150806 Housing costs vs CPI
  • Starting with a post-script. An even to-the-point-ier To The Point post than usual, as this one is basically an addendum to Tuesday’s. That, you might remember, was about how the average household spends its money. After taxes, housing costs were the largest item of expenditure.
  • Housing costs add up. Housing costs are also one of the items in the Office for National Statistics’ Consumer Price Index. They get mixed in with various other goods ‘n’ services to produce our nation’s preferred measure of inflation. But what if you look at them in isolation? That’s what the above graph does. It shows that housing costs have far outpaced CPI over the past decade. They’ve gone up by 55 per cent in that time, whereas prices in general have gone up by 28 per cent.
  • A bundle of bundles. This “housing costs” measure is itself a bundle of other costs, some of which have gone up by more than others. For instance, rents have risen by 29 per cent, whilst for gas and electricity the figure is a wallet-shrivelling 112 per cent.
  • Adding H to CPI… What this housing costs bundle doesn’t include is house prices themselves. Neither does the ONS’s separate measure of inflation, CPIH, even though that tries to account for the costs faced by owner occupiers. As they explain it, “Although this may be inconsistent with some users’ expectations of measures of [owner occupiers’ housing costs], the inclusion of an asset price and therefore capital gains would make the index less suitable for a measure of consumption.”
  • …will it ever work? CPIH, and how it deals with owner occupiers’ housing costs, is currently being refined by the ONS. In the meantime, it’s had its National Statistics status rescinded by the Statistics Authority. This is worth remembering when the next inflation figures are published. They’re just bundles of bundles – but those bundles may not include everything they should.

3 comments for: How housing costs are outpacing other costs

Leave a Reply

You must be logged in to post a comment.