This is the most European thing I’ve read all week. Income is inflow of money, while rent is an expense. The avoidance of expense should not be considered income for tax purposes: it would discourage frugality.

If you applied that principle consistently, it would be much worse to tax income, since that discourages production.

No, that's just a measurement methodology. It's income because it's a valuable product that you receive.

Consider a farm that grows wheat on 15 acres of fields. Are those fields an income-producing asset? If so, your house is also an income-producing asset.