{"id":17915,"date":"2020-07-16T07:49:09","date_gmt":"2020-07-16T14:49:09","guid":{"rendered":"https:\/\/www.homelight.com\/blog\/?p=17915"},"modified":"2022-05-19T13:29:47","modified_gmt":"2022-05-19T20:29:47","slug":"school-district-impact-on-property-values","status":"publish","type":"post","link":"https:\/\/www.homelight.com\/blog\/school-district-impact-on-property-values\/","title":{"rendered":"How Does Your School District Impact Nearby Property Values?"},"content":{"rendered":"

\u201cI had a client who basically wanted a $500,000 house. Where they wanted to go, they could not get a $500,000 house,\u201d says Michael Whitney<\/a>, a top-selling real estate agent in Rockingham County, New Hampshire. \u201cI recommended they go 10 miles away, and their reply was:<\/p>\n

\u201c\u2018Absolutely not, because I don\u2019t like the school system.\u2019\u201d<\/p>\n

Whitney\u2019s experience shows just how passionate many homebuyers feel about school quality and the education of their children. It also echoes data from the National Association of Realtors showing that 26% of recent homebuyers<\/a> were influenced by the quality of their school district when selecting a neighborhood. Among buyers ages 30 to 39, that percentage jumps to 46%<\/a>, followed by 36% of buyers ages 22 to 29<\/a>.<\/p>\n

As a homeowner, you\u2019d like to know about all of the factors (internal and external) that impact your property value \u2014 and your school district is a big one. If your house falls within the boundaries of a great district, you\u2019ll likely be able to sell it for more than if you were in an average one because of the increased buyer demand.<\/p>\n

At the same time, the property taxes used to fund local schools can be a deterrent for some buyers who don\u2019t benefit from the spend on education directly. Here we\u2019ll explore the ways that property values and school quality in the U.S. are inextricably linked, and how you can market your school district to attract more interest in your home.<\/p>\n

\"A<\/a>
Source: (Trong Nguyen \/ Shutterstock)<\/figcaption><\/figure>\n

Same street, similar properties, different values<\/h2>\n

\u201cLocation is everything,\u201d says Mason Spurgeon<\/a>, a certified general real estate appraiser since 2004 who handles appraisals in Missouri, Illinois, and Iowa. \u201cA property\u2019s school district can have a huge impact on value. The better the school district, the more desirable the property. Some buyers will only purchase properties in areas with certain schools.\u201d<\/p>\n

According to a 2013 study, people paid an average of $50 more per square foot for homes in top-ranked school zones<\/a> compared with homes in districts with schools of average quality.<\/p>\n

In the Los Angeles metropolitan area, for example, this means that homes in a top-tier school district cost an average of 79% more<\/a> than those in an average district.<\/p>\n

One analysis from the National Bureau of Economic Research found that overall, every $1 spent on school funding increases property values by about $20<\/a>.<\/p>\n

Spurgeon notes that comparable properties on the same street can be worth more or less depending on their school district (the home zoned in the quality district will sell for more, despite being comparable in other regards).<\/p>\n

Although Spurgeon does not directly adjust for school district ratings in the comparable sales grid of an appraisal report, he will check that comparable sales are located in the same location and district as the property he\u2019s evaluating.<\/p>\n

How school enrollment impacts property values<\/h2>\n

One 2019 NAR analysis found a positive relationship between public school enrollment and home prices. Specifically, counties with the highest gains in public elementary- and secondary-school enrollment over seven years experienced an average 33% increase in home prices<\/a>.<\/p>\n

This enrollment growth may reflect stronger employment, or at least more goods and services, the analysis says, forecasting that housing demand also would increase<\/a> in these areas.<\/p>\n

\"A<\/a>
Source: (Pragyan Bezbaruah \/ Pexels)<\/figcaption><\/figure>\n

Schools are one piece of the package, parents say<\/h2>\n

Although schools can be a deciding factor in purchasing a home, parents who spoke with HomeLight said they also considered the big picture.<\/p>\n

Kristin W., a law firm office manager who lives in Palmetto, Florida, bought a newly built 2,400-square-foot house with her husband and two young children in 2017 after living in a rental. Their daughter was about four and a half, and their son was under two at the time. \u201cI saw heading to kindergarten as my deadline to have her settled in the school she\u2019d be in for years,\u201d Kristin recalls.<\/p>\n

Before buying, she and her husband looked at several homes zoned for an elementary school that they liked, but the middle school grades varied; their current home is zoned for elementary and middle schools both graded \u201cB\u201d during the 2018-19 school year.<\/p>\n

\u201cOur property taxes are much higher, as is our mortgage, and we now pay HOA fees \u2014 all expenses we feel are completely worth the transition,\u201d she says.<\/p>\n

On the flip side, lower property taxes can be a plus<\/h2>\n

Sometimes a lower-rated school district can work as a benefit to buyers, such as retirees, land investors, or farmers \u2014 all people who like to keep expenses low, he adds. \u201cUsually, the better the school district, the higher the property tax rate,\u201d says Spurgeon.<\/p>\n

Merrilyn C., a private middle-school teacher who has a 15-year-old daughter and 12-year-old son, moved to Orange County, Florida, from a more rural area in the state \u2014 not for the schools, but because of her husband\u2019s job transfer. \u201cIt was a big change,\u201d she says.<\/p>\n

