Published Oct 25, 2023 Owners’ Equivalent Rent (OER) is a measure used by economists and policymakers to estimate the cost of renting a home that is owner-occupied. It represents the amount of money a homeowner could potentially earn if they were to rent out their property on the open market. OER is often used in economic analyses to account for the imputed rent that owners derive from their own homes. Let’s consider a scenario where Sarah owns a three-bedroom house. Instead of renting it out, Sarah decides to live in it herself. The market rent for similar properties in her area is $2,000 per month. In this case, the OER for Sarah’s house would be $2,000 per month, as it represents the potential rental income she could earn if she chose to rent out her property. OER is derived by comparing the rental prices of similar properties in the market and adjusting it to account for factors such as location, size, amenities, and condition of the property. It provides an estimation of the economic benefit homeowners receive by living in their own homes, which is an important consideration for measuring household wealth and housing costs. OER is often used to calculate the housing component of inflation and to compare the costs of owning versus renting a home. By imputing a rental value to owner-occupied housing, economists can analyze trends in the housing market, assess affordability, and determine the impact of housing costs on inflation rates. Additionally, OER allows policymakers to evaluate the housing market’s contribution to the overall economy and make informed decisions regarding housing policies and regulations.Definition of Owners’ Equivalent Rent (OER)
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Why Owners’ Equivalent Rent (OER) Matters
Economics