Location, Location, Structure Type: Rent Divergence within Neighborhoods

Housing rents are a large share of household budgets and make contribution to overall inflation. Rent inflation rates for different types housing units sometimes diverge, even in the same neighborhoods. We estimate during 2013 2016 apartment outpaced detached United States by 0.76 percentage points annually after controlling location effects. These rent dynamics imply segmented market. They also suggest indexes need be based on data structurally representative their measurement objective. In particular, professionally managed complexes mismeasure generally. Even careful geographical sampling, such as Consumer Price Index’s Owners’ Equivalent component, may biased using an unrepresentative mix apartments houses.