Start Submission

Reading: Treatment of Housing Costs in the UK Income Statistics

Download

A- A+
Alt. Display

Research

Treatment of Housing Costs in the UK Income Statistics

Author:

Amy Yizhi Mao

London School of Economics’ Institute of Public Affairs, GB
About Amy Yizhi
Second year student in the M.P.A. in International Development and he specialises in development economics, social development and fiscal policy.
X close

Abstract

The measurement of housing costs is an important precursor to research in public policy and discussions on the consumption patterns of low-income individuals. This paper analyses the two primary housing-cost measurements currently used in the UK: before deduction of housing costs (BHC) and after deduction of housing costs (AHC). BHC treats housing-costs as on par with everyday expenditures, whereas AHC distinguishes between housing expenditures and other general consumption goods. UK and EU researchers have shown a preference for the BHC method, however this paper argues that a wider acceptance of AHC allows for a more accurate statistical understanding of housing costs. The BHC is limited by its assumptions that housing costs are a reflection of an individual’s chosen standard of living, while the AHC allows for adjustments such as regional price differences, life-cycle variations, and interest rate fluctuations. The paper also introduces alternative measures including imputed rent and decile-specific price indices that can be used to supplement BHC and AHC and produce more robust measures of housing costs.

How to Cite: Mao, A.Y., 2012. Treatment of Housing Costs in the UK Income Statistics. The Public Sphere: Journal of Public Policy, 1(1), pp.73–79.
Published on 01 Jan 2012.
Peer Reviewed

Downloads

  • PDF (EN)

    comments powered by Disqus