Économie et Statistique n° 381-382 - 2005Housing
Imputed rents and living standard inequalities
In studies of inequalities, economic theory recommends imputing to owner-occupiers the notional rent that they could earn from their housing if they rented it and imputing to low rental public housing tenants the «implicit subsidy» represented by the rent differential between the public housing sector and the private sector. However, in practice, these two approaches do not reveal the same degree of legitimacy and need. Imputing notional rents to owners significantly alters the hierarchy of standards of living: poverty would be slightly overestimated if this were disregarded. It gives rise to a younger and more urban low-income population. Most importantly, imputing notional rents to owners accentuates the contrast between low-income and other households' housing conditions. Imputing an implicit subsidy to public housing tenants is even more debatable in that low rental public housing and private rented housing do not provide the same services and are not designed for the same households. Nevertheless, such an exercise does highlight the handicap that low-income households have as regards housing and also the relative inability of the subsidised housing sector to resolve this problem. It confirms the differences between the two sectors and the capacity of the subsidised housing sector to provide the most disadvantaged with better quality housing conditions than those proposed by the private sector. It therefore proves to be a useful approach, at least for the analysis of the housing divide between the most underprivileged and others.