Policy Research Working Paper 10936 Usus Fructus Taking Account of Property Use Rights in Household Wealth Measurement G. D’Alessio A. Neri I. Toma Development Economics Development Data Group September 2024 Policy Research Working Paper 10936 Abstract This paper discusses the inclusion of usufruct rights in the wealth distribution, with some increases characterizing household wealth estimates, emphasizing the theoretical younger households. Overall, adjusted estimates show a rationale for adjusting traditional estimates that do not significant decrease in the concentration indices compared include this component. It then applies this concept to with unadjusted ones. These findings suggest the impor- the Italian context using Survey on Household Income and tance of considering this component in standard household Wealth data. Despite usufruct being relatively rare (around wealth estimates, particularly in countries where use rights 3 percent of residential homes), adjusting for it impacts are more common. This paper is a product of the Development Data Group, Development Economics. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world. Policy Research Working Papers are also posted on the Web at http://www.worldbank.org/prwp. The authors may be contacted at gdalessio@worldbank.org. The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent. Produced by the Research Support Team Usus Fructus: Taking Account of Property Use Rights in Household Wealth Measurement G. D’Alessio,* A. Neri ** and I. Toma * JEL Classification: D23, D31, P14. Keywords: property rights, use rights, usufruct, wealth distribution. Index 1. Introduction ............................................................................................................... 4 2. Some general reflection on use rights ....................................................................... 4 3. The data ..................................................................................................................... 6 4. Taking account of use rights in Italy ......................................................................... 8 5. Free residential houses in HFCS data ....................................................................... 9 6. Conclusions ............................................................................................................. 10 Appendix A: statistical tables ......................................................................................... 11 Appendix B: SHIW empirical evidence on the value of use rights ................................ 17 References ....................................................................................................................... 19 Usufructus est ius alienis rebus utendi fruendi, salva rerum substantia Roman law * The World Bank, Development Data Group - Living Standards Measurement (DECLS Unit). ** Bank of Italy, Directorate General for Economics, Statistics and Research. 1. Introduction 1 Household sample surveys are invaluable tools for understanding economic dynamics, social structures, and the distribution of resources within societies. Among the various indicators collected in these surveys, wealth stands out as a fundamental indicator of economic well-being and household stability. The inclusion of wealth data in household surveys is crucial for several reasons. Firstly, wealth provides insights into the economic status and living standards of households, providing a more comprehensive view beyond income alone. While income reflects the flow of resources over time, wealth captures accumulated assets and savings, providing a measure of long-term financial security and capacity for investment. Additionally, wealth data allow policy makers, researchers, and analysts to assess disparities in asset ownership, intergenerational wealth transfer, and access to economic opportunities, thereby informing targeted interventions and policy initiatives aimed at reducing inequality and promoting economic inclusion. Net wealth encompasses tangible assets such as land, real estate, valuables, and financial instruments like savings accounts and stocks, while debts constitute the negative component. Traditionally, the real items considered in household surveys are those for which households hold full property rights. However, this approach may not capture the full spectrum of resource ownership held by households. Solely focusing on assets with full property rights may overlook significant aspects of wealth accumulation and resource utilization. In many contexts, individuals or households may possess partial rights or entitlements to certain assets, such as in the case of usufruct contracts, where individuals hold the right to use and enjoy property owned by others. Neglecting the patrimonial value of such assets can lead to a distorted understanding of wealth distribution and economic well-being, particularly in communities where informal arrangements or non-traditional property rights prevail. This paper aims to address the gap in wealth assessment methodologies by advocating for the inclusion of assets with partial rights in household surveys. Specifically, we will explore the importance of taking account of use rights, such as those conferred by usufruct contracts, when estimating household wealth. By incorporating these nuanced dimensions of asset ownership, we seek to provide a more comprehensive and equitable framework for assessing wealth that better reflects the socio-economic realities of diverse communities. An application to the Italian case offers the opportunity to assess a significant impact on wealth distribution, even in a country where this kind of phenomenon is relatively uncommon. 