Education Spending on Teachers – Not Buildings — Lifts Home Prices
Real estate values closely tied to perceived school quality in some areas
Spending more on teachers lifts home prices, a new report finds. New buildings don’t matter. A study published by the National Bureau of Economic Research (NBER) adds to the potential research that education-savvy families may want to do before choosing a home or a school.
Many have focused on overall district spending per pupil, a widely followed statistic. But this study suggests that how that money gets spent is important, not just to learning but also to perceptions of school quality, which in turn affect local home prices.
The research further suggests that real estate price movements, which may be easier to discern than precisely how a school district is allocating its budget, are worth studying for clues to school quality.
The working paper follows separate research showing that higher school spending boosts salaries for students later in life. That 2015 study found a 1% increase in school spending increases the adult wages of a student by 0.70% to 0.80%.
The new study’s authors note, “When we disaggregate school spending into spending on salaries and non-salary spending, we find that that salary spending is positively capitalized into house prices whereas non-salary spending is not.”
An earlier study likewise found that increased spending on teacher salaries improved student test scores and reduced drop-out rates, but increases in capital spending — building new buildings — had no such impact.
Affluent communities have long seen home prices boosted by highly funded, top-performing school districts. But the new research indicates that increased school spending has the same positive effect on less affluent communities across demographic profiles.
“That spending on salaries is so highly valued by households suggests that households observe and appreciate the increase in either the number of positions funded, which might reduce class sizes, or the average salary per position, which might improve teacher quality,” the researchers said.
The NBER paper studied home prices nationwide in communities that experienced jumps in funding as a result of school financing reforms. It found each 1% rise in school spending produces a 0.95% increase in home prices, a remarkably high correlation.
The boost comes both from hiring more teachers and paying teachers more, write the authors of the report, Patrick Bayer of Duke University, Peter Q. Blair of Harvard University, and Kenneth Whaley of the University of Houston. They said that spending on school buildings didn’t translate to higher home prices.
Economists have studied the relationship between school performance and home prices for decades. It’s well established that some parents will pay up for housing in school districts with high test scores or where more students are admitted to top colleges. But it’s tough sorting whether school performance — and related real estate price movements — spring from funding levels or from education-focused families choosing to send their kids to those schools, a sort of self-fulfilling prophecy.
Chopping through the debate
The NBER report looks at districts that got boosts in spending through court-ordered reforms intended to even out funding disparities between richer and poorer districts. The study ended up examining data from 35 states and 6,300 school districts.
Of course, equalizing spending is easier said than done. The state of New York spends an average of $24,000 per student, highest in the U.S. and nearly double the national average. Even so, New York, which was ordered by courts to change its school system funding in 2003, has endured years of fights over equalizing spending between districts
South Carolina, meanwhile, spends less than $11,000 per student, 33rd in the U.S., and its funding formula has been a contentious issue for decades, as well.
Urging districts to pool resources
In a general anti-tax environment, how to increase per pupil outlays? Cutting overhead — or non-teacher expenses — is getting the attention of some. A New Jersey nonprofit called EdBuild urges neighboring school districts to pool resources to ease disparities. It says about two-thirds of students would get more funding.
EdBuild pointed to suburban Oklahoma City as a poster child of uneven funding. The 8,500-student Yukon School District raises $3,728 per pupil. Neighboring Banner Public Schools raises more than $11,000 for each of its 234 students.
In a policy paper, James Machell, dean of the University of Central Oklahoma College of Education and Professional Studies, says the state could save nearly $30 million by combining some of its 525 school districts. However, he acknowledged that getting rid of districts was “political dynamite.”