What does research say about the correlation between school quality and home value?

  • It may seem obvious by observation in the Menlo Park/Atherton and surrounding areas that high home prices and school quality are related, but there is also research dating back several decades that indicates this trend to be true. Charles Tiebout began studying the effects of high quality schools on home prices back in 1956 when he noted that local public goods (LPG), which include schools, are strong drivers of where individuals will choose to buy a house and they are willing to pay higher prices where their desired LPG quality exists. Research from various municipalities around the nation since then has confirmed the trend and added the following specific conclusions:

    • The quality of primary school education is positively correlated with house prices. The price premium remains substantially large, especially for houses associated with above-average schools (FRB St. Louis)
    • The price premium parents must pay to buy a house in an area associated with a better school increases as school quality increases (FRB St. Louis)
    • If all K-12 schools in an area are rated Average and Above, the value of homes is 19% higher in that area than those in areas with Below Average schools (Urban Economics)
    • Even after controlling for omitted variables, it can be seen that better school quality, as shown by an increase in test scores, has a positive effect on housing prices (Urban Economics)
    • On average, buyers pay $50 more per square foot for homes in top-rated school districts compared with homes served by average-rated schools. (Redfin/Washington Post)
    • $1.00 increase in per pupil state aid increases aggregate per pupil housing values by about $20.00, indicating that potential residents value education expenditure (Public School Review)
    • There is no evidence that school districts are overspending, on net; and school spending in districts with wealthier residents may be more efficient (Public School Review)