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The measurement of rent inflation


  • Jonathan McCarthy
  • Richard Peach
  • Matthew Ploenzke


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 the PCE deflator. Nonetheless, the way in which rent inflation is measured is not widely understood. In this paper, we describe how the Bureau of Labor Statistics estimates tenant rent and owners? equivalent rent (OER) inflation. We then estimate alternative tenant rent and OER inflation rates based on American Housing Survey (AHS) data, following BLS methodology as closely as possible. Our alternative tenant rent and OER inflation series are generally consistent with the corresponding BLS series. In analyzing the AHS data, we find a strong inverse relationship between rent levels and their rate of increase. We also find that substantially more than all of the increase in housing units for the upper half of the income distribution comes from new construction, while nearly three-fourths of the increase in housing units for renters in the bottom half of the income distribution results from downward filtering of units that had once been occupied by higher-income households. This finding suggests that lower-income households tend to face higher overall inflation than do middle- and upper-income households.

Suggested Citation

  • Jonathan McCarthy & Richard Peach & Matthew Ploenzke, 2010. "The measurement of rent inflation," Staff Reports 425, Federal Reserve Bank of New York.
  • Handle: RePEc:fip:fednsr:425

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    Cited by:

    1. Andrea Ferrero, 2015. "House Price Booms, Current Account Deficits, and Low Interest Rates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 47(S1), pages 261-293, March.
    2. Stefano Giglio & Matteo Maggiori & Johannes Stroebel, 2014. "Very long-run discount rates," Globalization Institute Working Papers 182, Federal Reserve Bank of Dallas.
    3. Mojmír Hampl and Tomáš Havránek, 2017. "Should monetary policy pay attention to house prices? The Czech National Bank’s approach," BIS Papers chapters, in: Bank for International Settlements (ed.),Macroprudential policy frameworks, implementation and relationships with other policies, volume 94, pages 129-140, Bank for International Settlements.
    4. Mojmir Hampl & Tomas Havranek, 2017. "Should Inflation Measures Used by Central Banks Incorporate House Prices? The Czech Approach," Working Papers IES 2017/12, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jul 2017.
    5. Nikhil Patel & Agustín Villar, 2016. "Measuring inflation," BIS Papers chapters, in: Bank for International Settlements (ed.),Inflation mechanisms, expectations and monetary policy, volume 89, pages 9-21, Bank for International Settlements.
    6. Janet L. Yellen, 2010. "The outlook for the economy," Speech 81, Federal Reserve Bank of San Francisco.
    7. Tomas Havranek & Mojmir Hampl, 2017. "Should Inflation Measures Used by Central Banks Incorporate House Prices? The Czech National Bank's Approach," Research and Policy Notes 2017/01, Czech National Bank.
    8. Ambrose, Brent W. & Coulson, N. Edward & Yoshida, Jiro, 2017. "Inflation Rates Are Very Different When Housing Rents Are Accurately Measured," HIT-REFINED Working Paper Series 71, Institute of Economic Research, Hitotsubashi University.

    More about this item


    CPI; housing markets; rental prices; American Housing Survey;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • 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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