Real Estate Roundup with Sharon Alva: Real estate and public schools
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 email@example.com.