The ABS has implemented new methodologies for household level estimates of gross imputed rent in the 2015–16 Survey of Income and Housing (SIH) and Household Expenditure Survey (HES). Different methodologies have been developed for owner-occupied dwellings and other subsidised tenure types.
The housing costs for deriving net imputed rent for each tenure type are unchanged, however the net imputed rent estimates are impacted by the change in gross imputed rent estimates.
Net imputed rent is estimated as gross imputed rent less housing costs. For owner-occupiers, the housing costs subtracted are those which would normally be paid by landlords i.e. general rates, water and sewerage rates, mortgage interest, building insurance, and repairs and maintenance. For households paying subsidised rent (e.g. tenants of an employer or of a state/territory housing authority) and households occupying their dwelling rent-free, the housing costs that are subtracted are largely made up of the reported rent paid, but also include other housing costs incurred, such as rates, which are also subtracted for some tenure types.
The availability of imputed rent estimates allows the analysis of household income to be extended to include the imputed rental incomes that flow to people living in homes owned by the occupant and those paying subsidised rent. Such imputations allow for more meaningful comparison of the income circumstances of people living in different tenure types, and to understand changes over time in income levels and the distribution of income when tenures may also be changing over time. 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 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.
The new methodologies for household level imputed rent estimates are explained in Estimates of Imputed Rent, Australia, 2015-16 (cat. no. 6525.0) which is expected to be released in late 2017. The information paper also quantifies the impact of the new methodologies compared to the previous methodologies, including the experimental method implemented in 2013-14.
The methodology for owner-occupied dwellings uses aggregated dwelling sales data from the eight state and territory Valuers General departments and Census rental data to produce mean rental yields for very small geographic regions. Median rental yields are then allocated to 220 strata or groups across Australia (based on location, dwelling type, and socio-economic status). These rental yields are used to produce gross imputed rent estimates for individual dwellings in the SIH and HES. Net imputed rent estimates are then derived for individual dwellings by deducting their housing costs from the gross imputed rent estimates. Historical gross and net imputed rent data from 2003–04 to 2013–14 have been revised using the new methodologies. These will be published in Household Income and Wealth, Australia, 2015–16 (cat. no. 6523.0)
In 2015-16, the experimental methodology implemented in 2013-14 was further refined. Stratification by number of bedrooms was removed from the method and semi-detached dwellings were combined with apartments. Overall, the effect of these changes reduced the number of strata from 725 to 220. For further information on the method implemented in the 2015-16 SIH and HES and the refinements made to the imputed rent methodology, please refer to Estimates of Imputed Rent, Australia, 2015-16 (cat. no. 6525.0)
For more information on the previous methodologies, see the previous issue of the publication Experimental Estimates of Imputed Rent, Australia, 2003–04 and 2005–06 (cat. no. 6525.0) which contains background on the hedonic regression method, and Experimental Estimates of Imputed Rent, Australia, 2013–14 (cat. no. 6525.0) which contains background on the experimental method.
Analysts who use SIH confidentialised unit record files (CURFs) will be able to produce revised gross imputed rent estimates using the latest methodology for individual owner-occupied dwellings for each SIH from 2003–04 to 2013–14. Rental yields for strata based on CURF variables will be provided as a data cube in Estimates of Imputed Rent, Australia, 2015-16 (cat. no. 6525.0). The revised gross imputed rent for an owner-occupied dwelling can be calculated as the 'Estimated sale price of the dwelling' reported in the relevant SIH or HES, multiplied by the published rental yield for the stratum of the dwelling (based on location and dwelling type). More information is available in the 'Historical Data' section of the same publication.
Additional data items are available for income measures which include imputed rent that exclude housing related social transfers in kind (STIK). These data items are useful for undertaking analysis where both imputed rent and STIK are included in the measure of income. These data items exclude the housing component of STIK in imputed rent for state/territory housing authority tenants to prevent double counting of housing STIK estimates.