Do choice schools break the link between public schools and property values? Evidence from house prices in New York City

While school choice has attracted much attention from policymakers and researchers, virtually all of the research has focused on the relationship between school choice and student academic performance. There is, in contrast, little work examining whether additional choice schools weaken the link between residential property values and locally zoned schools — despite the well accepted theoretical (and empirical) link between schools and housing. As school choice becomes more important in reforming urban school systems, and improving public schools is critical for attracting and retaining middle class families in urban neighborhoods, it is important to understand how increasing school choice shapes the long-term economic health and viability of the country's central cities. In this paper, we examine how choice schools affect house prices, particularly the link between the quality of locally zoned schools and surrounding housing values. Our study utilizes rich data on New York City public elementary schools geo-coded and matched to data on property sales for a fifteen-year period beginning in 1988. To identify the impact of a choice school on the capitalization of school quality into housing values first we incorporate a boundary discontinuity approach to compare the capitalization of zoned school quality into housing prices of buildings that are close to one another but in different elementary school attendance zones. We rely on smaller and smaller distances from the boundary to test the stability of our results. Second, we compare housing units that are within 3000ft of a choice school to housing units outside of these rings, which is traditionally considered the ‘walk zone’ around a school. Third, we take advantage of choice school openings to look at the capitalization rates before and after the choice school opens. We find that the proximity of alternative school choices does weaken the link between zoned schools and property values. The opening of a choice school reduces the capitalization of test scores from zoned schools into housing values by approximately one third.