2. Some general reflections on use rights Household wealth is traditionally divided into two components, real and financial. Financial wealth represents the net value between the claims (e.g., the bank deposits) and the obligations (e.g., the debts) that the household has towards other households or economic entities. By definition, for every claim and obligation held, there exists a corresponding obligation and claim of the same amount held by someone else. The notion of real wealth, instead, is inherently linked to the rights over resources with an economic value. Being an owner of real assets (e.g., apartments, land, livestock) usually means being 1 We would like to thank Luigi Cannari for the suggestions provided on an earlier version of the paper. The opinions expressed in this paper are of the authors alone and do not necessarily represent the views of our institutions. the holder of the full set of rights that can be defined over the good, as the right to use, to sell, to bequeath, to use as collateral, to make other use, 2 free of any encumbrances or deficiencies. 3 However, there are cases in which different people (or economic entities) hold different rights on the same asset. From the economic point of view, all these cases can be included in the notion of wealth as well. The most frequent case is the separation of the use rights from the bare ownership, as happens in the contract of usufruct. According to an old maxim of Roman law, "Usufruct is the right to use and enjoy the property of others while preserving the substance of the property". In practice, the usufructuary buys (or acquires in some way) from the bare owner the right to use the property for some time (usually as long as he or she lives). From an economic point of view, the full value of the property is shared between the two contractors. The main aspects of usufruct, i.e. the temporary right to use an asset owned by someone else, are common across the legislations of many countries like France, Germany, the Netherlands, the United States, Canada, Brazil, South Africa, India, Mexico, and the Philippines. 4 In Italy, the usufructuary can use the good, without altering its substance, and derive profit from that possession. If not explicitly stated differently in the contract, the usufructuary can also transfer the right to others (i.e. rent or make available to others the property, as long as he or she holds the right). The bare owner will hold again the full ownership only at the end of the defined period of time (or at the death of the usufructuary). 5 In the Italian housing market, real estate agencies currently offer for sale the bare ownership of some houses, along with the usual sales of full-property houses. Most of the time, these houses are owned by elderly people who want to continue to live in their homes for all their life and try to monetize the value of the property when they are no longer alive. On the other hand, the buyer of bare ownership is often someone who wants to make a medium- or long-term investment (depending on the age of the seller), with some elements of riskiness due to the randomness of the event that will transfer to him the use rights of the house. The asking price for these homes is usually significantly lower than those for which full ownership is sold, and the difference is inversely linked to the age of the owner. When the period of time of the contract refers to the life of the usufructuary, the valuation of the two parts is usually obtained through an actuarial formula that combines the full value of the property, an interest rate, and the life expectancy of the usufructuary. However, for fiscal purposes, in Italy an official table is currently published providing the shares of bare ownership and usufruct, according to the current legal interest rate and mortality tables. For example, in table A1 that refers to 2023, we derive that a 73–75-year-old owner could sell the bare ownership of a house for about 65 percent of its full value. The value that remains in the hands of the usufructuary (35 percent of its full 2 According to European SNA 2008, “The legal owner of entities such as goods and services, natural resources, financial assets and liabilities is the institutional unit entitled in law and sustainable under the law to claim the benefits associated with the entities” (EC and others, 2009, 3.21). The conceptualization of ownership as a bundle of rights is described in United Nations (2019). 3 In practice, any legal system contains some limitations on the use of the assets held, for example, those concerning the possibility of building a house on owned land. 4 Sometimes, and especially in low- and middle-income countries, the rights associated with ownership are not limited by private contracts but by law and social context. For example, in China, the property of urban land belongs to the state in a way similar to that described above for England, while that of rural land to collective entities (i.e. group of farmers). On the impact of incomplete property rights on informal housing prices, see also Cheng (2023). 5 Romans use to mention "Usus, fructus, abusus" to describe the rights associated with ownership: the right to use the property (usus), the right to enjoy its fruits or benefits (fructus), and the right to abuse or dispose of it (abusus). value) corresponds to the right to use that property until death. 