School District Related Housing Costs Key to Sinking Middle Class?

Posted by admin on December 31, 2008

Interesting article by Elizabeth Warren and Amelia Warren Tyagi argues that the idea that the middle class is overspending itself into debt is a myth. Instead, they try to show that a key reason so many middle-class folks are over-leveraged is because of home costs linked to good schools:

Why such a staggering increase in the cost of housing? That is a long, separate discussion, but one point is worth underlining here: when a family buys a house, it buys much more than shelter from the rain. It also buys a public-school system. Everyone has heard news stories about kids who can’t read, classrooms without textbooks, and drug dealers and gang violence in school corridors. Failing schools impose an enormous cost on the children who are forced to attend them, but they also impose an enormous cost on those who don’t. . . .

A 2000 study conducted in Fresno, California, (population 400,000) found that, for similar homes, school quality was the single most important determinant of neighborhood prices —more important than racial composition, commute distance, crime rate, or proximity to a hazardous-waste site. A 1999 study conducted in suburban Boston showed that two homes less than half a mile apart and similar in nearly every aspect would command significantly different prices if they were in different elementary-school zones. Schools that scored just five percent higher than other local schools on fourth-grade math and reading tests added a premium of nearly $4,000 to nearby homes. . . .

Perhaps the strongest evidence that parents’ concern for their children’s welfare has driven their spending is the relative changes in housing prices for parents and non-parents. The federal government has not reported the data for the full 30-year period we have been examining, but looking at the period from 1984 to 2001 we see that housing prices for families with at least one minor child at home grew at a rate three times that of other families.

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