Second Schedule

Clause 32

COST RENT FORMULA

The following formula is to be used to determine real cost rents for public rental accommodation. States are to charge rents at least equal to those resulting from the use of this formula. The formula is not to be applied to the costs of individual dwellings but rather to the total cost pool of the rental stock. In allocating the total cost rent pool to individual tenancies States will have regard to variation in housing standards and locations within the constraints of available administrative arrangements for assessing these variations.

1. Recovery of operating expenses

The costs to be recovered in this area are ordinarily listed in the rental accounts of State housing authorities as yearly expenditure items. These include:

(a) administration;

(b) rates;

(c) insurance;

(d) specific operating expenses associated with particular types of units;

(e) annual maintenance;

(f) yearly allowance for rent arrears and debts written off;

(g) yearly allowance for vacancies;

(h) leasing expenses related to land and dwellings;

(i) operating expenses of community facilities;

(j) any other operating costs agreed between Federal and State Housing Ministers.

2. Interest Charges

Interest payable on loan funds invested in public rental housing.

3. Depreciation

(i) depreciation rate is to reflect a life of between 40‑75 years of the capital improvements on the land;

(ii) the value of capital improvement will be based on the estimated current capital improved value;

(iii) the minimum annual depreciation rate will be not less than the rate resulting from a term of 75 years.

IN WITNESS WHEREOF etc.