Housing Policy, Inflation, and Monetary Policy: An Unorthodox View

This paper examines the role of housing—particularly rents—in shaping inflation dynamics and monetary policy. The authors argue that post-pandemic rent increases played a major role in elevated inflation and that standard monetary policy tools may be ill-suited to address housing-driven inflation due to supply constraints and measurement issues. They show that accommodative monetary policy can raise housing costs and discuss how housing market frictions complicate inflation targeting. The paper proposes a more nuanced approach in which policymakers treat housing inflation differently and consider housing policy as a complement to monetary policy.