CPI rent and owners equivalent rent (OER) questions and answers : U.S. Bureau of Labor Statistics

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Bureau of Labor Statistics > Consumer Price Index > Methods > Additional Resources

CPI rent and owners' equivalent rent (OER) questions and answers

Overview

Questions on this page are intended to address issues on methodology that are specific to the rent and owners’ equivalent rent (OER) indexes.

The rent and rental equivalence factsheet covers item definition, data sources, relative importance, sample selection, price change and quality adjustment, and imputation for rent and OER.

General CPI information is available on the questions and answers page.

Terminology

Housing Unit: a house, an apartment, a mobile home, a group of rooms, or a single room that is occupied (or if vacant, is intended for occupancy) as separate living quarters. Separate living quarters are those in which the occupants live and eat separately from any other persons in the building and which have direct access from the outside of the building or through a common hall.'

Panel: a partition of the Housing Survey sample of housing units into a mutually exclusive group for the purpose of data collection. There are six panels, with data collection occurring twice a year for the sample in each panel according to the schedule presented in table 1 below.

Table 1: Housing survey panel data collection schedule
Panel	Months priced
1	January and July
2	February and August
3	March and September
4	April and October
5	May and November
6	June and December

Segment, Block Group, and Neighborhood: A segment is a partition of the total land area defining a sampled core-based-statistical-area (CBSA). A segment is almost always equivalent to a Census Block Group (CBG), but in some cases it could be a subset of a CBG or a grouping of multiple CBGs. Segments are used in the housing unit sample selection process. Colloquially, segments are referred to as neighborhoods.

Single Family Detached (SFD), non-Single Family Detached (non-SFD): SFD is a free-standing home; more specifically a structure consisting of just one dwelling unit intended for occupancy of one household or family and that does not share walls with other housing units A non-SFD may be a single family attached housing unit, apartment, condominium, row house, etc. Note that although mobile homes and house boats are both eligible for the CPI rent survey, they are classified as non-SFD for calculation purposes.

Questions

Why use rental equivalence/owners equivalent rent in the CPI?▸
- The CPI has measured changes in the cost of owner-occupied shelter using a rental equivalence framework since 1987. Rental Equivalence (REQ) can be described as the implicit cost to the owner imputed as the value they could have received by renting out the good (i.e., the home) rather than using it themselves. Price changes are imputed from a sample of rented units.
What explains the difference in relative importance between rent and OER?▸
- The expenditure weight in the CPI market basket for OER is based on the following question that the Consumer Expenditure Survey asks of consumers who own their primary residence:
  “If someone were to rent your home today, how much do you think it would rent for monthly, unfurnished and without utilities?”
  The expenditure weight in the CPI market basket for Rent is based on the following questions that the Consumer Expenditure Survey asks of consumers who rent their primary residence:
  “What was your total rental payment for (reference month) for this unit? Include any extra charges for garage or parking facilities, but do not include direct payments by local, state or federal agencies.”
  From the responses to these questions, the CPI program derives estimates of total annual expenditure on Rent and OER for each of the index populations. The higher relative importance for OER reflects that the average implied rent for homeowners is larger than the average rent of renters, coupled with the fact there are more owners than renters. More information is available on the relative importance page.
Can you explain the various weights associated with rent and OER? What they are, what they are used for, and how often they are updated?▸
- There are two sets of weights to consider:
  1. “Upper level” or “aggregate” weights are updated annually with the publication of January indexes. These weights are derived from Consumer Expenditure Survey (CE) data and represent spending estimates for each item/area combination in the CPI. These determine the relative importance of different CPI item categories, including Rent and OER.
  2. Unit level weights, which are comprised of multiple weighting factors, represent the weight of the specific sampled units in the rent and OER indexes. A given unit will have a different weight for rent than for OER. BLS reweights the existing PSU sample whenever a new six-year sample is introduced. Each month a portion (approximately 1/72) of the sample is replaced.
Why did BLS decide to implement adjustments for structure type representation (SFD vs non-SFD)?▸
- Single family detached (SFD) homes in the CPI rent sample are underrepresented relative to ACS structure information for the US population of homeowners. This is not an issue for the CPI unless SFD experience different price trends than non-SFD units. However, recent research as described in the 2020 working paper “Location, Location, Structure Type: Rent Divergence within Neighborhoods” concluded that there are different price trends by structure type. An underrepresentation of SFDs has the potential to reduce the accuracy of the OER index.
- Starting in January 2023, the weights for housing units within a given segment have been modified according to their structure type. This affects OER only, and not the rent index. We use the latest American Community Survey (ACS) five-year estimates which are typically released each year in December. The unit level weights are adjusted to match ACS percentages to the degree possible, constrained by the rule that no units weight be adjusted by a factor less than 0.5 or greater than 2.0. The total segment or basic weight is not changed by these unit level adjustments; the weights for individual housing units within the segment are re-distributed to be a better, more representative reflection of the SFD and non-SFD mix of owner-occupied homes in that segment..
Does the share of single-family detached homes in OER vary across the 6 housing survey panels? ▸
- Yes. The share of SFD varies by area and panel and is specific to the housing units available in that segment, and those units that are selected to be in the CPI sample. Generally speaking, SFD units comprise approximately 25 percent of the CPI Housing sample.
Will BLS release more detailed or granular indexes than the current rent and OER; for example, indexes for SFD or non-SFD? Will BLS release the exact share of SFD in the sample?▸
- We periodically run special calculations for research purposes that are not currently published. We routinely review the types of data we publish and may make changes based on statistical, legal, and resource constraints. It is our policy to announce on the CPI homepage when new data are available.
Why did BLS decide to cap the adjustment factors?▸
- We limit the increase in weight to a factor of 2 (and the decrease to 0.5) to avoid giving excessive weight to specific units; this also mitigates the impact on variance should heavily weighted units also experience significant changes in price (rent).
BLS has mentioned having a supplemental group of rental units (“helper segments”) that better represent owner-occupied units in areas where there are not enough rental units suitable for measuring OER. Does that mean the reweight would also occur in these segments? ▸
- As part the 2018 geographical revision, BLS ceased using a supplemental group of rental units (helper units). In our current methodology, prior to segment selection, if a block group does not contain a sufficient rental sample size, then we combine to its nearest neighbor and continue this until sample sufficiency is achieved. For additional detail please see the CPI Handbook of Methods, Design section for shelter.

Last Modified Date: February 11, 2025