In March 2017, CPIH will become the Office for National Statistics’s (ONS’s) headline measure of inflation. CPIH is more comprehensive than the current CPI measure as it includes the costs associated with owning and maintaining a home, known as owner occupiers’ housing costs (OOH).
The CPIH estimates these costs using a method known as “rental equivalence”. ONS has today published an article that looks at other methods for estimating OOH and what impact changing the method for estimating OOH would have on CPIH. The article finds that over the period 2006 to 2015, changing the method for calculating OOH would change the average annual CPIH inflation rate by a maximum of 0.2 percentage points compared with CPIH using the rental equivalence method. When looking at the period 2012 to 2015, which is less affected by the economic downturn, the average annual rate only varies by a maximum of 0.1 percentage points.
ONS Deputy National Statistician Jonathan Athow has today written a blog post about the challenges of measuring owner occupiers’ housing costs and why ONS favours using the rental equivalence method for estimating these costs.
Commenting, Jonathan Athow said: “Estimating the costs associated with owning and maintaining your home is one of the most difficult issues in inflation measurement. However, we believe that the rental equivalence method best reflects these important costs.”
Background notes
The full Understanding the different approaches of measuring owner occupiers’ housing costs (OOH): weights analysis release is available on the ONS website.
Read Jonathan Athow’s Including housing costs in measures of inflation blog post.
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