What Is the Cost of Living Index and How Do You Use It?

You’ve probably seen the phrase “cost of living index” come up when researching a move or evaluating a job offer in another city. It sounds technical, but the concept is straightforward — and once you understand how to read it, it becomes one of the most useful tools in any relocation decision.

This article explains what the index is, where it comes from, what the number actually means, and how to put it to work alongside the ZIP-level data at ZipCodePlus.com.

What the Cost of Living Index Is

The cost of living index is a number that tells you how expensive one city is compared to a national benchmark. The most widely used version in the United States is published by the Council for Community and Economic Research (C2ER), which has been tracking local consumer costs since 1968.¹

C2ER sets the national average equal to 100. Every city gets a number relative to that baseline:

A city with an index of 120 costs 20% more than the national average
A city with an index of 85 costs 15% less than the national average
A city right at 100 is priced at the national average

That’s the whole concept. The index is not a dollar amount — it’s a ratio that tells you how one place compares to another.

What Goes Into the Number

The C2ER index measures prices across six spending categories, based on 60+ individual goods and services collected quarterly by local researchers in each participating city:¹

Category	What It Covers
Housing	Rent and home purchase prices — the largest driver
Groceries	Food staples: bread, eggs, milk, meat, produce
Utilities	Electricity, heating, cooling, water
Transportation	Gas prices, auto costs, transit fares
Healthcare	Doctor visits, dental care, prescriptions
Miscellaneous	Clothing, personal care, dining, services

Housing typically drives 60 to 70 percent of the difference between cities.² When a city’s index is unusually high or low, housing is almost always the reason.

One important limitation: the C2ER index does not include state and local income taxes. A complete city comparison requires adding that layer separately. Two cities with identical index scores can produce very different take-home pay if one has a high state income tax and the other has none. For that comparison, see States With No Income Tax in 2026.

Reading the Index: Real City Examples

Here are approximate C2ER index values for major U.S. cities based on 2025 annual data:²

City	Approx. Index	What It Means
Manhattan, NY	187	87% above national average
Honolulu, HI	180+	Near double the national average
San Jose, CA	181	81% above — Silicon Valley premium
San Francisco, CA	160	60% above average
Boston, MA	158	58% above average
Seattle, WA	145	45% above average
Denver, CO	110	10% above average
Austin, TX	105	Near national average
National Average	100	Baseline
Raleigh, NC	97	Slightly below average
Dallas, TX	95	5% below average
Columbus, OH	91	9% below average
Indianapolis, IN	89	11% below average
Memphis, TN	86	14% below average
Oklahoma City, OK	84	16% below average

Source: C2ER Cost of Living Index, 2025 annual data.²

The range is striking. Living in Manhattan costs more than twice what living in Oklahoma City costs, even before accounting for New York’s state and city income taxes.

The One Formula Worth Knowing

The most practical use of the index is converting a salary from one city to another. The formula is:

Equivalent Salary = Your Salary x (New City Index / Your City Index)

Two examples:

Earning $75,000 in Columbus (index 91) and considering Manhattan (index 187): $75,000 x (187/91) = ~$154,000 needed to maintain the same lifestyle
Earning $110,000 in San Francisco (index 160) and considering Raleigh (index 97): $110,000 x (97/160) = ~$66,700 is the equivalent purchasing power

The second example explains why people who move from expensive coastal cities to mid-sized Sun Belt or Midwest cities often feel like they got a raise even when they took a pay cut. Their dollar simply goes further. For a full walkthrough of this analysis, see How to Compare Cost of Living Between Two Cities.

What the Index Does Not Tell You

Used alone, the index can give you a false sense of confidence. Three things it misses:

Income taxes. As noted, C2ER excludes state and local income taxes. Florida, Texas, and Tennessee have no state income tax. California’s top rate is 13.3%. That gap is real money that needs to be calculated separately.

Neighborhood variation. The index is a city-level average. Two ZIP codes in the same city can have median home values that differ by $300,000. Always drill down to the ZIP level before making a housing decision. The housing card on every ZipCodePlus page shows median home value and median rent for that specific ZIP code.

Sales tax. The combined state and local sales tax rate — visible on every ZipCodePlus taxes card — is not captured in the C2ER index. In some cities, that rate tops 10%, adding thousands of dollars per year in real cost. For more, see How Sales Tax Affects Your Cost of Living.

How to Use It With ZipCodePlus Data

The C2ER index gives you the city-level picture. ZipCodePlus sharpens it to the neighborhood level. For any city you are researching, look up specific ZIP codes at ZipCodePlus.com and check:

Demographics card — median household income for that ZIP
Housing card — median home value and median rent
Taxes card — combined sales tax rate, which varies by municipality

Together, the city index and the ZIP-level data give you a complete picture: what the city costs in aggregate, and whether the specific neighborhoods you can actually afford fit your budget.

For a step-by-step guide to that full research process, see How to Research a Neighborhood Before You Move and Cost of Living by State 2026.

Sources

Page last updated: April 2026. C2ER index values reflect 2025 annual averages. City scores are approximate composites and vary by data source. Always verify current figures before making a relocation or employment decision.

C2ER — ‘Cost of Living Index.’ Council for Community and Economic Research, published quarterly since 1968. https://www.coli.org ↩ ↩²
FinanceWonk / C2ER — ‘Cost of Living Index by City 2026: C2ER Data, Salary Comparison and Most Affordable Cities.’ Data from C2ER Cost of Living Index 2025 Annual Average. https://www.financewonk.com/references/cost-of-living ↩ ↩² ↩³