The antipoverty effect of public rental housing in Hong Kong

• Estimated imputed rents from PRH differed between two rental equivalence methods.
• The improper use of stratified equivalence method in Hong Kong may lead to biased estimation result.
• The evaluation of the anti-poverty impact of PRH is susceptible to the choice of estimation method.

This paper examines the antipoverty effect of public rental housing (PRH) in Hong Kong based on a comparison of estimated imputed rents from PRH through regression-based and stratified rental equivalence methods. Empirical analysis shows that stratified equivalence method tended to generate a larger effect of poverty rate reduction and smaller effect of poverty gap reduction than regression-based method. The study identified a trend towards upwardly biased estimate of public imputed rent in the implementation of stratified equivalence method in Hong Kong where limited strata was available for the estimation. The development of antipoverty measures may be misguided if the stratified equivalence method is used in its current form in Hong Kong. The paper suggests that the choice of estimation method has important implications for evaluating the pros and cons of PRH from both poverty reduction and budgetary perspectives.