6 This table changes periodically, according to some significant revisions of the two ingredients of the formula. For our analysis, for the sake of simplicity, we will resort to the values contained in these tables over time, which approximate the actuarial formula. Taking account of use rights that derive from a contract of usufruct in the survey measurement of household wealth implies two different tasks: (1) If the interviewed household has the use rights (bought or received for free, it does not matter), the capital value of such rights should be considered together with other real assets. (2) If the household interviewed instead is granting the use rights to someone else, the value of such a right must be subtracted from the full value of the property, i.e., the valuation of the property must take into account the missing use rights. 7 It is worth noting that in Italy usufruct is not the only form of right on someone’s else property, although it is probably the most frequent. Similar to usufruct is the “right to inhabit”, which typically arises by law when one spouse passes away and leaves behind a house of residence that was jointly owned or owned solely by the deceased spouse. In such a case the surviving spouse keeps the right to live in the house of residence lifetime, even if other heirs acquire a share of ownership. So as the usufructuary, the survivor spouse is responsible for the maintenance of the property and must pay associated expenses like taxes and utilities, while cannot make significant alterations to the property without permission. Contrary to usufruct, however, the right to inhabit is personal, and cannot be transferred or assigned to another individual. 8 9 It is important to underline that the condition of a usufructuary is substantially different from that of a household that lives in a property offered by another household for free. Granting a property free of charge to someone else implies a current transfer that, by its own nature, can be stopped at any time, and thus has no certain value for the future. The absence of any right suggests excluding them from the notion of wealth. 3. The data In this paper, we will use the data from the Bank of Italy’s Survey of Household Income and Wealth (SHIW), conducted in Italy since the 1960s to gather information on household income, consumption, wealth, and various aspects of household economic behavior. It has been conducted yearly on a national two-stage sample of 4,000 households up to 1984; since 1986 it has been carried out every two years (with some exceptions) using a sample of 8,000 households (Bank of Italy, 2022; Baffigi et al., 2016). 6 A similar example of “split property” is provided by the “rule of 99 years” in England and Wales where purchasing a leasehold property means buying the right to live in and use the property for the duration of the lease only (typically 99 years). As the lease term decreases, also the value of the property tends to decrease. 7 In cases in which the use rights of a property are obtained at the cost of a payment lower than that present value on the market (i.e. a subsidized rent), the present value of this difference could be considered as part of the household wealth as well. In practice, this can be the case only when the actual rent paid is largely lower than the market value and when the contract extends for a considerable period of time. 8 Notwithstanding this difference, when in legal context it is needed to assign a value to this inherited right to inhabit, jurisprudence tends to use the same tables used for evaluating the usufruct. 9 Further rights on someone’s else property exist in the Italian legislation but are less frequent and conceptually less relevant for their impact in terms of household wealth. In the case of “enfiteusi”, for example, the lessee (called the "enfiteuta") holds the right to use and enjoy the property (traditionally a plot of land) for an extended period, typically long-term, in exchange for certain obligations, usually payment of an annual fee or rent, or improvements of the property. This form is nowadays very rare and - due to the contextual obligations - does not significantly impact the wealth of the two subjects. In the questionnaire, the information about the tenure of the house of residence, inclusive of the usufruct, has been collected regularly since 1989. The questionnaire also includes a different item devoted to the “free of charge” use of the house, that does not involve any right on the property and is thus excluded from our analysis. The right to inhabit is instead missing among the provided modalities; it is plausible that the respondents in that condition chose the option “free of charge” or the residual option “other”. This implies a presumable underestimation of the situations of use rights that include both cases. The share of households living in usufruct does not show a strong trend over time; it is on average around 3.5 percent between 1989 and 1998, 2.7 percent between 2000 and 2008, and 3 percent between 2010 and 2020. The shares show limited variations across geographical areas, while a significant concentration of the phenomenon emerges in households whose head is older than 65 years, with an overall average of 5.6 percent (Table A2, top panel). In just under half of the cases, the bare owners of houses granted in usufruct are the children of the occupants; in one-third of the cases, the bare owners are the parents, while in most of the remaining cases they are other relatives. The share of bare owners outside the family circle is limited, around 8 percent (Table A3, top panel). Overall, this result demonstrates that the usufruct contract is predominantly used for managing family properties for tax and intergenerational transfer purposes. Conversely, its usage among unrelated parties to monetize real estate beyond one's own lifetime is relatively