APPENDIX 3 IMPUTED RENT FOR OWNER-OCCUPIED DWELLINGS
The ABS expects to release experimental household level estimates of the imputed rent for owner-occupied dwellings early in 2008. The estimates have been derived using data reported in the 2003-04 Household Expenditure Survey (HES) and the 2003-04 and 2005-06 Surveys of Income and Housing (SIH). Estimates for both reference periods will be released concurrently.
The international standards for household income and expenditure statistics, established by the International Conference of Labour Statisticians, include the net imputed rent for owner-occupied dwellings in their definitions of household income and expenditure. In adopting this practice, a value for the flow of household consumption services conferred by home ownership is imputed. Its inclusion allows a more comparable analysis of the economic resources available to households with different types of housing tenure.
Including imputed rent as part of household income and expenditure 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 measures on a net basis i.e. the imputed value of the services received less the value of the housing costs incurred by the household in their role as a landlord.
This is the first time the ABS has produced household level estimates of the imputed rent for owner-occupied dwellings, although household sector estimates have been included in the Australian System of National Accounts (ASNA) for many years. The ASNA sectoral estimates use a broadly similar methodology, but are currently benchmarked to Population Census data and interpolated / extrapolated between Censuses using a range of indicator data.
In this study, the net imputed rent for owner-occupied dwellings has been estimated as the market value of the rental equivalent less the housing costs normally paid by landlords i.e. rates, mortgage interest, insurance, repairs and maintenance.
To estimate the value of the rental equivalence, data from the SIH on actual rents paid by renters has been regressed on the characteristics of their rented dwellings e.g. location and dwelling structure. The estimated coefficients have then been applied to the characteristics of owned dwellings to produce predicted values of the rental equivalence of these dwellings.
In practice, a range of methods can be applied to household survey data to determine the rental equivalence of owner-occupied dwellings. The methodology used in this study is consistent with the approach used in the ASNA and that recommended in the international standards for household income and expenditure statistics.
The study will also impute a benefit to tenants of government housing authorities who are paying subsidised rent and to those households occupying their dwelling rent free.
An ABS Information Paper will be released early in 2008 outlining the methodology and sources used in the study, presenting the experimental estimates derived in respect of 2003-04 and 2005-06, and analysing the effect of the imputation on the distribution of income among private households in Australia. The Information Paper will outline the assumptions used in the study and the inherent limitations of the estimates.
At the same time, the unit record imputations will be made available for use with the following confidentialised unit record files (CURFs):
The ABS will be seeking comment from users on the methodology applied in the study and the usefulness of the resulting estimates for their analytical purposes. These will help guide decisions on any future ABS work in this area. It is currently proposed that the study would next be reported using data from the 2009-10 SIH and HES surveys, if user demand supports this work.