Presented by Robert Hill (University of Graz)
The concept of the user-cost of owner-occupied housing has two main measurement applications. First, it can be used to construct a price index and expenditure share for owner-occupied housing, thus allowing owner-occupied housing to be included in a consumer price index. Second, the user-cost equilibrium condition asserts that in equilibrium the cost of owner occupying should equal the cost of renting. On rearrangement, this condition provides a formula for the equilibrium price-rent ratio (or rental yield) in the housing market. In this talk I will discuss and contrast some of the problems one encounters in practice when trying to apply the user-cost concept to measure either inflation or the equilibrium price-rent ratio. In both cases, nonsensical results can easily arise if care is not taken.
Robert Hill is Professor of Macroeconomics at University of Graz, Austria. He is a Fellow of the Academy of the Social Sciences in Australia, a Fellow of the Society for Economic Measurement, and a member of the Conference on Research in Income and Wealth at the NBER. In 2021 he joined ESCoE as a Topic Lead. He is also currently serving as an advisor to Eurostat on Commercial Property Price Indices (2020-2023). Previous recent service includes membership of the Computation Task Team of the International Comparisons Program at the World Bank (2017-2020) and the United Nations Task Force on the Price Adjustment System for UN Staff (2018-2019). From 2008 to 2014 he was Managing Editor of the Review of Income and Wealth. He has published in leading journals including American Economic Review, International Economic Review, Review of Economics and Statistics, Journal of Econometrics and Journal of Business and Economic Statistics.