The measurement of rent inflation
Providing for shelter represents a large portion of the typical household budget. Accordingly, rent, paid either to a landlord or to oneself as an owner-occupant, has a large weight in the CPI and in the personal consumption expenditures deflator, resulting in substantial scrutiny of how tenant rent and owners' equivalent rent are measured in these price indexes. In this paper, we describe how the Bureau of Labor Statistics (BLS) estimates tenant rent and owners' equivalent rent. We then estimate alternative inflation rates for tenant rent and owners' equivalent rent based on American Housing Survey data, following BLS methodology as closely as possible. Our alternative tenant rent inflation series is generally consistent with the corresponding BLS series. However, our alternative owners' equivalent rent inflation series is consistently lower than the corresponding BLS series by an amount large enough to have a significant effect on the overall inflation rate. This result is driven by the inverse relationship between rent inflation and the level of monthly housing cost evident in the American Housing Survey data.
|Date of creation:||2010|
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