modest. In contrast to usufruct, homes occupied rent-free are primarily inhabited by young families, and little more frequently located in the Center and the South and Islands than in the North (Table A2, bottom panel). In half of the cases, the owners of these houses are the parents, while the opposite relationship is observed more rarely (around 13 percent). On the whole, the family circle absorbs on average 85 percent of the cases of houses occupied for free (Table A3, bottom panel). According to what was stated in the previous section, we will add to the wealth of the households the value of the use rights for those who live in usufruct only, while overlooking the houses occupied for free that do not provide the occupants any right. The value of the usufruct right depends on the age of the reference person and is estimated based on the shares provided in official tables used for the computation of taxes (see Table A1 for 2023). On the other hand, while there is a large amount of data for every property held by households, the information on the specific destination of usufruct (i.e. granted to others in usufruct) is not always available in SHIW. In many surveys (1989, 1993, 1995, 1998, 2000, 2002) in the question about the use of the houses held, the item related to the “usufruct” is absent, and the cases are included in the “other” residual basket; in the 2020 questionnaire the term “usufruct” is explicitly recalled but only together to the “free of charge, from relatives and friends” that, as reminded earlier, does not imply rights and is thus a different condition. Thus, information on the properties granted in usufruct to someone else, useful for our analysis, is collected only in 1991 and from 2004 to 2016. The results reported in the next section will thus refer to these years only. The share of such properties is small and quite irregular over time; on average it is equal to 0.9 percent of the residence houses for the four surveys up to 2008 and 0.8 percent for the four surveys from 2010 to 2016. The lower share found on this side, compared to that shown above for the usufructuary, could depend also on the fact that the usufruct is not necessarily a contract involving households on both sides; other entities (firms, banks, public institutions) could grant usufruct contracts. However, we have seen that many times it is a family matter. There is a likely effect of under-reporting behavior that affects the houses that are not used for residence (Cannari and D’Alessio, 1990 and 1993; Baffigi et al., 2016). The value of the use rights on houses granted in usufruct must be subtracted from the wealth of the bare-owner households. However, in SHIW the information on the age of the usufructuary is not available 10; it is thus unknown which share of the full value of the property to apply. In order to obtain a tentative estimate of the value of the use rights to be subtracted from the full value of these properties, and then from the wealth of these households, we will resort to some imputations based on different hypotheses, to test the robustness of our results. 4. Taking account of use rights in Italy As recalled earlier, standard household wealth estimates do not include use rights. According to our approach, this implies an underestimate of the wealth for those households who live in usufruct and an overestimate for the households who grant usufruct rights to others. Some evidence on the need to assign a wealth value to the use rights based on SHIW data is provided in Appendix B. Using data from SHIW we can estimate both cases in several waves (1991, and from 2004 to 2016). However, as explained before, information on the age of the usufructuary is available only when the interviewed household is the usufructuary and not when he is the bare owner. For such cases we have assumed (H1) that the usufructuary is 25 years older than the corresponding bare owner, being this the approximate age gap between fathers and sons. This situation approximately corresponds to that of a parent who transfers bare ownership to their child, retaining usufruct. A similar age gap could also be the case of an elderly person who, perhaps in the absence of heirs, sells bare ownership of the house of residence to ensure a more comfortable old age while retaining the right to live there for free. As we have seen in the previous section, partial support for this hypothesis is offered by the interviewed usufructuaries that, when asked about the bare owners of the homes they occupy, most of the times indicate their children, with a share little below 50 percent (Table A3, top panel). However, in one-third of the cases the relationship is reversed, being the parents the bare owners and the children the usufructuaries and in a further 20 percent the age gap between bare owners and usufructuaries is totally unknown. This uncertainty suggests testing the robustness of the results by evaluating also two alternative assumptions: H2) the usufructuary is as old as the bare owner; H3) the usufructuary is 6 years older than the bare owners, being approximately 6 years the average gap between the sample age average estimates of usufructuaries and bare owners. The results of the 3 hypotheses are shown in Table A4. The estimates of the net wealth adjusted for the use rights are almost always higher than the unadjusted ones; the increase of the net wealth values is, on average across the considered SHIW waves, between 0.9 (H1), 0.7 (H2) and 0.6 per cent (H3). The increase tends to characterize more frequently the households whose reference persons are less than 40 years old (from 1,9 to 1,6 percent on average across years, depending on