The Economic Consequences of Homelessness in The US

calculations, tables (e.g., economic depreciation) and guidelines for the consideration of
different influences. WertV and WertR are not binding for appraisals for nonofficial use,
nonetheless they should be regarded as best practice or Generally Accepted (German)
Valuation Practice (GAVP).
Comments on German GAVP
In most regards Generally Accepted (German) Valuation Principles is consistent with
international practice. The investment market weighs the income approach most
heavily. However, there are some important differences:
Land and improvements are treated separately. German GAVP assumes that the
land can be used indefinitely, but the buildings have a limited lifespan; This
coincides with the balancing of the assets. The value of the land is determined by
the sales comparison approach in both the income and cost approaches, using
the data accumulated by the Gutachterausschuss which is then added to the
building value.
In order to account for the usage of the land, the net operating income is reduced
by the Liegenschaftszins (interest paid to the land-owner by the owner of the
building, i.e., ground rent). The Liegenschaftszins is the product of the land value
and the Liegenschaftszinssatz (interest rate for land use). The
Liegenschaftszinssatz is the equivalent of the yield—with some important
differences—and is also determined by the Gutachterausschuss.
Unlike the All Risks Yield (ARY) in UK practice, the Liegenschaftszinssatz (abbr.
LZ) does not include an allowance for default (not to be confused with structural
vacancy), therefore this needs to be subtracted from gross operating income. As
a result, the Liegenschaftszinssatz will usually be lower than the All Risks Yield.
Based on the assumption that the economic life of the improvements is limited,
the yield and remaining economic life determine the building value from the net
operating income.
Contracts in Germany generally prescribe that the landlord bears a higher portion
of maintenance and operating costs than their counterparts in the United States
and UK.
Criticism
Mathematically the distinction between land and improvements in the income approach
will have no impact on the overall value when the remaining economic life is more than
thirty years. For this reason it has become quite common to use the Vereinfachtes
Ertragswertverfahren (simplified income approach), omitting the land value and the
Liegenschaftszins. However, the separate treatment of land and buildings leads to more
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