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Do Choice Schools Break the Link Between Public Schools and Property Values? Evidence from House Prices in New York City

  • Amy Ellen Schwartz
  • Ioan Voicu
  • Keren Mertens Horn

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

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Paper provided by University of Massachusetts Boston, Economics Department in its series Working Papers with number 2014_03.

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Length: 33 pages
Date of creation: Feb 2014
Date of revision:
Handle: RePEc:mab:wpaper:2014_03
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  1. Stephen Machin, 2011. "Houses and Schools: Valuation of School Quality through then Housing Market - EALE 2010 Presidential Address," CEP Occasional Papers 29, Centre for Economic Performance, LSE.
  2. Fack, Gabrielle & Grenet, Julien, 2010. "When do better schools raise housing prices? Evidence from Paris public and private schools," Journal of Public Economics, Elsevier, vol. 94(1-2), pages 59-77, February.
  3. Machin, Stephen & Salvanes, Kjell G., 2010. "Valuing School Quality via a School Choice Reform," IZA Discussion Papers 4719, Institute for the Study of Labor (IZA).
  4. Sandra E. Black, 1999. "Do Better Schools Matter? Parental Valuation Of Elementary Education," The Quarterly Journal of Economics, MIT Press, vol. 114(2), pages 577-599, May.
  5. Patrick Bayer & Fernando Ferreira & Robert McMillan, 2007. "A Unified Framework for Measuring Preferences for Schools and Neighborhoods," NBER Working Papers 13236, National Bureau of Economic Research, Inc.
  6. John B. Horowitz & Stanley R. Keil & Lee C. Spector, 2007. "Do Charter Schools Affect Property Values?," Working Papers 200707, Ball State University, Department of Economics, revised Nov 2007.
  7. Brunner, Eric J. & Cho, Sung-Woo & Reback, Randall, 2012. "Mobility, housing markets, and schools: Estimating the effects of inter-district choice programs," Journal of Public Economics, Elsevier, vol. 96(7), pages 604-614.
  8. Nechyba, Thomas, 2003. "School finance, spatial income segregation, and the nature of communities," Journal of Urban Economics, Elsevier, vol. 54(1), pages 61-88, July.
  9. Reback, Randall, 2005. "House prices and the provision of local public services: capitalization under school choice programs," Journal of Urban Economics, Elsevier, vol. 57(2), pages 275-301, March.
  10. Nguyen-Hoang, Phuong & Yinger, John, 2011. "The capitalization of school quality into house values: A review," Journal of Housing Economics, Elsevier, vol. 20(1), pages 30-48, March.
  11. Dhar, Paramita & Ross, Stephen L, 2012. "School district quality and property values: Examining differences along school district boundaries," Journal of Urban Economics, Elsevier, vol. 71(1), pages 18-25.
  12. Cecilia Elena Rouse & Lisa Barrow, 2009. "School Vouchers and Student Achievement: Recent Evidence and Remaining Questions," Annual Review of Economics, Annual Reviews, vol. 1(1), pages 17-42, 05.
  13. Machin, Stephen, 2011. "Houses and schools: Valuation of school quality through the housing market," Labour Economics, Elsevier, vol. 18(6), pages 723-729.
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