1 — U.S. BUREAU OF LABOR STATISTICS • bl s.gov

Measuring National Housing Costs 

from Consumer Expenditure (CE) Data

Taylor J. Wilson

Economist

Division of Consumer Expenditure Surveys

American Council on Consumer Interests

May 2019
2 — U.S. BUREAU OF LABOR STATISTICS TATISTICS • bl s.gov bl s.gov

Outline

1. Housing in the CE surveys

2. Measuring the cost of housing

3. Hypotheses

4. Alternative choices
3 — U.S. BUREAU OF LABOR STATISTICS TATISTICS • bl s.gov bl s.gov

Outline

1. Housing in the CE surveys

2. Measuring the cost of housing

3. Hypotheses

4. Alternative choices
4 — U.S. BUREAU OF LABOR STATISTICS TATISTICS • bl s.gov bl s.gov

Housing in the CE Surveys

 Housing comprises the 

largest share of the 

consumer budget.

 Data from renters and 

homeowners are used 

in creating this 

housing expenditure 

share. 
5

— U.S. BUREAU OFLABORSTATISTICS• bl s.gov

5 CE Expenditure Shares 2017
6 — U.S. BUREAU OF LABOR STATISTICS TATISTICS • bl s.gov bl s.gov

Housing in the CE Surveys

 The housing concepts collected by the survey:

• Rented Dwellings

• Rent

• Rent as pay

• Other renter 

expenses

• Household 

Operations

• Household Supplies

• Utilities

• Mortgage principal

• Owned Dwellings

• Mortgage interest

• Property taxes

• Property insurance

• Other owned dwelling 

expenses

• Estimated monthly rental value 

of owned home (Owners’ 

Equivalent Rent – OER)
7 — U.S. BUREAU OF LABOR STATISTICS TATISTICS • bl s.gov bl s.gov

Outline

1. Housing in the CE surveys

2. Measuring the cost of housing

3. Hypotheses

4. Alternative choices
8 — U.S. BUREAU OF LABOR STATISTICS TATISTICS • bl s.gov bl s.gov

Measuring the cost of housing

 Rent for renters

Direct measure of rental cost

Cost changes are sensitive to time

 Owners’ equivalent rent for homeowners

Indirect measure of the cost of ownership

Cost changes are sensitive to time
9 — U.S. BUREAU OF LABOR STATISTICS TATISTICS • bl s.gov bl s.gov

Measuring the cost of housing

 Mortgage payments

Direct measure of the cost of ownership

Cost changes are not sensitive to time

FRM vs. ARM

 Home value

Indirect measure of the cost of ownership

Cost changes are sensitive to time
10 — U.S. BUREAU OF LABOR STATISTICS TATISTICS • bl s.gov bl s.gov

Measuring the cost of housing

Direct

Indirect

Time Insensitive Time Sensitive

Rent

Mortgage 

Payment

OER

Home

Value
11 — U.S. BUREAU OF LABOR STATISTICS TATISTICS • bl s.gov bl s.gov

Measuring the cost of housing

 OER and Rent are ultimately used by the CPI 

for housing weights. Change in reported rents 

(rent and OER) are used to measure inflation.

 Since the market basket is based on 

consumption, home price and mortgage 

principal would be investment spending. So, 

“the cost of shelter is the implicit rent that 

owners would have to pay if they were 

renting.” – CPI Documentation
12 — U.S. BUREAU OF LABOR STATISTICS TATISTICS • bl s.gov bl s.gov

Outline

1. Housing in the CE surveys

2. Measuring the cost of housing

3. Hypotheses

4. Alternative choices
13 — U.S. BUREAU OF LABOR STATISTICS TATISTICS • bl s.gov bl s.gov

Hypothesis One

Investigate: 

Do Owners’ Equivalent Rent and Rent produce 

similar values on average?

Motivation: 

These concepts are meant to capture similar 

experiential data about the housing market. 