the hypothesis done) and those residing in the South and in the Islands (from 1.3 to 1.2 percent). The higher impact on average wealth observed for the households with a younger reference person compared to the others is due to their higher life expectancy, which implies a higher value attributable to the observed use rights. This effect more than counterbalances the higher share of usufructuaries among the elderly. In terms of concentration, the changes induced by the adjustments show a reduction of the Gini index of almost 1 percentage point (on average across the years approximately 0,008), regardless of the assumption made (Figure 1). This change seems attributable to a double effect. On the one side, the share of adjusted net wealth held by the richest 20 percent stably decreases compared to the unadjusted estimates (-0.43 and -0.13 percent on average for the top and the following tenth of household); on the other, the share of the third and fourth tenths of households (i.e. those from the 20th to the 40th percentile of the wealth distribution) increases in both cases of a quarter of a percentage point (Table A5). In sum, the phenomenon seems to favor more markedly usufructuary households 10 In future waves this information should be collected to allow a more precise estimate of this amount. who belong predominantly to lower-middle wealth classes at the expense of the richest 20 percent, who grants the usufruct. Figure 1 - Gini concentration index - Adjusted and unadjusted net wealth 0.650 0.640 Unadjusted 0.630 H1 H2 0.620 H3 0.610 0.600 0.590 0.580 0.570 1985 1990 1995 2000 2005 2010 2015 2020 5. Free residential houses in HFCS data The Household Finance and Consumption Survey (HFCS) is a comprehensive and harmonized survey conducted at the national level within the Eurozone. It aims to collect detailed data on household finances and consumption. The SHIW survey is the Italian part of the HFCS. According to this source, the share of main residences used for free is a significant issue in several countries, including Austria, Croatia, Cyprus, Estonia, Greece, Poland, Portugal, Slovenia, and Spain, where the share of households is around 10 percent, close to or higher than in Italy (Table A6). By examining the age of the reference person, we can gain evidence of the relative importance of this tenure mainly for the young and the old. In many countries (Austria, Cyprus, Czechia, Estonia, Germany, Hungary, Latvia, Poland, and the Slovak Republic), the age profile shows a U shape, and the shares of households whose reference person is below 30 years or above 65 years are the highest. In many other countries (Italy, Croatia, France, Greece, Lithuania, Portugal, Slovenia, and Spain) the share is generally decreasing with age. Unfortunately, the harmonized survey's questionnaire collects information on the tenure status for the main residence, but it does not allow us to distinguish the forms that provide the occupants with a right to use the property (e.g., usufruct), that we have considered for the household wealth measurement, from other forms of free use (e.g. temporary use permit), that we have considered current transfers, and thus outside the wealth definition. Still, in all countries, the share of free users is mainly concentrated in the bottom class of the wealth distribution (Table A7). It is thus presumable that even considering a small share of the households living for free in the main residence as holders of a right of use would significantly lower wealth inequality for these countries. It is only a hypothesis. The lack of data prevents us from being more precise. The relevance of this aspect would suggest delving deeper into the issue, including questions in the questionnaires that can clarify whether the free use of these houses can be defined as a right held by occupants and helps to define their value by clarifying whether the occupation is subject to uncertainty and whether it is short or long term. 6. Conclusions The paper addresses the theme of the inclusion of use rights held in the form of usufruct in household wealth sample estimates. After recalling the theoretical appropriateness of correcting traditional estimates for this component, the paper presents an application to the Italian case. Using SHIW data shows that, although the phenomenon of usufruct is relatively uncommon (around 3 percent of households), the distribution of wealth is significantly affected by such an adjustment. Younger households appear to be relatively slightly wealthier than in unadjusted estimates. Overall, adjusted estimates exhibit levels of the Gini concentration index that are lower than unadjusted ones by approximately 1 percentage point. The estimates do not take account of a different form of use right, namely the right to inhabit, which typically arises when one spouse passes away and leaves behind a residential home that was jointly owned or owned solely by the deceased spouse. On the one hand, SHIW data do not provide information about this condition; on the other, the right to inhabit is personal and cannot be transferred or assigned to another individual; in the absence of a market, the monetary evaluation of this right can be more complex. In any case, this additional element should also be considered in the measurement of household wealth. We also conducted a brief analysis of residential homes occupied free of charge by households in European countries whose data are included in the HFCS. In several countries, residential homes occupied for free are relatively widespread, with shares similar to that found in Italy. However, the lack of data does not allow us to identify those cases in