Orange County is home to Orlando, best known for Walt Disney World and other theme parks, while their previous neighborhood was near acreages where people kept horses, cows, goats, and chickens.<\/p>\n

Their three-bedroom home is roughly a half-mile from Seminole County, which also has highly ranked schools as well as higher property taxes.<\/p>\n

\u201cWe wouldn\u2019t have ruled out a house in Seminole County because of property taxes, but we do like having lower taxes where we are,\u201d Merrilyn says. \u201cThey are definitely higher than the area we moved from, but we are in a much more populated area now, so we expected it.\u201d<\/p>\n

\"A<\/a>
Source: (Pixabay \/ Pexels)<\/figcaption><\/figure>\n

How taxes connect school districts and home values<\/h2>\n

The evidence is clear: Homes in good school districts tend to sell for more. But whether property values are higher because of a good school district \u2014 or whether a school district ranks better because of high property values \u2014 is a chicken-or-the-egg kind of dilemma.<\/p>\n

Here\u2019s why:<\/p>\n

The U.S. Department of Education keeps tabs on all schools through the Every Student Succeeds Act<\/a>, which specifies accountability plans that each state submits to the federal agency addressing goals such as proficiency on tests and graduation rates.<\/p>\n

Your state\u2019s Department of Education compiles these accountability reports (here\u2019s one example<\/a>), which many people refer to as \u201cschool grades<\/a>.\u201d<\/p>\n

School district borders indicate who is eligible to attend which schools. Funding for those schools is tied to local taxes, which determines the resources<\/a> that these schools have for the children they serve. (The money also supports<\/a> community safety, infrastructure, and other public projects.)<\/p>\n

According to a report from NPR, it\u2019s typical for local funding to account for 45% of a school\u2019s budget<\/a>. Oftentimes much of that local funding is drawn from property taxes. Since property taxes are calculated as a percent of property value, higher property values translate to more tax revenue to give to schools, which in turn help schools pay for teachers and textbooks.<\/p>\n

If you look into why a school earns an A or an F grade, you can see how property taxes (and the resources they provide) would play a role in their performance and determine the quality of education a district can offer.<\/p>\n

Racial disparities in school funding <\/b><\/h2>\n

You can\u2019t talk about the relationship between school districts and property values without acknowledging the lasting impacts of America\u2019s history of segregation<\/a> and redlining<\/a>, and how these practices still drive racial disparities in school funding today.<\/p>\n

Even though the U.S. Supreme Court in 1954 ruled that segregated public schools are unconstitutional, America\u2019s school funding system still relies on geography<\/a> (that\u2019s the local property tax funding we discussed above) and community wealth, says EdBuild<\/a>, a nonprofit organization that investigated school funding inequities from 2016 to 2020.<\/p>\n

The system \u201chas inherited all of the historical ills of where we have forced and incentivized people to live<\/a>,\u201d these researchers say, because small districts concentrate resources<\/a> and amplify political power.<\/p>\n

This research found that predominantly white public school districts enroll just over 1,500 students<\/a> while nonwhite districts serve over 10,000. However, the latter receives an average of $2,226 less than the former because of local and state resources, a nationwide gap of $23 billion<\/a>.<\/p>\n

The larger the tax base<\/a> \u2014 meaning the larger these districts are \u2014\u00a0the more balance the researchers found between a wealthy suburb and a less-wealthy rural or urban one.<\/p>\n

\"A<\/a>
Source: (e.backlund \/ Shutterstock)<\/figcaption><\/figure>\n

How to talk about school districts when you\u2019re selling<\/h3>\n

NAR\u2019s Code of Ethics<\/a> prevents real estate agents from steering a buyer toward or away from a community based on their race, color, religion, gender, disability, familial status, or national origin \u2014 all characteristics that would violate the 1968 Fair Housing Act<\/a>.<\/p>\n

Rather than offer their perspective on whether a school system is \u201cgood\u201d or \u201cbad\u201d (which could be \u201ccode for racial differences,\u201d NAR says) agents can instead refer clients who ask about schools to the state\u2019s education department\u2019s rankings so that they can view the data themselves.<\/p>\n

Other agents might provide a handout that invites clients to be more specific<\/a> as far as what a \u201cgood\u201d school or school district means to them. Is it one that offers accelerated courses or special education programs? Does it have a variety of sports teams or clubs?<\/p>\n

For sellers, a listing within a top school district can be a selling point as long as \u201cyou have that piece of paper that shows that they\u2019re the top schools in the state,\u201d Whitney says. \u201cYou\u2019re going to be very careful because you can\u2019t even give advice [such as] \u2026 \u2018That\u2019s the best school.\u2019\u201d<\/p>\n

One way your agent can provide information about schools upfront is by including a list of district schools in your property\u2019s online listing (sites like Zillow will also include the school\u2019s proximity to the listing, as well as its corresponding \u201cGreatSchools<\/a>\u201d rating).<\/p>\n

If you\u2019re concerned because you don\u2019t live in a top school district, talk to your agent about other pluses to market about your home and your community \u2014\u00a0and make sure your agent has provided a sheet listing local tax rates so buyers can take any savings into account.<\/p>\n

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