Regional Coordinators Meeting September 28-30, 2009 Washington DC Housing in ICP 2011: Outstanding...

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International Comparison Program 2011 Round Regional Coordinators Meeting September 28-30, 2009 Washington DC Housing in ICP 2011: Outstanding Issue

Transcript of Regional Coordinators Meeting September 28-30, 2009 Washington DC Housing in ICP 2011: Outstanding...

Page 1: Regional Coordinators Meeting September 28-30, 2009 Washington DC Housing in ICP 2011: Outstanding Issues.

International Comparison Program2011 Round

Regional Coordinators MeetingSeptember 28-30, 2009

Washington DC

Housing in ICP 2011: Outstanding Issues

Page 2: Regional Coordinators Meeting September 28-30, 2009 Washington DC Housing in ICP 2011: Outstanding Issues.

Housing is an important component of household expenditures & a significant contributor to GDP.

However, calculating PPPs for rents has proved to be problematic because:

1. the rental market in some economies is so small that it is difficult to obtain realistic average prices.

2. the prices reported for calculating PPPs have not always been consistent w/those underlying the values of rents in the national accounts.

RESULT: The real value of housing services computed using PPPs derived from reported rental prices have been different from those derived from unit values estimated from national accounts sources.

Housing in ICP

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Page 3: Regional Coordinators Meeting September 28-30, 2009 Washington DC Housing in ICP 2011: Outstanding Issues.

The Global Office developed a questionnaire to obtain detailed data underlying the estimates of dwelling stocks used in the national accounts for both rented dwellings and owner-occupied dwellings (imputed rent):

1. The number of dwellings,

2. Number of rooms

3. Total square footage of each type (detached houses,

apartments)

4. Classified by size, region, locality (urban or rural)

5. The facilities available (electricity, running water, private

toilet)

Background: Housing in ICP 2005

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Page 4: Regional Coordinators Meeting September 28-30, 2009 Washington DC Housing in ICP 2011: Outstanding Issues.

Regions used one or a combination of different approaches:

The quantity method: physical measures of the numbers and characteristics of dwellings are used to produce comparable real expenditures on housing.

The direct rent approach: rental data for comparable housing types are used to compute the PPP for the dwelling basic heading.

In the absence of detailed rental data and detailed information on the numbers and characteristics of dwellings, Asia-Pacific and Africa used the PPP for individual consumption expenditures by households (excluding rentals for housing) as a reference PPP for housing.

South America and CIS used the quantity method.

Western Asia and Eurostat-OECD used a combination of two methods.

Background: Housing in ICP 2005

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Page 5: Regional Coordinators Meeting September 28-30, 2009 Washington DC Housing in ICP 2011: Outstanding Issues.

Two separate issues to be resolved:

1. How should the expenditure weights be estimated so that they are more reliable and more comparable across countries than was the case for ICP 2005?

2. What price and/or quantity information should be requested from countries in order to estimate PPPs?

Main objective:

to decide how the ICP 2005 guidelines on housing should be revised.

Housing in ICP 2011: Issues & Objectives

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Expenditure Weights

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1. Expenditure weights for countries other than those included in the OECD-Eurostat comparisons are poorly estimated:

there should be a positive relationship between expenditures on housing and per capita GDP.

However, Chart 1 shows NO significant relationship of this kind.

0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,0000

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

0.18

f(x) = 6.95464546145682E-07 x + 0.0528794302770115R² = 0.0822251978830204

Rents for dwellings and per capita GDP. All countries

Per capita GDP (US$ PPP)

Expendit

ure

share

in G

DP

(%

)

Page 7: Regional Coordinators Meeting September 28-30, 2009 Washington DC Housing in ICP 2011: Outstanding Issues.

The OECD-EU chart shows the expected relationship meaning that the expenditure weights for this group of countries are relatively well based:

Expenditure Weights: OECD-EU

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10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,0000.04

0.05

0.06

0.07

0.08

0.09

0.1

0.11

0.12

f(x) = 1.46178013268194E-06 x + 0.0436303372679817R² = 0.378835200807767

Rents for dwellings and per capita GDP. OECD-EU Countries

Per capita GDP (US$ PPP)

Expendit

ure

share

in G

DP

(%

)

Page 8: Regional Coordinators Meeting September 28-30, 2009 Washington DC Housing in ICP 2011: Outstanding Issues.

For Africa, however, there is no relationship and similar results are found for the other regions:

Expenditure Weights: Africa

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0 2,000 4,000 6,000 8,000 10,000 12,000 14,000

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

0.18

f(x) = 5.10927224730895E-07 x + 0.0440796855073738R² = 0.00298961595864444

Rents for dwellings and per capita GDP.Africa

Per capita GDP (US$ PPP)

Expendit

ure

share

in G

DP

(%

)

Page 9: Regional Coordinators Meeting September 28-30, 2009 Washington DC Housing in ICP 2011: Outstanding Issues.

Two possible explanations:

The SNA: rents for owner-occupiers should be imputed by reference to rents actually paid for similar dwellings. This works for OECD-EU countries as in most of them enough dwellings of different kinds are actually rented to provide a good basis for imputing rents to owner-occupied dwellings. In many developing countries, however, relatively few dwellings are rented so that it is difficult to apply the SNA guidelines.

