Accounting for Housing in Poverty Analysis

The treatment of housing in the definition of income used to measure poverty makes a big difference to who is counted as poor. Both the Before Housing Costs (BHC) and After Housing Costs (AHC) measures in current use in the UK pose problems. BHC income does not capture the advantages of living in owner-occupied housing and AHC income might not account for the benefits of living in higher-quality accommodation. We explore the potential of including in income the difference between the estimated value of housing consumed and housing costs, which we refer to as net imputed rent. We investigate whether findings about child and pensioner poverty, and judgements about the effectiveness of poverty-reducing policies, are affected by accounting for housing in this way.