Rents Have Been Rising, Not Falling, in the Postwar Period

Until the end of 1977, the U.S. consumer price index (CPI) for rents tended to omit rent increases when units had a change of tenants or were vacant, biasing inflation estimates downward. Beginning in 1978, the Bureau of Labor Statistics (BLS) implemented a series of methodological changes that reduced this nonresponse bias, but substantial bias remained until 1985. We set up a model of nonresponse bias, parameterize it, and test it using BLS microdata. From 1940 to 1985, the official BLS CPI for urban wage earners and clerical workers (CPI-W) price index for tenant rents rose 3.6% annually; we argue that it should have risen 5.0% annually.