Real estate professionals have long known that housing prices are higher in areas with good public schools. An indicator of the importance of schools to homebuyers is that while crime rates and transportation options are also understood to affect housing prices, only schools are a searchable field on Multiple Listing Service databases. It is no surprise that academic studies conducted in many countries show parents are prepared to pay substantially more for homes in better-performing school districts.
Most kindergarten through 12th grade education in the United States is provided by public schools where attendance is linked to home location based on district boundaries, or catchment areas. Students who live in a particular catchment area are assigned to a specific school. Families can exercise choice over which schools their children attend by buying a home in the catchment areas of their preferred schools. It is evident that people pay more for homes in catchment areas where school quality, as measured by student outcomes, is higher. However, it is not clear that parents are willing to pay more for higher-quality schools as measured by inputs—that is, the amount spent per pupil.
Occasionally, districts alter the boundaries of catchment areas to fill available school spaces or reduce overcrowding, eliminate spare capacity, or promote other goals such as equalizing perceived school quality or promoting racial or ethnic integration. As one would expect, research suggests that homes reassigned to lower-performing catchment areas decline in value. Subsequent uncertainty about future student assignment policy also lowers housing prices. Buyers appear to be less eager to purchase a home in a high-quality school catchment zone if history suggests changing policies may result in the home being assigned to another school.
An unfortunate effect of the current assignment-by-catchment-area model can be seen in the pattern of development in most major urban areas. To choose a better school, parents must choose a better home—or at least a better catchment area. This home-to-school linkage has led to middle-income families migrating from catchment areas of underperforming urban schools to areas with higher-performing suburban schools. The fallout from this migration includes increased urban sprawl, concentrated inner-city poverty, and reduced inner-city economic and racial diversity.
Growing discontent with the quality of assigned public schools—particularly inner-city schools—has led to some growth in attendance at private schools and in home schooling. However, more significant, the U.S. Department of Education reports that between 1993 and 2007, there was over a 57 percent increase in the number of students enrolled in public school choice programs, which allow students to enroll in schools other than those to which they are otherwise assigned.
Public school choice is a catch-all description for a wide array of school programs. Some choice programs allow students to attend a traditional public school in another catchment area. Others allow students to attend a magnet school in the same district. Some programs allow students to attend charter schools operated by not-for-profit entities. Eligibility differs for each of these programs. Some choice programs are means tested—offered to poor families but not to those with a higher income. Minnesota’s Enrollment Options Program allows the state education agency to prevent white students from transferring out of districts that have high percentages of minorities.
Many studies have examined the impact of school quality on home prices, but only a few have focused specifically on the effects of school choice on home values. As school options grow, these studies are worth reviewing. For example, in 1997, Oslo, Norway, scrapped its zone-based school assignment system in favor of choice-based open enrollment. Before the change, a catchment area with pupil test scores significantly above average registered home prices 7 to 10 percent higher than average. After the policy change, about half the price premium for these homes disappeared.
In 1990, Minnesota implemented a statewide system of interdistrict open enrollment that allowed students to attend a school outside their own district. As a result, students in poor-performing districts were able to attend schools in better-performing districts. Eight years later, home prices were found to have appreciated more in districts where higher percentages of students transferred out to preferred districts. The explanation for the home value changes in both Minnesota and Oslo is that after the policy change, families could get access to the premium-quality schools without paying for premium-priced homes in a preferred catchment.
The impact of charter schools, which typically operate without catchment areas, on home values has not been studied extensively. The influence of publicly funded private schools, which have catchment areas, on home prices has been studied—in France. Paris has a catchment-based school assignment system as well as a well-developed publicly funded private school system—based on vouchers—that operates without catchments.
One-third of all middle schools and high schools in France are private. However, the distribution of private schools is not uniform, with some areas having few private schools and others having several. In areas with few private school options, homes are worth more in the catchment with desirable public schools. However, where many publicly funded private schools exist, public school assignment boundaries apparently have no impact on home prices.
To the extent that charter schools are similar to publicly funded private schools, one can expect that the proliferation of such schools will similarly smooth home values across school district boundaries.
Although the number of school choice programs has grown substantially over the past two decades, the nation appears to be nearing a tipping point that will see a substantial increase in the percentage of students educated outside the assigned-school model. For example, a cap limiting the number of charter schools in North Carolina to 100 was eliminated this year by an overwhelming bipartisan vote: only five of 113 legislators voted to retain the cap. Similar changes have occurred recently in more than a dozen states.
Research conducted at North Carolina State University examined how the families of children who attend a charter school in North Carolina migrate after they enroll. Using changes in mailing addresses, the home addresses of charter school students were tracked over time. Previous research had shown that individuals tend to relocate closer to their work when they move, but the new research indicates that a charter school is an even stronger magnet than parental work locations.
It is possible that charter schools are unusually attractive simply because they are not subject to redistricting uncertainty—a continuing issue in the state—but more research is needed to understand which characteristics of charter schools (and perhaps of private schools) make them relocation magnets. School-centered residential developments have been built in China and Korea, and it seems plausible that urban planners and developers in the United States will partner with—or launch—charter schools to take advantage of their urban development potential.
In any case, two things now seem certain: political forces will continue to drive change in how education is delivered to children, and the direction of change is likely to continue toward greater parental choice. Changes that weaken the importance of attendance zones will also reduce the price premium attached to living in a catchment area with good traditional public schools. However, because families place a value on short home-to-school commutes, the proliferation of these alternative schools may present their own planning and redevelopment opportunities. Expanded educational choice may even be harnessed to reverse urban sprawl by attracting families back toward the urban core, increasing inner-city vitality and diversity.
Of course, the devil is always in the details. For example, Milwaukee’s voucher program targets students from poor families but excludes participation by higher-income families. Denying educational choice to higher-income families is not intended to drive these families to the suburbs, but it almost certainly does. Since the means-tested voucher program began, inner-city poverty has risen and the city has become even more racially segregated. Fortunately, Milwaukee’s voucher program is only one of the hundreds of school choice programs being implemented. Developing school choice options that are environmentally friendly and sustainable will require more thoughtful approaches and continued study.
