California is famous for many things, including its year-round pleasant climate, innovative and successful industries and excellent public higher education system.
While California’s public universities rank high on generic lists like U.S. News and World Report for their top-notch research and athletic programs, the best, less transparent, thing about our schools is that almost everyone who is qualified can afford to attend.
Each year, the New York Times ranks U.S. colleges and universities based on each school’s economic diversity in its College Access Index. In 2017 (and most years), the top five schools were all in California:
- University of California (UC) Irvine
- UC Santa Barbara
- UC Davis
- UC San Diego
- UC Los Angeles
UC Berkeley also made the top ten list, at number nine.
The index measures college access for students coming from households earning less than $75,000. Schools that rank high in the index enroll a high percentage of students from this income group and also offer substantial aid to these students, often in the form of Pell Grants — federal aid given to low-income students attending an undergraduate program.
For example, UC Irvine charges students from households earning less than $75,000 an average of $12,000 a year. 39% of graduating students receiving Pell Grants — the highest share in the list. In contrast, number five-ranked UCLA charges students from this income group $11,000, slightly less than UC Irvine, but it has a much lower 26% share of Pell recipient grads.
The American Dream is income class mobility
California’s public university system is a major player in income class mobility.
The American Dream essentially says that no matter what family you are born into, you can “make it” in this country. Rich or poor, we all have a shot at success, encompassing a high-paying job, comfortable family life, transportation and homeownership. Or, in the words of Henry Hoover: “A chicken in every pot and a car in every garage.” Collectively, this idea translates to income class mobility.
But the reality is much more complicated than the ideal.
For a nation to achieve true income class mobility status, public education is key. Quality education for the masses ensures an equal starting line, so that every motivated individual can reach their true potential and contribute to the economy at a high level.
From the housing perspective, public post-secondary education is extremely important for homeownership, as more school translates to higher incomes (with rare exceptions). In California during 2016, the median income was:
- $20,400 for someone without a high school degree;
- $28,700 for someone with a high school degree;
- $36,600 for someone with some college;
- $57,100 for someone with a bachelor’s degree; and
- $80,600 for someone with a graduate or professional degree.
But any agent who has dealt with homebuyer demand for good school districts knows education is not equal everywhere you go. Further, when it comes to higher education, schools are able to charge whatever they want for their version of education. When students from low- and moderate-income backgrounds are unable to meet these high tuition payments, they and their parents take out student loans. These loans can cripple a student’s chances at homeownership for decades.
The good news for California is that higher education is mostly accessible, especially compared to public university systems in other states.
For a little perspective, compare California’s university system with another public university across the country. A very small 11% of Penn State’s graduating class are Pell Grant recipients. Worse, the university charges these students on average $24,000 a year. Most of this tuition is paid with student loans.
Student loans are flimsy band aids
In years past, the U.S. government regularly paid for college education. The most significant instance was through the GI Bill, passed in 1944. To this day, the GI Bill provides for the education of service members, as well as loan guarantees for homes and businesses. Following World War II, half of the number of students attending college did so under the GI Bill, according to the U.S. Department of Veterans Affairs.
When these students graduated, they were able to obtain higher paying jobs and pay for amenities they wouldn’t have otherwise had access to, including homes. Their graduations correlated with a sharp jump in the homeownership rate that lasted for decades.
Fast-forward to today: the latest statistics have students attending college with GI Bill benefits at just 270,000 students, according to the Chronicle of Higher Education. With 21 million students currently enrolled in degree-granting, postsecondary institutions nationwide, that’s about 1% of all students enrolled under the GI Bill. Further, a significant share of GI Bill students attend for-profit colleges, where they are less likely to graduate.
The difference means more students today are leaving college with student debt, which reduces their purchasing power across all economic sectors. In many cases, college graduates — and those who did not graduate but carry student debt nonetheless — are paying back their loans for 10 or 20 years.
Nonetheless, California students have an advantage over young adults in other states. Low tuition and high student aid have contributed to a high percentage of college graduates in the state. In fact, 33% of Californians over the age of 25 have a college or graduate degree, significantly higher than the 28% U.S. average.
All of these additional college graduates contribute to the state’s thriving economy and the homeownership rate.
Californians are the lucky ones
Access to California’s university system is one of the reasons parents of college-aged children move to the state. This includes people immigrating to California from other countries.
International students are increasingly making up a larger share of California’s college and university student population. International students made up a small 5% of the UC system in 2007, rising to 13% in 2015, according to the San Francisco Chronicle. The increase is due to more foreign interest in California’s schools, but also to schools needing the funding international and out-of-state students provide.
All of this is good news for housing. A growing population of well-educated and high-income earners builds a solid base for home values to rise. This is especially true near California’s colleges and universities.
For instance, consider one of California’s quintessential college towns, San Luis Obispo, home to California Polytechnic State University (CalPoly) San Luis Obispo. The University is the largest employer in the city, and the area’s vibrant student population supports many of the local businesses. Here, the median price-per-square-foot is $415 as of January 2018.
About 30 miles south is Santa Maria, home to Allan Hancock Community College, mostly supporting local students seeking a two-year degree or to transfer to a state university. The population is about twice that of San Luis Obispo, and the major employers are the local Air Force Base and the state. Here, the average price-per-square-foot is $224 in January 2018.
The difference a thriving and successful university can make for a local economy is easily spotted in the higher home values found in San Luis Obispo compared to neighboring cities.
Agents and brokers can use this information to your advantage: spend some time around your local college or university. Locate where people want to live in these areas — transportation and local businesses are hot spots for college students and recent graduates. These parts of town will see higher rents and home values than average, which collect higher fees for your efforts.