The Office for National Statistics is to include housing costs in its headline measure of inflation from March next year.
Following a consultation, the ONS has decided to switch its preferred measure of inflation from the consumer price index (CPI) to the consumer price index including owner occupier’s housing costs (CPIH) from March.
The measure calculates housing costs for owner-occupiers not in relation to house prices, but based on the rental value and council tax band of their properties.
In September the CPI was 1 per cent, while the CPIH was 1.2 per cent.
It is not yet clear whether this measure will be used for index-linked state benefits or for the Bank of England’s inflation target.
ONS chief executive and national statistician John Pullinger says: “I have listened to views on CPIH and ONS has engaged with interested parties and released a number of publications to raise understanding and confidence.
“Various users have indicated that they are open to recognising CPIH as the main measure of consumer price inflation and are comfortable with the methodology behind it.
He adds: “I have therefore concluded that we will make CPIH our preferred measure of consumer price inflation as I indicated earlier this year.
“I believe that CPIH has a number of desirable properties, most notably the inclusion of an element of owner occupiers’ housing costs.
“It also addresses several flaws and limitations present in alternative measures.
“We intend to make CPIH the preferred measure from March 2017, by which time all the planned improvements will have been implemented.”