A few folks in the community have asserted that there is a clear correlation between the quality of schools and housing prices I am one of those folks. Others have suggested that the link isn’t there or that the price of homes actually drives the quality of schools. Detractors suggest that a quick look is all you need to determine there is no link Luckily, with such a data-driven question like the correlation between home prices and school quality, there’s no need to rely on guess work and intuition let’s save that for Grandma’s tuna casserole instead, we can just look at the math.
I’ll highlight my favorite study (well designed and thoughtful) and although there are scores of studies that demonstrate a clear link between school quality and housing prices, I’ll list just a few below for your reference below. (Aside from the study I have provided a link to, I think you can find most of these to read for yourself online with the help of our local library).
The first study was done by the Federal Reserve Bank of St. Louis (known to be a fiscally conservative group, another reason I like the study).
A couple of study design notes worth mentioning: The study looked at house price and house characteristics data from First American Real Estate Solutions and a cross section of single-family residences sold during the 1998-2001 period in the St. Louis area. But, to make the data meaningful for all of us (including here in Coronado), the study authors matched this information to census blocks and publicly available population tables from the Census 2000 Summary File. They included (as neighborhood controls) the property tax rates defined at the school-district level for the years 1998 through 2001. In this case, each house was matched to the tax rate prevailing during the year of sale in its associated school district. They also looked at state based standardized test scores across all disciplines of learning, the same structure as the Academic Performance Index (API) used in California. Parents who look for homes to rent or buy in California need no introduction to the API, of course.
This study, and the others I’ve listed do a pretty good job of correcting for market variability to look at the core data applicable to the question: Does school quality impact home prices?
The key take home point is pretty straight forward “the price premium parents must pay to buy a house in an area associated with a better school increases as school quality increases.”
Two other key take home points:
- In an environment in which potential buyers are heterogeneous in the intensity of their preferences for school quality and neighborhood characteristics, buyers with a stronger preference for education quality may concentrate their buying search for a house in the highest-quality attendance zones. As school quality increases, competition from other buyers creates an increasingly tight housing market. KEY: Parental jockeying for a high performing school directly increases home values in that area.
- School quality can be considered a “luxury good,” KEY: At higher quality schools (and therefore richer neighborhoods), people are willing to pay more for the same relative marginal increase in school quality.
Folks should read this study for themselves, of course so it is referenced first with a direct link. The other nine studies listed are others that I have found helpful and although they each use slightly different statistical models to look at the data, they reach the same conclusion: Better Schools = Higher Home Prices.
I have yet to find a study that does not show this strong link between school quality and home values. That said, I’m always happy to learn so let us know what you find!
References
Black, Sandra E. “Do Better Schools Matter? Parental Valuation of Elementary Education.” Quarterly Journal of Economics, May 1999, 114(2), pp. 577-99.
Bogart, William T. and Cromwell, Brian A. “How Much More Is a Good School District Worth?” National Tax Journal, June 1997, 50(2), pp. 215-32.
Bogart, William T. and Cromwell, Brian A. “How Much Is a Neighborhood School Worth?” Journal of Urban Economics, March 2000, 47(2), pp. 280-305.
Clapp, John M.; Nanda, Anupam and Ross, Stephen L. “Which School Attributes Matter? The Influence of School District Performance and Demographic Composition of Property Values.” Journal of Urban Economics, March 2008, 63(2), pp. 451-66.
Haurin, Donald R. and Brasington, David. “School Quality and Real House Prices: Inter- and Intrametropolitan Effects.” Journal of Housing Economics, December 1996, 5(4), pp. 351-68.
Hayes, Kathy J. and Taylor, Lori L. “Neighborhood School Characteristics: What Signals Quality to Homebuyers?” Federal Reserve Bank of Dallas Economic Review, Fourth Quarter 1996, pp. 2-9;
Kane, Thomas J.; Staiger, Douglas O. and Samms, Gavin. “School Accountability Ratings and Housing Values,” in William Gale and Janet Pack, eds., Brookings-Wharton Papers on Urban Affairs. Washington, DC: Brookings Institution, 2003, pp. 83-137.
Rosenthal, Leslie. “The Value of Secondary School Quality.” Oxford Bulletin of Economics and Statistics, July 2003, 65(3), pp. 329-55.
Weimer, David L. and Wolkoff, Michael J. “School Performance and Housing Values: Using Non-Contiguous District and Incorporation Boundaries to Identify School Effects.” National Tax Journal, June 2001, 54(2), pp. 231-53.
–
