Disentangling Rent Index Differences: Data, Methods, and Scope
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.
Download NTRR and ATRR indices through 2023q1 here. Quarterly updates to the NTRR, now named The New Tenant Rent Index, are available on the BLS website. The index is currently calculated by the BLS as a prototype research index.
Working Papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded official Federal Reserve Bank of Cleveland publications. The views expressed in this paper are those of the authors and do not represent the views of the Federal Reserve Bank of Cleveland or the Federal Reserve System.
Suggested Citation
Adams, Brian, Lara Loewenstein, Hugh Montag, and Randal J. Verbrugge. 2023. “Disentangling Rent Index Differences: Data, Methods, and Scope.” Federal Reserve Bank of Cleveland, Working Paper No. 22-38R. https://doi.org/10.26509/frbc-wp-202238r
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