Questions About the Equivalence of Market Rents and User Costs for Owner Occupied Housing

Posted: 6 Jun 2013

See all articles by Alan W. Heston

Alan W. Heston

University of Pennsylvania - Department of Economics

Alice Orcutt Nakamura

University of Alberta - School of Business

Date Written: June 5, 2013

Abstract

For modern nations, it is recognized as important that temporal and spatial variations in costs for comparable dwelling services are carefully measured. The costs of owner occupied as well as rental housing have important roles to play in both the consumer price index (CPI) and the System of National Accounts (SNA). The 1993 System of National Accounts (SNA93) specifies that a rental value of the housing stock should be included as part of the aggregates for personal consumption, personal income, income of proprietors and value added for the real estate industry. Yet, little attention has been devoted to an underlying commonality of practice: the implicit assumption that housing cost information for either renters or owner occupiers can be used for assessing movements over time and spatial differences in the cost of housing for both renters and owners, after allowing for differences regarding payment for taxes and certain ongoing expenses such as insurance and utilities. But in the real world, are the services that renters and owner occupiers get from their dwellings comparable? Also, for both renters and owner occupiers, are there place-related differences in the services they derive from their dwellings? And if so, what are the implications for official statistics making? These are the questions raised by the empirical results presented in this paper.

Keywords: Owner occupied housing, Rental housing, Consumer price index

JEL Classification: C21, C80, D12, R21, R31

Suggested Citation

Heston, Alan W. and Nakamura, Alice Orcutt, Questions About the Equivalence of Market Rents and User Costs for Owner Occupied Housing (June 5, 2013). Journal of Housing Economics, Vol. 18, No. 3, 2009, University of Alberta School of Business Research Paper No. 2013-601, Available at SSRN: https://ssrn.com/abstract=2274942

Alan W. Heston (Contact Author)

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States

Alice Orcutt Nakamura

University of Alberta - School of Business ( email )

2-32C Business Building
Edmonton, Alberta T6G 2R6
Canada

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