In this paper, experimental estimates of imputed rent for owner-occupied dwellings, and of the benefits to tenants paying subsidised rent or occupying their dwelling rent-free, have been presented. The effect of the inclusion of imputed rent on the distribution of income among private households in Australia has also been examined.
The inclusion of net imputed rent in income measures provides a broader picture of the economic wellbeing of owner-occupier households and their circumstances relative to other households, and has a partial equalising effect on the income distribution. Reflecting their high rates of outright home ownership, the inclusion of net imputed rent results in the greatest increases in equivalised disposable household incomes for couples with reference person aged 65 and over and lone persons aged 65 and over, although these groups still have amongst the lowest incomes of the selected life cycle groups examined in this paper.
In 2005-06 the proportion of owners without a mortgage in the lowest equivalised disposable household income quintile decreased from 48% to 30% once imputed rent is added to income. The corollary was an increase in the proportions of renters and mortgagors in the lowest equivalised disposable household income quintile when net imputed rent was included.
When imputed rent was included in household income, the characteristics of those in the lowest income decile changed significantly. With 33% of people in the lowest equivalised disposable household income decile moving up the distribution, largely reflecting older people who owned their home outright, the mean age of the reference person in the lowest decile dropped from 58 to 49 years and mean net worth and mean expenditure both fell.
The methodologies used to produce the experimental estimates presented in this paper can be applied whenever a SIH or HES is conducted. Subject to feedback from users, the ABS is considering repeating the study using data from the 2009-10 SIH and HES.
The ABS would welcome any comments from users on the methodology applied in the study and the usefulness of the resulting estimates for analytical purposes. Comments can be forwarded to: Director, Living Conditions Section, Australian Bureau of Statistics, Locked Bag 10, BELCONNEN ACT 2616. Alternatively, email <firstname.lastname@example.org>.