A hedonic approach that explicitly calculates capitalization rates produces a methodologically consistent measure of the rental cost of owner-occupied housing. They estimate that between 1985 and 1999 the Consumer Price Index (CPI-U) may have understated the cumulative increase in rents. But any understatement was slight. On the other hand, the authors estimate that the CPI overstated the increase in the cost of housing services for homeowners by 0.4 percent on an annualized basis from 1985 to 1999.View the Full Working Paper
Hedonic Estimates of the Cost of Housing Services: Rental and Owner-Occupied Units
WP 04-22 – Recent papers have questioned the accuracy of the Bureau of Labor Statistics' methodology for measuring rent increases and changes in implicit rents for owner-occupied housing. The authors compare the BLS estimates of increases in rents and owner-occupied housing costs to regression-based estimates using data from the American Housing Survey.