Testing for equality can give insight into their 

inherent differences.
14 — U.S. BUREAU OF LABOR STATISTICS TATISTICS • bl s.gov bl s.gov

Hypothesis One

Data: CE Interview Data 2017Q1 – 2018Q1

Monthly Values from Sample Data

Rent OER

N 10,493 19,329

Sample Median 800 1400

Weighted Mean 962

(16.91)

2021

(18.97)
15 — U.S. BUREAU OF LABOR STATISTICS TATISTICS • bl s.gov bl s.gov

Hypothesis Two

Investigate: 

Do OER and Rent produce similar values on 

average controlling for income of the Consumer 

Unit?

Motivation: 

In 2017, Homeowners had an average income 

before taxes of $88,538 where Renters had an 

average income before taxes of $48,201.
16 — U.S. BUREAU OF LABOR STATISTICS TATISTICS • bl s.gov bl s.gov

Hypothesis Two

 Controlling for income alone reduces the 

average difference in the homeowner-renter 

mean to $535, a reduction of about 50%. 

 The difference remains statistically significant 

across quintiles. 

 Both the main effect and interaction effect is 

significant. 
17 — U.S. BUREAU OF LABOR STATISTICS TATISTICS • bl s.gov bl s.gov
18 — U.S. BUREAU OF LABOR STATISTICS TATISTICS • bl s.gov bl s.gov

Hypothesis Three

Investigate: 

Do OER and Rent produce similar values on 

average controlling for income and house 

characteristics?

Motivation: 

The average number of total rooms for renters 

and homeowners is 5.95 and 8.93, respectively. 

85% of homeowners and only 30.5% of renters 

live in single-family detached. 
19 — U.S. BUREAU OF LABOR STATISTICS TATISTICS • bl s.gov bl s.gov

Hypothesis Three

 Controlling for income and housing 

characteristics reduces the average difference 

in the homeowner-renter mean to $240.

 The $240 is statistically insignificant. 

CI: [-268, 747]

 The 2-way and 3-way interactions are 

statistically significant.
20 — U.S. BUREAU OF LABOR STATISTICS TATISTICS • bl s.gov bl s.gov
21 — U.S. BUREAU OF LABOR STATISTICS TATISTICS • bl s.gov bl s.gov
22 — U.S. BUREAU OF LABOR STATISTICS TATISTICS • bl s.gov bl s.gov
23 — U.S. BUREAU OF LABOR STATISTICS TATISTICS • bl s.gov bl s.gov

Outline

1. Housing in the CE surveys

2. Measuring the cost of housing

3. Hypotheses

4. Alternative choices
24 — U.S. BUREAU OF LABOR STATISTICS TATISTICS • bl s.gov bl s.gov

Measuring the cost of housing

Direct

Indirect

Time Insensitive Time Sensitive

Rent

Mortgage 

Payment

OER

Home

Value
25 — U.S. BUREAU OF LABOR STATISTICS TATISTICS • bl s.gov bl s.gov

Alternative Choices

 In the CE, Mortgage Interest is captured as a 

housing expenditure item. Principal remains 

an investment expenditure. 

 Interest, for most households, is paid as part 

of a fixed-rate mortgage. This means that it is 

nearly useless in capturing short-term changes 

in the housing market. 
26 — U.S. BUREAU OF LABOR STATISTICS TATISTICS • bl s.gov bl s.gov

Alternative Choices

 In the CE, Home Value is estimated by the 

respondent. 

 In addition to collection error associated with 

this, it is rare for the full value of the home to 

be paid outright. 

 Home purchases are counted as investment 

spending, so measuring changes in the full 

value of the home will not accurately reflect 

consumer price changes. 
27 — U.S. BUREAU OF LABOR STATISTICS TATISTICS • bl s.gov bl s.gov

Conclusions

 OER and Rent are likely doing a reasonable job 

of measuring the same basic concept (housing 

costs) for renters and homeowners.

 Homeowners are buying fundamentally 

different types of homes than renters are 

renting, likely leading to different rent/OER 

estimates between the groups.

 Income and housing characteristics explain 

much of the difference. 
28 — U.S. BUREAU OF LABOR STATISTICS TATISTICS • bl s.gov bl s.gov

Questions
Contact Information

29 — U.S. BUREAU OF LABOR STATISTICS • bl s.gov

Taylor J. Wilson

Economist

Division of Consumer Expenditure Surveys

www.bls.gov/cex

202-691-6550

wilson.taylor@bls.gov