which the occupation takes place on the basis of a right of use which justifies its inclusion in households' wealth. An initial tentative evaluation shows that the effects of such an adjustment could lead to a significant reduction in wealth inequality. These results also suggest that the replication of the analysis in countries where the phenomenon of use rights separated from bare ownership is more widespread than in Italy could produce a much greater impact on wealth estimates. Appendix A: statistical tables Table A1 - Fiscal value of the usufruct and of the bare property, depending on the age of the usufructuary, Italy, 2023 (percentages) Share of the value of the Share of the value of the bare Age of the usufructuary usufruct property From 0 to 20 years 95 5 From 21 to 30 years 90 10 From 31 to 40 years 85 15 From 41 to 45 years 80 20 From 46 to 50 years 75 25 From 51 to 53 years 70 30 From 54 to 56 years 65 35 From 57 to 60 years 60 40 From 61 to 63 years 55 45 From 64 to 66 years 50 50 From 67 to 69 years 45 55 From 70 to 72 years 40 60 From 73 to 75 years 35 65 From 76 to 78 years 30 70 From 79 to 82 years 25 75 From 83 to 86 years 20 80 From 87 to 92 years 15 85 From 93 to 99 years 10 90 More than 99 years - - Source: decree of the Italian Ministry of Economy and Finance of 13 December 2022, published in the Official Gazette no. 292 of 15 December 2022. Table A2 – Share of households living in usufruct or free of charge in Italy, 1989-2020 (percentages) Age of the reference person (*) Geographical area Period Up to More South Total 41-50 51-65 40 than 65 North Center and years years years years Islands Usufruct 1989 -1998 2.8 1.4 2.0 7.5 3.6 4.1 3.0 3.5 2000-2008 2.1 2.2 1.5 4.6 3.2 1.9 2.6 2.7 2010-2020 3.1 2.1 1.4 4.7 3.2 2.0 3.2 3.0 Total 2.7 1.9 1.6 5.6 3.3 2.7 2.9 3.1 Free of charge 1989 -1998 11.9 4.9 2.8 6.8 6.2 7.7 7.7 7.0 2000-2008 11.6 8.8 3.9 5.1 6.1 8.4 8.4 7.3 2010-2020 12.1 10.3 5.4 4.4 5.6 8.1 9.7 7.5 Total 11.8 8.0 4.0 5.5 6.0 8.1 8.6 7.2 Source: Our elaboration on SHIW data. (*) The reference person is defined as the member with the highest income. Table A3 – Ownership of houses occupied in usufruct or free of charge in Italy, 2002-2016 (percentages) Sons or Other Other Period Parents Other Total Daughters relatives households Usufruct 2002-2008 31.5 46.2 14.4 3.0 5.0 100.0 2010-2016 33.3 45.9 12.4 2.4 6.1 100.0 Total 32.4 46.0 13.4 2.7 5.5 100.0 Free of charge 2002-2008 51.4 13.1 17.2 10.1 2.3 100.0 2010-2016 48.2 12.7 16.3 13.9 2.7 100.0 Total 49.8 12.9 16.8 12.0 2.5 100.0 Source: Our elaboration on SHIW data. Data for 2020 and before than 2000 are missing. Table A4 – Net wealth estimates adjusted for the use rights, Italy, 1991-2016 (euros, percentages) Unadju Use Adjusted /Unadjusted sted Use right granted Adjusted net wealth rights net wealth (percentages) Net held Year wealth (H1) (H2) (H3) H1 H2 H3 H1 H2 H3 Age (years) 1991 Up to 40 80961 2565 2071 2777 2880 81455 80749 80646 0.6 -0.3 -0.4 41-50 112265 653 1287 2276 2536 111631 110642 110382 -0.6 -1.4 -1.7 51-65 114989 1074 556 1295 1536 115507 114768 114527 0.5 -0.2 -0.4 > 65 70387 1536 254 655 882 71669 71268 71041 1.8 1.3 0.9 Area North 102378 1598 1763 2742 3013 102213 101234 100963 -0.2 -1.1 -1.4 Center 103079 2151 1020 1947 2241 104210 103283 102989 1.1 0.2 -0.1 South and Islands 73236 1174 207 348 377 74203 74062 74032 1.3 1.1 1.1 Total 93136 1573 1112 1811 2009 93597 92898 92700 0.5 -0.3 -0.5 2004 Age (years) Up to 40 151672 2888 900 1253 1329 153660 153307 153232 1.3 1.1 1.0 41-50 217571 3430 401 678 731 220600 220323 220270 1.4 1.3 1.2 51-65 262622 1167 232 498 583 263557 263291 263206 0.4 0.3 0.2 > 65 179223 1650 66 159 210 180807 180714 180663 0.9 0.8 0.8 Area North 224372 2923 673 1045 1144 226622 226250 226151 1.0 0.8 0.8 Center 237504 1714 130 241 268 239088 238977 238950 0.7 0.6 0.6 South and Islands 137741 1495 161 290 334 139075 138946 138902 1.0 0.9 0.8 Total 199296 2221 399 641 707 201118 200876 200809 0.9 0.8 0.8 2006 Age (years) Up to 40 172303 4916 300 455 479 176919 176764 176740 2.7 2.6 2.6 41-50 256683 3106 456 776 833 259333 259013 258957 1.0 0.9 0.9 51-65 287880 1032 132 336 407 288780 288576 288505 0.3 0.2 0.2 > 65 233701 2152 23 70 93 235830 235783 235760 0.9 0.9 0.9 Area North 256976 3231 390 700 776 259817 259507 259431 1.1 1.0 1.0 Center 315868 2466 82 151 169 318252 318183 318165 0.8 0.7 0.7 South and Islands 150865 2380 14 27 32 153231 153218 153213 1.6 1.6 1.6 Total 234970 2809 210 377 419 237569 237402 237360 1.1 1.0 1.0 2008 Age (years) Up to 40 167703 4479 565 814 870 171617 171368 171311 2.3 2.2 2.2 41-50 234541 6269 407 754 850 240403 240056 239960 2.5 2.4 2.3 51-65 332080 1342 226 615 737 333196 332807 332684 0.3 0.2 0.2 > 65 244338 1994 10 35 48 246322 246297 246283 0.8 0.8 0.8 Area North 269625 3591 501 911 1025 272715 272305 272190 1.1 1.0 1.0 Center 288448 3677 152 273 312 291973 291852 291813 1.2 1.2 1.2 South and Islands 173508 2780 39 79 93 176249 176209 176195 1.6 1.6 1.5 Total 243671 3357 285 520 588 246743 246508 246440 1.3 1.2 1.1 2010 Age (years) Up to 40 154895 6583 613 905 990 160865 160573 160488 3.9 3.7 3.6 41-50 248150 5717 875 1524 1689 252992 252343 252179 2.0 1.7 1.6 51-65 359559 1312 210 489 581 360661 360382 360290 0.3 0.2 0.2 > 65 267976 1653 83 199 276 269546 269430 269353 0.6 0.5 0.5 Area North 284916 6186 421 758 873 290681 290344 290229 2.0 1.9 1.9 Center 329996 1138 666 1156 1310 330468 329978 329823 0.1 0.0 -0.1 South and Islands 174466 1293 241 406 454 175518 175353 175304 0.6 0.5 0.5 Total 258548 3635 412 724 825 261771 261459 261357 1.2 1.1 1.1 2012 Age (years) Up to 40 136367 3866 1525 2305 2448 138708 137928 137785 1.7 1.1 1.0 41-50 232228 