Swedish re-considerations of user-cost approaches to owner occupied housing

Article type: Research Article

Authors: Ribe, Martin

Affiliations: Statistics Sweden, Box 24 300, SE-104 51 Stockholm, Sweden. Tel.: +46 8 506 948 54; Fax: +46 8 506 946 04; E-mail: martin.ribe@scb.se

Abstract: This paper discusses how a practically used index for the cost of owner occupied housing can be interpreted and understood in a theoretical framework of user cost. The considerations particularly apply to the present treatment of owner occupied housing in the Swedish Consumer Price Index, and they show how the present method can be conceptually interpreted in comparison to a new recently proposed approach. The view suggested here may on the one hand explore possible motivations for the present Swedish method, and on the other hand highlight some of its deficiencies. In particular it is seen that the present index theoretically depends somewhat artificially on the duration of ownership of homes, but that under present practical conditions it appears to provide a reasonable approximation of the cost change.

Keywords: capital cost, consumer price index, cost-of-living index, depreciation, durable assets, mortgage interest, opportunity cost, real interest

DOI: 10.3233/SJU-2004-21205

Journal: Statistical Journal of the United Nations Economic Commission for Europe, vol. 21, no. 2, pp. 139-146, 2004