“Residential School Choice” and the Mortgage Crisis

(Guest post by Greg Forster)

What do you guys think of this op-ed in yesterday’s Washington Post linking the mortgage crisis to parents’ desire to buy homes that will get their children into better schools? I don’t know enough about the mortgage crisis to really know, but Mike Antonnuci suggests the link is overblown (see item #2 here) and I’m inclined to think that’s likely.

Still, have you noticed that in just the past few years, schools are figuring much more prominently in residential real estate marketing? MLS listings now prominetnly display not only which school district a home is located in, but the indivdiual schools it’s assigned to. Real estate advertisements and flyers are prominently listing this information as well.

Of course, I’m just speaking from my own individual observations, which as you know is a highly scientific representative sample. :)

Larry, you’re the financial guy around here. Any thoughts?

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2 Responses to “Residential School Choice” and the Mortgage Crisis

  1. Rebecca says:

    Tiebout choice was first talked about in the 50s, but school choice proposals have long been posited to provide that choice without the requirement for money to buy into a better school district. If we assume that parents are making the best choice they can based on the information they have, why buy a more expensive house when you can buy a less expensive one but use open enrollment or some form of school choice to send your kid back to the better school? I just don’t buy it as a driving factor.

  2. Greg Forster says:

    That’s certainly the way it will look when school choice is available everywhere. For now, though, most people don’t have access to school choice, even in the radically attenuated form of “public school choice” programs such as open enrollment. And in the places that do have open enrollment, there are usually formidable obstacles to using it. Districts can block transfers on various grounds such as racial balance and lack of capacity. So, for example, an urban district that doesn’t want to lose students can block white students from transferring to the suburbs on racial balance grounds. That means only minority students will be eligible for transfer. If the suburban districts aren’t interested in receiving those students, they can say they have no free space and block all incoming transfers.

    That’s why even in Wisconsin, which has the nation’s most robust open enrollment policy, fewer than 1% of all students transfer out of their school district. As far as I know, there are no jurisdictions with open enrollment where significant numbers of students use the policy. One could say that proves a lack of parental desire to choose schools, but then how does one explain the much larger demand for school choice programs (meaning vouchers and similar programs) where they’re available? Wisconsin got open enrollment in exactly the same year (1998 ) as the major restrictions on the use of vouchers in the Milwaukee program were lifted. Milwaukee parents rushed into the voucher program and filled it to capacity, and since then, every time the cap on the program has been lifted, more parents have rushed in and filled it to the new cap. Over 20% of all Milwaukee students are in the voucher program. But Wisconsin open enrollment has remained stalled at fewer than 1% of all students.

    The body of empirical research showing the existence of an effect from residential school choice (Tiebout choice) is quite large. And the big US DOE household survey on education finds that large numbers of Americans buy their homes based at least in part on the local schools.

    That said, when you say it’s not a “driving factor,” if you mean it’s not one of the major causes of the mortgage crisis (rather than that it’s not a major component of why people choose their homes), I’m inclined to think that’s probably right.

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