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

Exploratory Analysis that Redefined the Parameter of a Structure’s Year Built in Consumer Price Index Housing Age

Alice Yu, Ayme Tomson, Ben Houck, and Chun Wing Tse

Abstract

Rent and owner's equivalent rent in Consumer Price Index (CPI) uses building's age bias and structural change factors. These factors are calculated each December, then run in January, and put into production use for the following 12 months. A multivariable linear regression model with 35 independent variables and one dependent (unit's rent) variable is used to calculate these factors. One of the independent variables is the product of the building's age (the current year minus the year a structure is built) and a binary variable, "old". The "old" binary variable is defined as if the unit is built in 1919 or earlier, or if the unit is built in 1920 or later. This "old" parameter is defined in a static manner that underperforms in statistical significance and restricts CPI methodology. An alternative, less restrictive, definition of the "old" parameter which performs with higher statistical significance is found in this research.