In many non OECD-EU countries, people build their own houses from locally gathered materials. These dwellings are almost never rented so that in many developing countries, particularly in Africa, national accountants have no guidelines for estimating imputed rents for owner-occupiers. In many countries no imputations are made while in other cases the imputations appear to be based on actual rents paid for dwellings that may be quite unlike most of the owner-occupied dwellings.

Expenditure Weights: Explanations

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Page 10: Regional Coordinators Meeting September 28-30, 2009 Washington DC Housing in ICP 2011: Outstanding Issues.

It’s been recommended that rents for owner-occupiers should be estimated by the user-cost method when

too few dwellings were rented or those that were rented were only located in a few parts of the country or they were mainly rented by expatriate workers,

User Cost as an Alternative

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User Cost as an Alternative: are these still the rules?

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Yes

Are most rented dwellings either occupied by foreigners or by employees paying subsidised rents.?

No

Are rented dwellings distributed evenly throughout the country?

No

Obtain expenditure weights by: Estimating actual rents paid for rented dwellings; Imputing rents for owner-occupied dwellings using rents actually paid for similar dwellings.If a comprehensive Rent Survey is already in place, supply information on average rents for the Modified SPD Approach (MSA).

Obtain expenditure weights by: Estimating actual rents paid for rented dwellings; Applying the user cost method for owner-occupied dwellings.

Yes

No

Yes

START: Are more than 25% of dwellings rented?

Page 12: Regional Coordinators Meeting September 28-30, 2009 Washington DC Housing in ICP 2011: Outstanding Issues.

User cost can be used to estimate expenditure on rents by calculating each of the separate components of market rents:

repair and maintenance costs, property taxes on dwellings, insurance service charges, consumption of fixed capital and net operating surplus.

If it is decided to focus on the user-cost method it would almost certainly be necessary to organise two workshops in each region:

the first one to explain the method, and the second to review country estimates.

User Cost as an Alternative

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Page 13: Regional Coordinators Meeting September 28-30, 2009 Washington DC Housing in ICP 2011: Outstanding Issues.

Two alternatives recommended in ICP 2005:

The modified SPD approach: in countries which meet the criteria and where there are nationwide rent surveys covering most kinds of properties

The quantity method: in other countries

Price or Quantity Info for Calculating PPPs

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Page 14: Regional Coordinators Meeting September 28-30, 2009 Washington DC Housing in ICP 2011: Outstanding Issues.

“Modified” because the Structured Product Descriptions (SPDs) are less detailed than for other goods and services.

Three Asian countries were identified as possible candidates for the modified SPD approach: Hong Kong, Malaysia and Philippines.

They met the three criteria specified in the decision chart and they had regular surveys of rents covering at least the main population centres. Despite their best efforts and help from the ADB advisors, it proved impossible to apply the modified SPD method in practice.

The Modified SPD Method

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Page 15: Regional Coordinators Meeting September 28-30, 2009 Washington DC Housing in ICP 2011: Outstanding Issues.

Involves calculating volume relatives which reflect both the quantity and quality of the housing stock.

PPPs are derived indirectly by dividing the volume relatives into expenditure relatives.

The quantity of dwellings in each country was measured by the total floor space of dwellings. If floor space is not available, the total number of rooms is used instead and if there is no information on the number of rooms, the total number of dwellings is used as the quantity measure.

A quality index is calculated as the geometric average of the percentage of dwellings with electricity, the percentage of dwellings with inside toilets, and the percentage of dwellings with piped water.

The quantity index for each country was multiplied by each country’s quality index to obtain the volume index for each country.

The Quantity Method

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Page 16: Regional Coordinators Meeting September 28-30, 2009 Washington DC Housing in ICP 2011: Outstanding Issues.

An Improved Quantity Method for ICP 2011

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Survey follow-up of non- response and partial response

Data editing

All countries must report total number of rooms

All countries strongly recommended to report total living area

All countries must report electricity, water and toilet percentages

Persons per room as a fourth quality indicator

Separate calculations for:

urban/ rural

modern / traditional

flats / houses

Page 17: Regional Coordinators Meeting September 28-30, 2009 Washington DC Housing in ICP 2011: Outstanding Issues.

Is it useful to circulate a questionnaire on country methodologies for rents?

When is it appropriate to use the existing SNA guidelines for imputing rents

for owner-occupiers? Should the rules adopted for ICP 2005 be retained?

Should we encourage the user-cost method to estimate total expenditure on

rents?

Should we also recommend user-cost as a means of estimating rents for

specific types of dwellings?

Can two workshops be held in each region to explain the method and review

results?

Improvements to the quantity method would require greater involvement by

the regional co-coordinators in checking and editing replies and following

up non- and partial-response. Is this feasible?

Questions

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Page 18: Regional Coordinators Meeting September 28-30, 2009 Washington DC Housing in ICP 2011: Outstanding Issues.

Two web-sites relevant to housing in ICP:

1.Habitat for Humanity: gives information on the costs of constructing houses.

2. Union des Banques Suisses: gives data on rents in capital cities.

Housing on the internet

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