Sell that school district! Read on for an analysis of the relationship between home prices and school district quality.
How often does a property's school district factor into homebuyer decisions?
- Almost always. (45%, 46 Votes)
- Frequently. (44%, 45 Votes)
- Sometimes. (11%, 11 Votes)
- Rarely. (0%, 0 Votes)
Total Voters: 102
But do parents have to pay through the nose to get into a good school district? In other words, is there a measurable difference between home prices located in a desirable school district and those in poor school districts? And how can agents help their homebuyers navigate schools, home prices and homeownership?
Great school district? Get ready to pay for it.
There’s no denying the trend: the higher a neighborhood’s average home price, the higher quality school district. Home prices are generally a reflection of a region’s economic health. Additionally, more affluent areas are able to subsidize school spending with high property tax revenue.
For example, take a look at the La Cañada School District, one of the top ranked districts in California. The median home price in the La Cañada area is nearly $1.3 million as of February 2014, according to Zillow. Contrast this with Stockton Unified School District, which is ranked very near the bottom of the state. The median home price in Stockton is$171,000.
High quality school districts also have a similar effect on home prices. This effect is described in an article by the St Louis Federal Reserve Bank:
“As school quality increases, competition from other buyers creates an increasingly tight housing market, because the housing supply in these areas is often very inelastic, as most metropolitan areas have a fixed housing stock in the short run.”
The answer to this inelasticity? Looser zoning.
Allowing builders to respond to this demand by building more homes (multi-family units) just makes sense. Of course, allowing greater access to good schools lessens the effect desirable school districts have on home prices. Good for homebuyers, but bad for sellers. All the same, looser zoning keeps real estate price bubbles from exploding out of control (think: San Francisco) and destabilizing regional economies. Thus, looser zoning restrictions are overall better for the local economy.
Finding out your local ranking
Curious about how the schools in your area stack up? School Digger ranks school district performance by combining average Math and English test scores reported by the state and federal Departments of Education.
Highest ranked school districts in California
|Rank||School district||Number of students
|2||La Cañada Unified||
|3||Hillsborough City Elementary||
|4||Las Lomitas Elementary||
|5||Saratoga Union Elementary||
|6||San Marino Unified||
||Los Altos Elementary||
|8||Orinda Union Elementary||
|10||Rancho Santa Fe Elementary||
*Data calculated by School Digger, based on rankings provided by the National Center for Education Statistics, U.S. Department of Education and the California Department of Education
More than half of the top ten schools are located in the San Jose and Bay Area, where it’s no coincidence that the cost of living (housing expenses) are the highest in the state.
Not every homebuyer has the income or savings needed to live in a top-ten school district. To find properties for school-minded homebuyers with real-world budgets, find out which general areas fit their other location criteria. Then, search within that school district for primary and secondary school rankings and have this list available for your homebuyers. You can do this at School Digger, or your local school district may provide rankings on their website. Then, use the location of the desirable schools as a starting off point for finding a property for your homebuyers.
Alternatively, have your homebuyer look into local private schools. Compare the cost of sending a child to private school for a year with the savings of purchasing in a public school district where home prices are lower.The average K-12 private school tuition is around $11,000 a year, according to the Council for American Private Education. Consider two neighboring cities in Southern California with widely different school districts.The first is Claremont, which has:
- a median home price of $522,500 in January 2014, according to DataQuick; and
- a school district ranked 173 out of 782 school districts in California, according to School Digger.
Next, neighboring Pomona has:
- a median home price of $292,500 in January 2014; and
- a school district ranked 655 of 782.
With a 4.5% mortgage interest rate, the average difference in monthly mortgage payments between the two median homes is nearly $1,200. Over the course of a year, living in Pomona saves over $14,000. This is more than enough to cover the cost of an average private school tuition for one student.
Property taxes are the benefit tax
With higher home prices (and values) comes higher property taxes.
But rather than thinking of high property taxes as a deterrent, think of them this way: the higher an area’s property taxes, the better the local public services. In return, better public services (like schools) increase property values. A study by the Show-Me Institute found that of income tax, sales tax and property tax, property tax is the most likely to directly benefit a community. Further, the study found properly allocated property taxes increase home values as well as individual income.
Property taxes are a benefit tax. They go directly back into supporting the local community, whereas income and sales tax benefit the state and federal government.
However, California’s system of property taxes funding valuable public services has been derailed since the 1978 inception of Proposition 13 (Prop 13).
California’s education system can do better
School districts should all be good and all students should have access to quality education. However, we can’t all live in fantastic school districts like those in the list of top ten districts, above.
Four of the top ten public colleges and universities in the U.S. are in California, according to U.S. News and World Report. These are funded by Californian’s income and sales taxes.
However, none of the top ten high schools in the nation are in the Golden State. So how do we do better by our young students?
If your suggestion is to buy more lottery tickets, you’re wrong. Only 1.5% of the state’s K-12 public school budget comes from lottery sales, according to the California Budget Project. The majority (55%) of our school budget comes from the state. 22% of funding comes from local property taxes. Prior to Prop 13, this was the exact opposite, with the majority of funding coming from property taxes and the state merely supplementing funding.
When the 2008 recession hit, the state budget suffered tremendously. So did our schools, as funding dropped by 15% — $7.2 billion — in a single year. Less funding means fewer teachers, larger class sizes and extracurricular programs cut.
Editor’s note: California already had one of the highest student:teacher ratios before the 2008 recession, with 19 students per teacher in 2005, compared with the national average of 15. This rose to the highest in the nation, at over 23 students per teacher as of 2012, according to the National Center for Education Statistics.
It pains us to say it, but higher — or rather, more equitable — property taxes are the best answer. Local property taxes are the most direct source of funding for public K-12 schools. A landmark 1977 case, Serrano v. Priest, prompted a scheme to better fund public K-12 schools, which relied on property taxes. [Serrano v. Priest, 20 Cal.3d 25 (1977)]
The case found that equal education for all students is imperative to giving them an equal opportunity to participate fully in society. One year later, Prop 13 was enacted, effectively erasing those steps. Further, immediately following the passage of Prop 13, California’s per-pupil spending dropped below the national average and continued falling each year. In 2005, per-pupil spending was more than $1,000 below the national average, making California 35th in the nation for per-pupil spending, according to a separate study by the California Budget Project.
Prop 13 allows property taxes to be frozen at the year the property is purchased, and allows a maximum annual increase of 2%. This means long-time homeowners are paying far less in property taxes than their new neighbors. As a result, public services relying on property taxes (schools) receive far less revenue.
Prop 13 makes property tax a regressive tax, benefitting only long-term homeowners. In theory, this benefits the housing market, as it encourages long-term homeownership and thus more stable neighborhoods. However, by reducing funding needed to support public services like roads, police and of course, schools, it’s ultimately a detriment to the neighborhood. Do away with Prop 13 and California will be that much closer to gaining a higher quality K-12 education system.