Purchasing Power Parities and Income Taxation have been dealing with difficulties associated to rent imputation. The Canberra Group’s report states that micro level estimates could benefit from drawing on the methodologies and data sources used in the macro-contest (Canberra Group, 2001, p.64). Yet, not all methods adopted in other contexts might be appropriate in the case of welfare measurement; like conflating GDP with measures of economic well-being which might lead misleading conclusions on people’s welfare and entail wrong policy decisions (Stiglitz, Sen and Fitussi, 2009).

# **3.1 National Accounts**

The importance of imputed rents in National Accounts is well summarized in Figure 1 more than half of the total housing consumption is imputed rent in many countries in Europe (see also Tormalehto and Sauli, 2010). The value of these housing services is estimated to be _equal to the rentals that would be paid on the market for accommodation of the same size, quality and type_ (SNA, 2008, §9.65), _taking into account factors such as location, neighborhood amenities, etc., as well as the size and quality of the dwelling itself_ (ESA, 2010, §3.75). This estimation might be difficult to define _in a situation where there is either no rental market in such properties or_ only _a very limited one_ (SNA, 2008, § 20.64). The European System of Accounts (ESA, 2010) suggests that rents for owner-occupiers should be imputed using the stratification method covered in Section 2.1.8.<sup>25</sup> The System of National Accounts<sup>26</sup> recommends including the imputed values of the housing services of owner-occupied dwellings in three chapters: the production account, the use of income accounts and the price and volume measures (SNA, 2008). In the first one, the production of services by household’s members for their own consumption has traditionally been excluded because of limited repercussions on the rest of the economy. However, the only exception is the production of housing services for own consumption by owners. This would guarantee international and inter-temporal comparability since the share of home owners varies significantly between countries, regions and over time. The imputed values of the housing services are also included in owners’ final consumption expenditures in the _use of income accounts_ .<sup>27</sup> The housing service is treated as one of the consumption items acquired by households and used to satisfy their needs. Individuals living in their own dwellings are treated as unincorporated enterprises selling dwelling services to themselves. Finally, in the chapter devoted to _price and volume measures_ , the SNA briefly mentions the problem of building the correct deflator for rental services of owner-occupied dwellings, making reference to the Consumer Price Index manual (ILO, 2004).

Deaton (2005) notices that imputed rents for homeowners are among those items of the consumption aggregate which consumption ratios between survey-to-National Accounts are typically less than unity.<sup>28</sup> The reason is that imputed rents are usually included in National Accounts’ consumption but rarely in household surveys’ consumption. Moreover, there has been a divergence between national accounts and households’ surveys over time and one of many possible reasons could be the increase in the share of the SNA’s consumption attributable to owner-occupiers’ rents.

> 25 The stock of dwellings is stratified by location, nature of dwelling and other factors that affect the rental, and then, the average actual rental per stratum is applied to all dwellings in that particular stratum.

> 26 The System of National Accounts (SNA) is the internationally agreed standard set of recommendations on how to compile measures of economic activity in accordance with strict accounting conventions based on economic principles, elaborated jointly by the European Commission, the International Monetary Fund, the Organization for Economic Cooperation and Development, the United Nations and the World Bank.

> 27 This approach records how different economic sectors such as households, government units and non-profit institutions serving households; allocate their disposable income between final consumption and saving.

> 28 As well as financial services indirectly imputed and consumption by nonprofit institutions serving households.

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