INTRODUCTION
The ABS first released experimental household level estimates of imputed rent for owner-occupied dwellings and other tenure types not paying market rents in May 2008, derived from data reported in the 2003–04 and 2005–06 Survey of Income and Housing (SIH). The same methodologies were used for each subsequent SIH up to 2011–12.
The ABS has developed new experimental methodologies for estimating gross imputed rent for owner-occupied dwellings and for other subsidised tenure types to overcome limitations in the previous methodologies and improve household level imputed rent measures. This is part of a program to continually review and improve ABS outputs.
This information paper presents a detailed explanation of the new methodologies which have been implemented in the 2013–14 SIH. Estimates of imputed rent using the new experimental methodologies are presented in Household Income and Wealth, Australia, 2013–14 (cat. no. 6523.0) for 2003–04 to 2013–14. These include imputed rent estimates for owner-occupied dwellings and the imputed benefit to tenants not paying market rents.
The ABS plans to use these new methodologies in future cycles of the SIH.
Details on the previous methodologies are provided in the first issue of this publication, available from the ‘Past & Future Releases’ tab.
The ABS welcomes comments from users on these new methodologies and the usefulness of the resulting experimental estimates for analytical purposes. Comments can be forwarded to: Director, Living Conditions Section, Australian Bureau of Statistics, Locked Bag 10, BELCONNEN ACT 2616. Alternatively, please email <living.conditions@abs.gov.au>.
BACKGROUND
Household income statistics compiled for individual households are critical to analysis and modelling that supports understanding of the socio-economic circumstances of different household types. They are also important in developing and evaluating policies on income support, income distribution and income taxation.
The ABS regularly collects detailed information on household income, expenditure and wealth in its SIH and Household Expenditure Survey (HES). SIH is conducted every two years, with the latest results published with respect to 2013–14. The HES is conducted every six years, with the latest survey relating to 2009–10. The SIH and HES have been conducted on an integrated basis in 2003–04 and 2009–10, and will be again for future HES cycles, the next being in 2015–16.
The ABS releases summary statistics on household income in Household Income and Wealth, Australia (cat. no. 6523.0). Confidentialised Unit Record Files (CURFs) from the surveys are also released to support comprehensive and detailed analyses by users.
The most restricted concept of income used in income analysis is the gross private income of individuals. While this measure is useful for certain purposes, it is generally of limited use when trying to understand people’s broader economic wellbeing. Published ABS household income analysis, in accordance with international statistical standards, extends this income measure by:
- adding government transfers (both cash and in kind),
- deducting direct and indirect taxes,
- equivalising household income to adjust for household size, and
- adding an imputed rent value for the net benefits of home ownership and subsidised rent payments.
Imputed rent is included in both household income and expenditure. This conceptually treats owner-occupiers as if they were renting their home from themselves, thus simultaneously incurring rental expenditure and earning rental income.
Imputed rent is included in income on a net basis i.e. the imputed value of the services received less the value of the housing costs generally incurred by the household in their role as a landlord. Gross imputed rent is added to the expenditure of owner-occupiers, and any housing costs generally borne by a landlord are deducted (e.g. general and water rates, building insurance).
Including imputed rent in income for people living in different tenure types enables more meaningful analysis to be undertaken on their economic wellbeing and enables better analysis of changes over time in income levels and income distribution if tenures change.
CURRENT INTERNATIONAL STANDARDS
The international standards for household income and expenditure statistics include imputed rent for owner-occupied dwellings in the conceptual definitions of both household income and expenditure. The current international standards for household income and expenditure statistics were adopted by the 17th International Conference of Labour Statisticians (ICLS) in 2003.
The ICLS standards recommend that, when estimating consumption expenditure, the services of owner-occupied dwellings are valued as the gross rental equivalence. Costs that are normally paid by landlords such as property taxes, property and liability insurance, mortgage interest, water and sewerage charges, and repairs and maintenance of the dwelling should be excluded from household consumption expenditure. For the estimation of household income, the ICLS standards recommend that imputed rent be included on a net basis, with the housing costs normally paid by landlords being deducted from the gross rental equivalence.
Where rents paid on rented dwellings are subsidised, the international standards recommend that a rental benefit flow be estimated as the market rental value for an equivalent dwelling less the rent actually paid.
The standards also recommend that the estimates of imputed rent be separately provided to support different types of analyses.
The ABS treatment of imputed rent is consistent with the international standards which are also reflected in the Canberra Group Handbook on Household Income Statistics, Second Edition, 2011. Both the new and previous methodologies use a rental equivalence approach.
The international standards for the macro-economic statistics (System of National Accounts, 2008) recommend the inclusion of imputed rent for owner-occupied dwellings in the household sector estimates on a comparable basis to the ICLS standards for household level estimates.
REFERENCES
International Conference of Labour Statisticians 2003, Final Report of the 17th International Conference of Labour Statisticians, Geneva, 24 November to 3 December 2003.
UNECE (2011), Canberra Group Handbook on Household Income Statistics, Second Edition, ECE/CES/11, Geneva.
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