Owner’s Equivalent Rent (OER) is an economic indicator used to measure the cost of renting a home compared to owning it. It represents the amount a homeowner would pay to rent their home. This tool is used by economists and policymakers to calculate the cost of housing in inflation indices like the Consumer Price Index (CPI). OER is determined by comparing the costs of owning a home (including mortgage payments, property taxes, maintenance costs, etc.) to the rental value of similar properties in the housing market.
OWR is used because it reflects changes in housing costs that affect homeowners and renters alike, providing a comprehensive measure of housing cost inflation. Changes in OER can affect the CPI, and through a domino effect, monetary policy decisions, which impact overall inflation and cost of living calculations.
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