Home buyers with children have always known the pivotal role that schools play in the decision on where to live. Today, though, all home buyers–single or married without children–are finding that schools must be a part of their housing equation.
“Schools continue to be important,” observes Cathy Horvath, vice president of relocation at Prudential Preferred Properties in Des Plaines.
While there is debate over just how much the schools-real estate relationship is changing, there is no arguing with this basic arithmetic: good schools beget higher home values.
In fact, the value of a home in a good school district is like the value of beachfront property in a resort market, says William Bainbridge, a former school superintendent who now heads SchoolMatch, an educational data service formed to cater to the real estate industry.
Communities served by quality schools are least likely to experience erosion of property values over the long term, Bainbridge points out.
And studies show that a house located in a suburban community with good schools and low crime is worth twice as much as an identical house located in a suburban community with poor schools and rising crime, reports William Wheaton, professor of economics at the Massachusetts Institute of Technology in Cambridge.
Bainbridge believes the relationship between good schools and high property values is only growing stronger.
Home buyers, however, don’t necessarily have to mortgage themselves to the hilt to ensure a solid education for their children (or for the children of the next family that may buy their house one day) Bainbridge argues.
“It’s true that quality schools help maintain property values and increase them over time, but it’s possible to find good schools in communities that won’t bankrupt (the buyer),” according to Bainbridge.
He says the search for qualitative information on schools has become more important and more widespread: data is sought not only by parents, but childless home buyers who recognize the correlation between quality schools and property values.
That’s indicative of a change of approach–by both consumers and industry insiders–regarding schools and real estate. This new approach is manifested in a growing realization that educational considerations are a much more complex piece of the housing and development decision than previously thought.
In part, the change is brought on by the continued national lament over the decline in the quality of public schools, which has fostered a mindset among all home buyers that no district or community can be free of scrutiny.
“The uniformity of quality in schools is not there,” says John Tuccillo, chief economist for the National Association of Realtors in Washington. “(So) people with school-age children have to think about education more than in the past.”
But Tuccillo and other experts wonder if the strength of education’s link in the real estate chain is being overstated.
“It’s a very gray issue,” Tuccillo said.
A quick look at the country’s demographic snapshot, which shows the number of households with children under age 18 decreasing, suggests that schools will have less impact in the real estate arena.
“We might get to the point where schools are not as important to real estate,” says Chris Eigel, executive vice president of Koenig & Strey, a large real estate firm based in Wilmette. “But we’re not there yet.”
SchoolMatch is counting on that day never coming. It is a computer-based information service that compares and contrasts schools, both private and public and domestic and foreign. Bainbridge says SchoolMatch’s big selling point is that its information is audited.
“Self-reported information is very suspect,”he says, referring to data compiled a few years ago known as the “Lake Woebegone study.”
Researcher John Kennell found 92 percent of all schools reported themselves as above average–obviously a mathematical impossibility.
Realtors have some factual information available to them via the Multiple Listing Service, including teacher-to-student ratios, per capita tax dollar expenditures and comparisons of Scholastic Aptitude Test scores to the national norm.
Yet many firms are contracting with educational research firms like SchoolMatch to provide potential buyers with school district data that has even more breadth and depth.
That’s to satisfy home buyers who are asking tougher questions–something agents chalk up both to rising consumerism and awareness that all schools are not created equal. Today’s buyers want to know if there is an honors program, a language program, and the type of athletics and extracurricular activities offered.
Fair housing laws prevent agents from discussing the racial composition of either a community or school. Aside from that, there is no prescribed code of conduct when it comes to the subject of schools.
Still, real estate agents are reluctant to vouch for the quality of a school today. Rather than being patted on the hand and assured education is alive and well in that area, home shoppers are more likely to find their agent chauffeuring them to the principal’s office.
“It’s very simple–we’re not qualified to do it (vouch for school quality). We’re venturing into an area where we don’t have expertise,” explains Stephen Baird, president and chief operating officer at Baird & Warner, a large real estate firm in Chicago.
“The question `where are good schools?’ is very misleading. It depends on your qualifications and needs.”
What one real estate agent might consider a terrific school may fall short of the home buyer’s needs, agrees Horvath at Prudential Preferred Properties.
While real estate agents, in a sense, are stepping back from involvement in the school debate, developers are increasingly being drawn in. Why?
For starters, education’s influence moves beyond the residential real estate arena to the commercial sphere. In today’s information age, knowledge and skills are valued above brawn in the workplace. That impacts relocation patterns of employers.
Companies will move to be near an educated work force, making quality schools an important benefit in commercial real estate transactions.
“Office locations that are proximate to good schools are going to be more attractive to tenants,” says M. Leanne Lachman, a demographer and director at Schroder Real Estate Associates in New York. That also is true for industrial space, adds Lachman.
Experts see greater participation from the private sector, including developers, with respect to schools. Some of this participation, in the form of impact fees and donations of land, is triggered by community demands. But developers are also contributing because they see schools as a selling benefit.
At the Woodlands, a large master-planned community in the Houston area, 40 acres were donated for a private school, although there were a number of public schools within the project.
“It was not a requirement, but a choice,” says Roger Galatas, chairman of the Woodlands Corp. The firm also contributed start-up capital and helped recruit school board members.
Galatas viewed the private school as an economic development tool that would attract businesses to the commercial component of his developement.
This proved to be true and, in turn, it has been a boon for homeowners. Because of the strong commercial tax base, Galatas says the school tax burden that homeowners shoulder has actually declined over the years.
Participation from developers can strengthen schools, but it is no panacea. The school district must be good from the outset and community support must be a given, says Galatas.
“It’s a chicken-and-egg situation,” says Charles Shaw, head of The Shaw Co. in Chicago, referring to the relationship between schools and real estate. “If we go in (to a community) with a quality project, we can increase property values.” But if the schools in the community aren’t good to begin with, Shaw adds, it would be difficult to attract buyers.
That doesn’t mean a developer will turn his back on a piece of property in an area where schools are considered less desirable. However, it will impact the type of project that is built.
Shaw refers to a residential project developed by his firm in an area where schools were not regarded as highly as those in surrounding communities: Instead of tailoring homes to young families, the project was geared to empty-nesters.
“You design to a market, you don’t market a design,” says Shaw.
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For more information about SchoolMatch and its various services, phone 1-800-SCHOOL-1.)
