notably fire; and sections 358 to 364 of the 1985 Act enable a local authority to specify the numbers of persons who may sleep in a room in an HMO. It will be clear from the above description that the legal framework has developed piecemeal and that there is scope for rationalisation.