Does GDP count both the investment and the house rental?

Question

Suppose you bought a new house in the year of 2010. Then the price of the house in counted toward the 2010 GDP. Say then you live in the new house in the following years. So in these years, the GDP includes the housing rental you paid yourself. But then why is it not an overcount? I mean, when we counted the house price into GDP in2010, we have already counted all the utility of the house in one year and there is no need to count the de sequent rental.

Answer 1

The way the BEA thinks about it, the value of the new house is separate from the value of the services that the house provides. Imagine that you build a house and then leave it vacant forever. The house adds to GDP when it's built (new production), and that's it. Now imagine that you rent out that house every year. Now the house is also providing a service, or a new service is "produced" every year that it's rented out. This service provides additional value, so counting it is not double-counting.

That having been said, you're right that the treatment of houses is a bit peculiar. E.g., the argument I just made above could also be made when a consumer buys a car (or a washing machine or any durable good). Doesn't the car provide you with a service every year that you use it, and shouldn't the value of that service be counted as well? The way the BEA sees it, cars are consumption goods, so even though they are durable, we don't count separately the services that they provide. Realistically, trying to do that would be too laborious (imagine trying to count the value that your T-shirt provides over time, and your kitchen table, and your briefcase...). But because rent is such a large expense for most families, leaving that out is considered problematic. And once you count the value of renting, it makes sense to also count the value of the service that the house provides when occupied by the owner.