Simple User Cost and Rentals Eight meeting of the International Working Group on Price Indices

• Main Author: Rósmundur Guðnason
• Other Authors: The Pennsylvania State University CiteSeerX Archives
• Format: Text
• Language: English
• Published: 2004
• Subjects: Iceland
• Online Access: http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.200.5382; http://www.stat.fi/tk/hp/gudnasonpaper.pdf

This paper describes and treats the problem of user cost from the point of view of the simple user cost approach to owner occupied housing. The simple user cost method uses a real interest rate as approximation to capital gains and measures depreciation by an inverse geometric rate. The prices are measured by a total house price index. Usually there is a problem in that connection because of the price divergence between rental markets and changes in house prices although that is not the case in Iceland. The price change in rental markets and house markets do not necessarily have to move in similar fashion. This problem is relevant for every user cost method and the use of the rental equivalence method. Key words Consumer price index, cost of living index, household expenditure surveys, owner occupied housing, user cost. JEL Classification