The OOH Experience: Rental Income and Housing Units in the United States

1. The Experience of OOH in the United States Michael Hayes Technical Workshop on Owner-Occupied Housing Astana, Kazakhstan December 3, 2014

2. Overview • Rental income of persons is similar in concept to corporate profits and proprietors’ income in that it measures the net income generated from the rental (actual or imputed) of property • Rental income of persons refers to the net income earned by landlords (including both actual landlords and owner-occupants) that are not sole proprietors, partnerships, or corporations

3. Derivation • Rental income = gross revenue – current expenses • Gross revenue is revenue from gross rents plus revenue from other sources (such as interest receipts, current transfer receipts, and subsidies • Current expenses include mortgage interest payments, intermediate inputs, consumption of fixed capital (or depreciation), business transfer payments, and taxes on production

4. Owner-Occupied Housing • Gross rental values of owner-occupied housing are imputed in the U.S. national accounts • This approach ensures that measures of GDP and national income are the same regardless of whether shelter is owned or rented • The imputation is derived using a rent-to-value ratio approach

5. OOH Derivation • U.S. uses owner-equivalent rent approach • Imputation is the product of units, rents, and changes in quality

6. Housing Units • Benchmarked to American Community Survey • Previously used the Decennial Census of Housing • Different definitions of vacant unit • Seasonally occupied units • Condominiums, townhouses, timeshares

7. Housing Units (continued) • Quarterly estimates from the Current Population Survey Housing Vacancy Survey • Removal • Depreciation/consumption of fixed capital • Disasters’ impact on the capital stock

8. Imputed Mean Rent • Rent-to-value ratio • Unpublished Census estimates • Mid-point of available rent intervals (12 or 8)

9. Estimated Rent-to-Value Ratios

10. Quality Adjustment • Owner- and tenant-occupied rent differential • Based on inflation-adjusted value of assets (CPI for residential rent)

11. Estimated Rent-to-Value Ratios

12. Intermediate Expenses • Mortgage interest • Effective rate of interest • Maintenance and repair, insurance, taxes • Other expenses • Acquisition and (expected) disposal costs (incorporated in 2013 to meet SNA guidelines) • Expected ownership is twelve years • Expenses moved to capital stock (impacting CFC) • Now recorded as Investment

13. Source Data • Mostly Census surveys • Operating assumption of one household = one unit • Differing weighting schemes across Census surveys • Table showing results of different weighting approaches • Standardization in 2016 to the Housing Vacancy Survey

14. Household Surveys Used • Basic CPS – Monthly labor force survey with occasional supplements (e.g., fertility, school enrollment) • CPS/ASEC – Current Population Survey Annual Social and Economic Supplement • Conducted over a 3-month period • Produces key income and poverty data as well as household and family estimates • CPS/HVS – Current Population Survey Housing Vacancy Survey • Conducted each month with results based on quarterly averages • ACS – American Community Survey • Conducted each month with results presented on an annual basis • AHS – American Housing Survey • Conducted in odd-numbered years (2007, 2009, 2011)

15. Comparison of Units, Housing–Based Versus Population-Based Weights

16. Source Data (cont.) • Space rent • Contract rent- utilities-consumer durables • Consumer price index for residential rent • Intermediate expenses • Challenging because some sources no longer available • Residential Finance Survey • Survey on maintenance and repairs (SOARAR) • Gradual rise of private-sector databases • Mortgage data (Black Knight) • Automated valuation models (AVMs) resulting from qualifying mortgage rule