3549 2246 3934 4328 233531 231843 231449 0.6 -0.2 -0.3 51-65 321248 1939 528 1194 1410 322659 321993 321777 0.4 0.2 0.2 > 65 257177 2037 166 358 461 259048 258856 258754 0.7 0.7 0.6 Area North 257913 3359 1048 1921 2158 260224 259351 259114 0.9 0.6 0.5 Center 287372 1130 2246 3742 4122 286256 284760 284380 -0.4 -0.9 -1.0 South and Islands 190191 2725 193 350 395 192723 192566 192521 1.3 1.2 1.2 Total 241640 2734 999 1758 1960 243375 242616 242414 0.7 0.4 0.3 2014 Age (years) Up to 40 133282 2226 1043 1529 1621 134465 133979 133887 0.9 0.5 0.5 41-50 201899 2024 324 574 639 203599 203349 203284 0.8 0.7 0.7 51-65 279882 1167 331 750 887 280718 280299 280162 0.3 0.1 0.1 > 65 227257 1926 23 49 62 229160 229134 229120 0.8 0.8 0.8 Unadju Use Adjusted /Unadjusted sted Use right granted Adjusted net wealth rights net wealth (percentages) Net held Year wealth (H1) (H2) (H3) H1 H2 H3 H1 H2 H3 Area North 250978 2086 346 648 734 252718 252416 252330 0.7 0.6 0.5 Center 243844 1098 979 1578 1731 243963 243364 243211 0.0 -0.2 -0.3 South and Islands 152412 1828 18 30 32 154222 154210 154208 1.2 1.2 1.2 Total 217574 1803 367 635 707 219010 218742 218670 0.7 0.5 0.5 2016 Age (years) Up to 40 108612 2384 39 56 56 110957 110940 110940 2.2 2.1 2.1 41-50 186292 1198 0 0 0 187490 187490 187490 0.6 0.6 0.6 51-65 256688 1220 374 816 965 257534 257092 256943 0.3 0.2 0.1 > 65 231667 1972 23 65 87 233616 233574 233552 0.8 0.8 0.8 Area North 239417 1443 234 509 604 240626 240351 240257 0.5 0.4 0.4 Center 231262 1486 19 40 47 232729 232708 232701 0.6 0.6 0.6 South and Islands 141700 2154 6 17 21 143848 143837 143833 1.5 1.5 1.5 Total 206422 1680 117 255 303 207985 207847 207799 0.8 0.7 0.7 Source: Our elaboration on SHIW data. (*) The reference person is defined as the member with the highest income. Table A5 – Differences between adjusted and unadjusted* net wealth shares held by tenth of households, Italy, 1991-2016 (percentages) Tenth of 1991 2004 2006 2008 2010 2012 2014 2016 Average households 1 0.02 0.01 0.06 -0.04 0.02 -0.03 -0.04 0.05 0.01 2 -0.27 0.05 -0.03 0.08 -0.01 0.06 0.01 -0.03 -0.02 3 0.27 0.21 0.24 0.31 0.22 0.23 0.21 0.26 0.24 4 0.29 0.16 0.26 0.28 0.32 0.29 0.25 0.21 0.26 5 0.15 0.09 0.11 0.12 0.19 0.11 0.08 0.06 0.11 6 0.08 0.06 0.04 0.04 0.04 0.05 -0.01 0.01 0.04 7 0.01 0.02 0.00 -0.04 -0.01 -0.01 -0.06 -0.03 -0.02 8 -0.04 -0.03 -0.06 -0.09 -0.04 -0.06 -0.09 -0.06 -0.06 9 -0.13 -0.15 -0.14 -0.14 -0.13 -0.16 -0.10 -0.11 -0.13 10 -0.38 -0.42 -0.47 -0.52 -0.59 -0.47 -0.24 -0.37 -0.43 Source: Our elaboration on SHIW data. * Adjusted estimates = average of H1, H2, H3. Table A6 – Share of households living in usufruct or free of charge in European countries (percentages) Age class * (average across years) Country 2014 2017 2021 Up to 40 41-50 51-65 More than years years years 65 years Austria 7.0 7.2 7.4 6.8 2.0 2.7 15.3 Belgium 3.1 2.3 2.3 1.2 2.8 1.0 5.0 Cyprus 17.7 19.0 18.8 18.6 6.3 12.3 39.2 Czechia - - 5.3 7.9 3.1 1.5 8.7 Germany 4.5 4.0 3.9 4.0 2.5 2.0 7.6 Estonia 12.7 13.0 11.1 14.8 7.6 9.4 15.4 Spain 7.9 7.7 7.1 11.9 7.2 5.3 7.1 Finland 1.1 1.3 1.0 1.3 0.4 0.8 1.8 France 2.8 2.8 3.2 4.0 3.2 2.3 2.4 Greece 6.5 7.7 7.0 12.6 7.0 4.4 5.8 Croatia - 9.2 12.9 21.4 14.3 7.2 5.7 Hungary 6.5 5.1 4.8 8.3 3.6 3.4 6.6 Ireland 1.2 1.8 1.9 1.6 - - - Italy 11.1 11.1 8.1 16.5 11.6 6.7 9.1 Lithuania - 4.2 3.0 5.0 3.9 3.3 2.5 Luxembourg 5.2 2.8 2.9 5.7 1.7 2.9 3.3 Latvia 7.6 8.8 5.4 10.2 3.3 4.0 10.9 Malta 2.5 2.3 5.5 3.6 - - - Netherlands 0.8 0.7 0.4 1.0 1.0 0.1 0.5 Poland 13.2 12.4 - 14.7 10.4 10.5 15.7 Portugal 7.3 7.7 7.7 10.5 8.1 5.9 6.8 Slovenia 14.2 13.8 13.3 30.3 12.5 7.0 11.2 Slovak 4.4 5.9 4.3 6.7 3.1 2.4 8.2 Republic Total 6.3 6.2 5.0 7.1 5.6 3.9 6.9 Source: Our elaboration on HFCS data. * Age of the reference person, defined according to the UN/Canberra definition. Table A7 – Share of households living in usufruct or free of charge in European countries by wealth quintiles (average values in the period 2014-2021) (percentages) Household net wealth quintiles Country First Second Third Fourth Fifth Austria 9.8 15.7 7.6 1.9 1.0 Belgium 4.8 4.1 1.3 1.3 1.2 Cyprus 63.9 15.1 5.3 4.3 3.6 Czechia 19.5 5.0 0.6 0.9 0.2 Germany 5.2 6.8 6.5 1.2 1.0 Estonia 41.6 10.1 4.5 2.6 2.4 Spain 25.2 6.8 2.3 1.7 1.8 Finland 2.1 2.5 0.5 0.4 0.2 France 4.9 5.7 1.8 1.5 0.8 Greece 23.8 6.8 2.0 1.5 1.1 Croatia 46.4 6.2 0.9 0.7 0.8 Hungary 19.7 3.3 2.0 1.2 0.9 Ireland 3.4 3.9 0.4 0.3 0.2 Italy 29.3 15.5 2.7 1.5 1.5 Lithuania 15.6 0.9 0.7 0.2 0.4 Luxembourg 8.5 5.8 1.7 0.6 1.0 Latvia 24.1 7.2 2.9 1.0 0.6 Malta 15.3 1.7 0.8 0.1 0.1 Netherlands 1.4 1.1 0.2 0.1 0.2 Poland 53.2 5.1 3.1 1.7 0.9 Portugal 22.6 9.2 2.5 2.0 1.6 Slovenia 50.1 10.9 3.0 2.9 1.8 Slovak Republic 21.0 1.2 1.1 0.5 0.4 Total 16.0 7.5 3.3 1.4 1.1 Source: Our elaboration on HFCS data. Appendix B: SHIW empirical evidence on the value of use rights In sections 3 and 4, we have examined the theoretical reasons why use rights associated with usufruct should be quantified and included in the net wealth of the households benefiting from them (and subtracted from that of the bare owners). We have also recalled that in Italy, as in many other countries, the use rights of houses are valued on the market, although this market is sometimes of a limited extent, and we have shown some possible estimation strategies using survey data. In this Appendix, we will attempt to provide some empirical evidence of the appropriateness of this line of reasoning based on the data collected in the SHIW. We have considered a model in which the subjective judgment on the household's economic well-being is explained by the economic resources in terms of household income and wealth, controlling for a set