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Bureau of Labor Statistics > Office of Survey Methods Research > Publications > Browse Research Papers

Location, Location, Structure Type: Rent Divergence within Neighborhoods

Brian Adams and Randal Verbrugge

Abstract

Housing rents are a large share of household budgets and make a large contribution to overall inflation. We show that, even withinthe same neighborhoods, rent inflation rates for different types of housing units sometimes diverge. Over the 2010s, apartment rentsgenerally outpaced detached unit rents; this pattern reversed during the COVID-19 pandemic. These rent dynamics imply a segmentedhousing market, and suggest that rent indexes need to be based on data structurally representative of their measurement objective. Evenindexes based on careful geographical sampling, such as the United States Consumer Price Index’s (CPI’s) Owners’ Equivalent Rent componentprior to 2023, may be biased by using an unrepresentative mix of apartments and houses. We demonstrate that this bias may bequite large, and offer recommendations –one of which was recently accepted by the CPI.