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Real Estate Roundup with Sharon Alva: Real estate and public schools

Submitted by on 1, March 12, 2010 – 5:50 am9 Comments

One of the first questions buyers ask me when they’re shopping for a home is, “How good are the schools?” So while we digest the drastic changes to our schools and look at further cuts in the event we fail to pass a parcel tax, I thought it worth examining the valuation aspect of the school debate.

While homeowners are asked to support schools through parcel taxes in Alameda and elsewhere, we rarely ask what the cost of NOT passing parcel taxes would be, and allowing our schools to further deteriorate.

Studies have shown that schools are pivotal in a buyer’s consideration of where to buy a home. A survey conducted by the National Association of Realtors concluded that Americans rank quality of public schools second only to crime when deciding where to live. But I didn’t need a survey to tell me that. The question comes up so often in my initial meeting with new clients that I assume it will be part of their decision making process.

UCLA economist Sandra E. Black calculated that parents are willing to pay 2.5 percent more for housing per 5 percent increase in test scores. This increases property values for all homeowners. Moving from the bottom 5 percent of schools to the top 5 percent is associated with an 18- to 25-percentage point difference in value according to a 2003 study by UCLA, Dartmouth and Kennedy School of Government researchers. They used Black’s modeling technique and found an even greater effect of quality public schools on real estate values.

Proficiency tests, expenditure per pupil, pupil-to-teacher ratio, teacher salary and student attendance rates are “consistently capitalized” into housing prices, according to these studies, although I suspect there is a lag between changes in schools and the reputation that leads to greater or lesser values.

More recently, in a study published last week by the National Center for the Study of Privatization in Education at Teachers College, Columbia University, a trio of researchers used national data to study changes in home values and residential populations between 1990 and 2000 as states introduced inter-district public school choice programs. According to the report, 31 states now offer such plans, which permit parents to enroll their children in schools outside of their assigned school district, and 26 of them were put in place during the course of the study.

What the researchers found was that, when states enacted such changes, population density increased in districts with low-quality schools that were near the jurisdictions with the “good” schools. This came as relatively high-income families moved into those lower-cost areas and, in essence, began to gentrify them. The study calculates that, as a result of those inflows, home values in the cheaper districts rose. Because some of those families left the more-expensive districts with high-quality schools, the overall effect is that home values started to even out throughout those areas.

“Residential homogeneity increases across local districts when excludable local public services become less exclusive,” the study concludes.

Our neighbors have looked the same demon in the eye and have had to make the tough choice between seeing their schools decline and dragging property values with them, or living with higher taxes on their properties but protecting education, the quality of their community and ultimately the value of their properties. In 2007, Emeryville passed a parcel tax of 15 cents per square foot. In June 2009, Piedmont renewed its parcel tax (over $1,000 per parcel), and Albany passed a more modest parcel tax around the same time.

In a city like Alameda where schools have long been a draw for families when they’re buying their homes, changes in the quality of education will likely have an impact on home values. Alameda’s location, beauty and the nature of our community also have a huge pull, but nonetheless, the public schools are part of the reason buyers are willing to pay a premium price for homes.

Sharon Alva is a real estate agent with Alain Pinel, living in Alameda. You can reach her at sharon@alvaproperties.com.


  • John says:

    Yes school’s are important to buyers they do not have an impact on price, unless it is an enclave like Piedmont. A good example is Montclair, Rockridge and San Francisco neighborhoods have under-funded schools but housing prices still hold value. People say they want good schools, but not all home buyers have school age children. Other factors like commute, walkable life style, shopping and safety play as an important role as schools. In most shopping decisions they play a bigger role.

    What you do not discuss is home affordability. With every new tax homes become less affordable.

    I would suggest to you that Not passing the parcel tax would actually be a benefit to Alameda. One high school would create a unifying symbol for the whole community. Adding Franklin parents into Washington and Haight would help increase participation at the schools. And for most students this would add one to two blocks to going to their new school.

    I attend both Encinal and Chipman, and would be happy to see them close if it would force the AUSD to consolidate

    The problem is AUSD has too many facilities that it is forced to operate with redundant costs. This is a drain on the community and forces schools to operate on very little. People are drawn to Alameda because of its local beauty and community but not all will pay a premium price for a home if you really do not get much for you taxes. The parcel tax will do nothing to improve education, it is the parents that participate are involved that have the most influence.

