Imputing Rents to Owner-Occupied Housing by Directly Modelling Their Distribution (PDF)

The Bureau of Economic Analysis (BEA) makes the official estimates of the National Income and Product Accounts (NIPAs).  Two key aggregates in these accounts are the nation’s gross domestic product (GDP) and the personal income of households.  The rental value of owner-occupied housing is an important component of both.  It accounts for about 8 percent of GDP and largely determines the rental income of persons.  Because this income is a net measure obtained from subtracting housing expenses from the gross rental value of owner-occupied housing services, i.e., space rent, it was only about 3 percent of personal income in 2013.   The space rent on owner-occupied housing is considered to be “imputed” because it is not directly measured but is inferred on the basis of its assumed relationship to variables that can be directly measured.  BEA’s existing methodology is based on data from a survey that has been discontinued.  This paper develops an alternative methodology that can be used to make this imputation by directly modelling the distribution of imputed rents from existing data. 

Arnold J. Katz