The LAI shows how transportation costs vary depending on neighborhood characteristics and the built environment. However, household characteristics also impact average spending on transportation. The LAI estimates costs in each region separately for each of eight household types. This accomplishes two things: it accounts for the variation in costs due to demographics and allows users to learn more about costs for specific segments of the population. Given these approaches, users can see how costs vary by place as well as between different populations.
These areas have some of the lowest transportation costs in the country, which helps offset the high cost of housing. The area median income (AMI) in these regions is also high, so when costs are shown as a percent of income for the typical regional household these neighborhoods appear affordable; however, they are generally unaffordable to households earning less than the AMI.
Regions used in the LAI correspond to metropolitan and micropolitan statistical areas defined by the Office of Management and Budget (OMB) for use by federal statistical agencies in collecting, tabulating, and publishing national statistics. The term Core Based Statistical Area (CBSA) is a collective term for both metropolitan and micropolitan areas. Because 2012 American Community Survey (ACS) 5-year estimates serve as the primary dataset for the LAI, this dictates using the 917 CBSAs defined by the ACS (which excludes 12 regions in Puerto Rico due to data limitations). LAI Version 2 expanded its coverage to the full borders of the fifty states. Outside of CBSAs, the regional typical household is calculated using county level data.
Housing costs in the LAI are modeled to estimate average costs for a specific household type characterized by household income, size, and number of commuters. It is highly unlikely that any actual residents of a given neighborhood will have the exact same household income and makeup as the household type for which LAI data is modeled, and costs for individual households will not necessarily match the average. Market rate housing prices also reflect what it costs to enter a neighborhood, not necessarily what people already residing in that neighborhood spend.
The discrepancy between real-time market prices and the estimates contained in the LAI are due largely to two limitations inherent to the American Community Survey (ACS), the primary source of LAI input data. First, the ACS’s five-year rolling sample includes household data spanning all five years, skewing any direct comparison with current real estate prices. Second, homeowners in the data sample report their actual costs, which may have little relationship to the current purchase price of a home—particularly when they are long-time incumbents and/or there has been an increase in price appreciation. The most appropriate uses of LAI data view it as an index that can show the relative affordability of neighborhoods within any given metropolitan area and the relative change in affordability in those neighborhoods in the five-year period represented by each version.
Data in the LAI is modeled, meaning that it does not measure actual housing and transportation costs; it estimates what average costs will be for a specific household type. Actual residents of a given neighborhood will not have the exact same household makeup and income as the household type for which LAI data is modeled, and costs for individual households will not necessarily match the average.
To help users better understand how applicable LAI estimates for each household type are to a given Census tract, three new fields have been added in Version 3: income percentile in a given tract for the household profile generally, and income percentile of renter households and owner households of the household profile among renters and owners in that tract, respectively.
The LAI covers the populated Census tracts of all fifty states and the District of Columbia.