of socio-demographic conditions (year, number of components, geographical area, municipality size, gender, age, education, and civil status of the adult with the higher income). In the first experiment, wealth is measured without considering the value of use rights. To assess whether usufruct affects the perceived economic well-being, two dummy variables were introduced in the model, indicating whether the household is a usufructuary or a bare owner. According to the thesis advocated in this study, the coefficient of these dummies should be significantly different from zero, with a positive sign in the first case, and a negative in the second. The analysis is conducted using an ordinal probit model, as the dependent variable has an ordinal nature. To avoid the potentially adverse effects of outliers often present in income and wealth distributions, both variables were subjected to the inverse hyperbolic sine (IHS) transformation, which is similar to the logarithmic transformation but allows for the treatment of negative values as well (Friedline et al., 2015). 11 The results show that, conditionally to all the socio-demographic conditions considered in the model and to household income and wealth (that have both – obviously – a positive effect on subjective economic well-being), the dummy variable indicating the usufructuary condition has a positive and significant coefficient, suggesting a residual content in terms of the well-being of this condition, not captured by the two variables reporting the economic resources (Table B1; Model 1). 12 The coefficient of the dummy indicating the bare ownership, instead, is slightly negative but insignificant. This result could depend on the low frequency of bare owners caught by the SHIW, also due to the limited attention paid to this phenomenon in the questionnaire. 13 In the second experiment, we used the same model with the only difference that household wealth is adjusted for the value of the use rights, i.e., obtained adding and subtracting respectively the estimated value of the usufruct. In such a model the coefficients of both the dummy variables become not significantly different from zero (Table B1; Model 2), suggesting that the adjustments done have caught the essence of well-being incorporated in those ownership conditions. 11 In a limited number of households, net wealth is negative, with debts being greater than assets. In some cases, income can also be negative, mainly due to the presence of business costs greater than the corresponding revenues. 12 It is worth noting that, analogously to the properties held, the houses occupied in usufruct contribute to the household income with imputed rents provided by the respondents themselves. Thus, the dummy in the model captures a benefit that goes beyond the value of the current occupation of the house free of charge. 13 The filter question defining the list of properties included in the roaster refers to those “held”, without any specific reference to bare ownership. This ambiguity could have emphasized the general tendency of households to under-report the properties owned. Table B1 – Perceived economic well-being explained by income, wealth, and usufruct conditions, 1991 and 2004-2016 Model 1 Model 2 Variable Parameter p-value Parameter p-value Income 0.6138 <.0001 0.6150 <.0001 Wealth 0.0564 <.0001 - - Adjusted wealth * - - 0.0563 <.0001 Usufructuary 0.1549 <.0001 -0.0279 0.2978 Bare owner -0.0043 0.9421 0.0624 0.2860 Model = Cumulative probit regression. Dependent variable = Subjective economic well-being: “Is your household’s income sufficient to see you through to the end of the month? 1 with great difficulty – 2 with difficulty - 3 with some difficulty – 4 - fairly easily – 5 easily – 6 very easily. Sample size = 55,435 observations in 1991 and from 2004 to 2016. Further variables included in the model: Year, Number of components (linear and squared), Geographical Area, Municipality size (inhabitants), Gender, Age, Education, and Civil status of the adult with the higher income. * Adjusted estimates based on H1 assumption (i.e. usufructuary age = respondent age + 25; see the text). Source: Our elaboration on SHIW data. References Baffigi A., Cannari L. and D’Alessio G. (2015), ‘Cinquant’anni di indagini sui bilanci delle famiglie italiane: storia, metodi, prospettive, Banca d’Italia, Questioni di Economia e Finanza (Occasional Papers), 368. Banca d’Italia (2022), The Survey on Household Income and Wealth, Methods and Sources: Methodological Notes, Statistics Series, July. Cannari L. and G. D’Alessio (1990), “Housing Assets in the Bank of Italy’s Survey of Household Income and Wealth”, in C. Dagum and M. Zenga (eds.), Income and Wealth Distribution Inequality and Poverty, pp. 326-334. Berlin: Springer-Verlag. Cannari, L. and G. D’Alessio (1993), “Non-Reporting and Under-Reporting Behavior in the Bank of Italy’s Survey of Household Income and Wealth”, in Proceedings of the ISI 49th Session, pp. 395-412. Florence: ISI. Cheng G. (2023), Effects of Incomplete Property Rights on Informal Housing Prices: Evidence from Small Property Rights Housing in China, Journal of Urban Planning and Development, Vol. 1249, no 4. EC, IMF, OECD, UN, WB (2009), SNA 2008, System of National Accounts. Friedline T., R.D. Masa and G.A. Chowa (2015), Transforming wealth: using the inverse hyperbolic sine (IHS) and splines to predict youth's math achievement, Social Science Research, Jan;49:264-87. doi: 10.1016/j.ssresearch.2014.08.018. United Nations (2019), Guidelines for Producing Statistics on Asset Ownership from a Gender Perspective, Department of Economic and Social Affairs, Studies in Methods, Series F, No. 119.