Disentangling Rent Index Differences: Data, Methods, and Scope

33 Pages Posted: 27 Dec 2022 Last revised: 28 Sep 2023

See all articles by Brian Adams

Brian Adams

University of Akron - Department of Economics

Lara Loewenstein

Federal Reserve Bank of Cleveland

Hugh Montag

Bureau of Labor Statistics

Randal Verbrugge

Federal Reserve Bank of Cleveland

Date Written: September 28, 2023

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 measures of rent inflation. 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, policymakers should integrate new-tenant inflation into inflation forecasts and monetary policy decisions.

Keywords: house prices, rent growth, inflation measurement, monetary policy, forecasting, marginal rent growth, average rent growth

JEL Classification: E31, E37, E27, H31

Suggested Citation

Adams, Brian and Loewenstein, Lara and Montag, Hugh and Verbrugge, Randal, Disentangling Rent Index Differences: Data, Methods, and Scope (September 28, 2023). FRB of Cleveland Working Paper No. 22-38R, https://doi.org/10.26509/frbc-wp-202238r, Available at SSRN: https://ssrn.com/abstract=4312734

Brian Adams

University of Akron - Department of Economics ( email )

Akron, OH 44325
United States

Lara Loewenstein (Contact Author)

Federal Reserve Bank of Cleveland

East 6th & Superior
Cleveland, OH 44101-1387
United States

Hugh Montag

Bureau of Labor Statistics

Randal Verbrugge

Federal Reserve Bank of Cleveland ( email )

East 6th & Superior
Cleveland, OH 44101-1387
United States

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