Owner Occupied Housing, Inflation and Monetary Policy

Robert J. Hill
University of Graz, Austria

Miriam Steurer
University of Graz, Austria

Sofie R. Waltl
Vienna University of Economics and Business, Austria & Luxembourg Institute of Socio-Economic Research, Luxembourg


Owner-occupied housing (OOH) is currently excluded from the Harmonized Index of Consumer Prices (HICP) in Europe. Using micro-level data for Sydney and aggregated data for the US, France and Germany we compare the impact of alternative treatments of OOH on measured inflation.
We recommend including OOH in the HICP using a simplified version of the user-cost method.
This would improve the harmonization of the HICP, help close the credibility gap between measured inflation and public perceptions of it, and allow the ECB to lean against a housing boom without departing from its inflation target.

JEL.: C31; C43; E01; E31; E52; R31

Keywords: Measurement of inflation; Owner-occupied housing; User-cost; Rental equivalence; Hedonic quantile regression; Housing booms and busts; Inflation targeting; Leaning against the wind


Forthcoming in Journal of Money, Credit and Banking.

Working Paper:  [Graz Economic Papers]

Presentations:  [NBER Conference on International Comparisons of Income, Prices and Production, MIT, Cambridge (MA), May 2016] [OeNB, Vienna, June 2016] [Oxford U, February 2017] [Institute of Fiscal Studies, London, May 2017] [GGDC 25th Anniversary Conference, Groningen, June 2017] [SEM conference at MIT, Cambridge (MA), July 2017][Reserve Bank of Australia, April 2018] [STATEC, Luxembourg, April 2018] [Economics Statistics Centre of Excellence (ESCoE) Conference on Economic Measurement, Bank of England, May 2018] [International Conference on Real Estate Statistics, Eurostat, Luxembourg, February 2019][US National Academy of Sciences, December 2020]

Media Coverage: Die Presse (AT), Central Banking (UK)D’Lëtzeburger Land (LU)Lëtzebuerger Journal (LU)