Housing Expenditures and Income Poverty in EU Countries

Abstract

Previous research has suggested that hidden income arising from home ownership has important consequences for poverty measurement as it tends to favour certain low income groups, especially the elderly, and to have a moderating effect on poverty rates in countries with high levels of home ownership. This article explores both methodological and substantive aspects of this issue using data for 14 EU countries drawn from the European Community Household Panel Survey 1996. Methodologically, in the absence of data needed to estimate hidden income from housing directly, it explores the validity of using a housing expenditures approach to take account of the income effects of housing in a poverty measurement context. Substantively, it examines whether poverty measured in this way in the 14 countries in the data set differs in expected directions from poverty as conventionally measured. The substantive effects are found to be modest overall and to conform only partially to expectations. Certain methodological problems raise a question mark over these findings, such as variation across countries in the degree to which mortgage payments capture the cost of house purchase for home owners. The article concludes that the distributive effects of housing are important for poverty measurement but need to be better understood within each country before attempting cross-country analysis.