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December 1996, Vol. 119, No. 12

Revision of the CPI housing sample and estimators

Frank Ptacek and Robert M. Baskin

The Consumer Price Index (CPI) currently consists of seven major categories, with the large aggregate grouping called ‘housing’ representing 41 percent of the total index. Within the ‘housing’ category, most of the relative importance belongs to the index for ‘owners’ equivalent rent’, also known as ‘rental equivalence’, and that for ‘residential rent,’ for which data are obtained through the Housing survey. These two items represent 20 percent and 6 percent, respectively, of the total CPI. The remaining 15 percent accounted for by the ‘housing’ group consists of many indexes, which are handled through the Commodities and Services survey. (For more detail see "Changing the Item Structure of the Consumer Price Index," pages 18–25.)

In addition to data on residential rents used to calculate changes in rents for the ‘rent’ index, the Housing survey also collects data for owned homes for use, in conjunction with the rent data, in calculating of changes in the rental value of owned homes for the ‘rental equivalence’ measure. Clearly, the rental value of owned homes is not an easily determined dollar amount, and Housing survey analysts have spent considerable time and effort in estimating this value. As a result, determining ‘rental equivalence’ is an important issue in the upcoming 1998 revision of the CPI.

The revision has provided a window of opportunity to initiate an extensive redesign of the Housing survey. Beginning in 1999, the CPI for ‘rent’ and for ‘rental equivalence’ will be based on a new sample design and estimation methodology. Major technological advances and improvements in the operational processes also will be implemented in the survey. More specifically, these changes include:

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