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Disentangling Rent Index Differences: Data, Methods, and Scope

Author

Listed:
  • Brian Adams
  • Lara Loewenstein
  • Hugh Montag
  • Randal Verbrugge

Abstract

Rent measurement determines 32 percent of the CPI. Accurate rent measurement is therefore essential for accurate inflation measurement, but the CPI rent index often differs from alternative rent inflation measures. Using repeat-rent inflation measures created from CPI microdata, we show that this discrepancy is largely explained by differences in rent growth for new tenants relative to all tenants. New-tenant rent inflation provides information about future all-tenant rent inflation, but the use of new-tenant rents is contraindicated in a cost-of-living index such as the CPI. Nevertheless, policy-makers should integrate new-tenant inflation into inflation forecasts and monetary policy decisions.

Suggested Citation

  • Brian Adams & Lara Loewenstein & Hugh Montag & Randal Verbrugge, 2024. "Disentangling Rent Index Differences: Data, Methods, and Scope," American Economic Review: Insights, American Economic Association, vol. 6(2), pages 230-245, June.
    • Handle: RePEc:aea:aerins:v:6:y:2024:i:2:p:230-45
    DOI: 10.1257/aeri.20220685
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    References listed on IDEAS

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    1. Adams, Brian & Verbrugge, Randal, 2025. "Location, location, structure type: Rent divergence within neighborhoods," Journal of Housing Economics, Elsevier, vol. 69(C).
    2. Molly Boesel & Shu Chen & Frank E. Nothaft, 2021. "Housing preferences during the pandemic: effect on home price, rent, and inflation measurement," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 56(4), pages 200-211, October.
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    6. Christopher L Foote & Lara Loewenstein & Paul S Willen, 2021. "Cross-Sectional Patterns of Mortgage Debt during the Housing Boom: Evidence and Implications," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(1), pages 229-259.
    7. Theodore M. Crone & Leonard I. Nakamura & Richard Voith, 2010. "Rents Have Been Rising, Not Falling, in the Postwar Period," The Review of Economics and Statistics, MIT Press, vol. 92(3), pages 628-642, August.
    8. Goetzmann, William Nelson, 1992. "The Accuracy of Real Estate Indices: Repeat Sale Estimators," The Journal of Real Estate Finance and Economics, Springer, vol. 5(1), pages 5-53, March.
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    Cited by:

    1. Ina Hajdini & Adam Hale Shapiro & Andrew Lee Smith & Daniel Villar Vallenas, 2025. "Inflation since the Pandemic: Lessons and Challenges," Finance and Economics Discussion Series 2025-070, Board of Governors of the Federal Reserve System (U.S.).
    2. Ronan C. Lyons & Allison Shertzer & Rowena Gray, 2026. "Rental Prices and the Cost of Living in the United States, 1914-2006," NBER Chapters, in: Measurement of Housing and the Housing Sector, National Bureau of Economic Research, Inc.
    3. Christopher D. Cotton, 2024. "A Faster Convergence of Shelter Prices and Market Rent: Implications for Inflation," Current Policy Perspectives 2024-4, Federal Reserve Bank of Boston.
    4. Kris Boudt & Koen Inghelbrecht & Maarten Van Besien, 2025. "Stable and Reliable Monthly Repeat Rent Indices: A Robust Approach," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 25/1126, Ghent University, Faculty of Economics and Business Administration.
    5. Lara Loewenstein & Paul S. Willen & Yuxi Yao & David Hao Zhang, 2025. "Is There a Puzzle in Underwater Mortgage Default?," Working Papers 25-22, Federal Reserve Bank of Cleveland.
    6. Augustus Kmetz & Schuyler Louie & John Mondragon, 2023. "Where Is Shelter Inflation Headed?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, vol. 2023(19), pages 1-6, August.
    7. Adams, Brian & Verbrugge, Randal, 2025. "Location, location, structure type: Rent divergence within neighborhoods," Journal of Housing Economics, Elsevier, vol. 69(C).
    8. Emanuel Nussli & Rachel Arulraj-Cordonier & Flurina Strasser & Marko Nanut Petrič & Morten Linnemann Bech & Antonio Pipino, 2025. "From listings to all-tenant rents: a probabilistic model," BIS Working Papers 1317, Bank for International Settlements.

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    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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