  • Ron says:

    The last person who commented, John, has clearly not read much about Alameda schools and property values. I don’t want to get on a soap box, but let me make a couple points that John seems to miss. First, as many have pointed out, consolidating schools does not in fact save much, if any, money. A school like Alameda high can just absorb all the students from Encinal without some major expansion, hiring new teachers, new administrators, adding facilities, etc. etc. The costs of doing all of that almost balance everything out, and not to mention the decrease in the quality of education and general school experience that will come from having that large of a school. Even beyond class size, students will have a much lower chance of being able to participate in extra-curricular activities, lower chance to get on sports teams, less access to teachers, etc. etc. Consolidating schools doesn’t save any significant amount of money and is not the answer.

    Furthermore, property value is tightly related to school performance, and that is well known by almost everyone. Places like San Francisco draw a lot of young people, many of whom are renters, and many of which aren’t concerned with schools. The same is not true for Alameda. One of the main draws of Alameda is for families, and families want good schools. Recent surveys of home buyers in Alameda all point to the school district as one of the primary factors in influencing people to buy here. Changing that will really hurt home sales and by extension, property value. This is a fact almost everyone agrees on, even the opponents of the parcel tax. Now I realize people may not want to may more taxes, but given the situation the state is in, we unfortunately have to.

  • Sarah Olaes says:

    I also want to make a point about Montclair and Rockridge. Those areas in Oakland actually have excellent elementary schools which is why young families buy homes there. That is a big reason why those areas are more expensive than other parts of Oakland. Why do I know this, because we looked closely at those areas when looking where to buy in the East Bay. Why did we choose Alameda, because it has excellent schools not just at the Elementary level, but all the way though. At least for now……..

  • dave says:

    Many of those young families in Montclair & Rockridge decamp for Alameda after the elementary years. Schools DO matter.

  • Jill says:

    My family moved to Alameda from Oakland exclusively because of the schools. Our house in Alameda is uglier than the one we left in Oakland, and our commutes from Oakland to SF (via casual carpool/public transit for me, car for my husband) were better than the commutes from Alameda. If we had stayed in Oakland we would have had the expense of private school, at least after the elementary level. Even though housing in Alameda was more expensive, it made financial sense to move because in Alameda we could send our kids to public schools. So I can attest that school quality does affect housing demand, which in turns affects home prices.

    (And anyone who thinks most Franklin parents will send their kids to Washington or Haight is out of touch with reality. Those parents will be sending their kids to private school, and I don’t blame them a bit.)

  • jw says:

    it’s hard to look at property values in piedmont vs. other east bay neighborhoods and conclude that something other than a strong school system is responsible for the significant premium that one pays for a home there. as a current montclair resident soon to be moving to alameda, it’s a farce to suggest that the oakland public school system is not a drain on property values and quality of life here. there’s no shortage of underfunded school systems in california so if it’s such a burden for you, consider moving elsewhere but don’t bankrupt one of the best things that alameda has going for it. strong schools are a tremendous public good.

  • Jan says:

    Even within AUSD property values are in part dependent on the perception of school quality. The school district commissioned a demographics report a couple of years ago that found home values significantly higher within a particular elementary school’s boundary. Why do you think the real estate community is supportive of strong schools?

  • Mark says:

    Jill, ouch. I understand that Franklin may be perceived as nicer in some ways than Haight and Washington, but personally I would blame Franklin parents a bit if their first response to closure was to abandon our public schools. Michele Ellson’s rare op-ed this week also explains that Franklin is not as elite as people suppose. Franklin is comparable to Otis in demographics. In know two very dedicated teachers at Washington who love their kids. Our family sent one child to Wood and one to Beacon because we didn’t have the where with all as parents to give the one child the extra parental attention we felt he would need to navigate middle school in general. We’re lucky we pulled that off, but three years at Beacon ate a good chunk of the kid’s college savings so now he can apply to Cal State East Bay, if there are any openings after all the cuts. We feel very fortunate that child had 20 kids in ninth grade math and English at Alameda High before the recent cuts. Those cuts are cuts to community, not just budgets. We will sorely miss his Ninth Grade math teacher if the parcel tax fails. A really great educator who may slip away.

  • Jill says:


    I am not saying anything about Frankin’s demographics vs. Haight/Washington, or whether it is perceived as “elite,” or anything about individual teachers. I don’t have personal experience with any of these schools. It’s a simple matter of test scores, which is what many parents base their school decisions on. According to the AUSD website, Franklin’s ranking is a 10, Haight is a 7 and Washington is a 5. Tests aren’t perfect, of course, but those kinds of gaps show a significant difference between the schools. Some Franklin parents may give Haight or Washington a shot, but others will enroll their kids at private schools as soon as Franklin closes for fear that the private schools will fill up and they won’t get another chance.

    So what I’m saying is we need to pass that parcel tax or the district will lose students, resulting in less ADA and even more cuts…

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