Changing Method for Calculating Owner Occupier Housing Costs Would Only Have a Small Impact on CPIH

In March, CPIH will become 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 which 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 2006-2015, 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 2012-2015, 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 recently published a blog post about the challenges of measuring owner occupier 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.”

(Source: Office for National Statistics)