ABSTRACT
The recent change from using both before and after housing cost measures of income to using just the former in calculating UK poverty and inequality measures has been the subject of some controversy (Brewer et al. 2004). For many of the poor, housing expenditures are not discretionary in nature as are other consumption goods. Their ‘lumpy’ nature implies that some agents are ‘rationed’ to a larger housing stock than they would otherwise choose. Furthermore, a large portion of housing stock is rent-controlled or owneroccupied so that measured housing cost differences may not reflect quality differences or opportunity costs. Thus each measure carries distinct information that in particular is pertinent to the situation of the poor relative to the rich and the abandonment of one of the measures implies a sacrifice of information on the status of the poor relative to the rich which may skew relative comparisons.
