‘House prices and the provision of local public services: capitalization under school choice programs’
Journal of Urban Economics 57, pp. 275-301
Empirical study looking for the effects of school choice programs on house prices, predicted in the general equilibrium models of authors such as Nechyba, Epple & Romano.
These models predict that, as school choice schemes sever the link between choice of residence and choice of school, house prices will rise in less expensive communities as individuals move into them and send their children to private/choice schools.
The author uses data from Minnesota’s inter-district ‘open enrolment’ scheme, which became mandatory for all Minnesota school districts in 1990-1.
He examines the effect of transferring patterns between school districts on changes in residential property values.
Key results:
Both incoming and outgoing transfer rates have large, statistically significant effects on the future growth rate of a school district’s property prices.
Controlling for new construction and improvements, the average house price within a district is more than 3% higher in school districts where students are able to transfer to preferred school districts, and about 3% lower in districts that accept transfer students.
These findings strongly support the idea that school choice programs can influence house prices and property tax bases.
