NCPA - National Center for Policy Analysis

School Quality Boosts Home Prices

January 25, 2001

A number of states award letter grades to their schools based on student performance. But more is at stake than education alone. A study by David N. Figlio of the University of Florida and Maurice E. Lucas of the Alachua County School Board demonstrates that a school's grade affects home prices in surrounding neighborhoods.

After analyzing home resale prices in the Gainesville, Fla., school district before and after the implementation in 1999 of a state system that assigned letter grades to 22 elementary schools in the area, the researchers found that:

  • Over the 14-month post-announcement period studied, houses in A-rated school neighborhoods commanded an average premium of 7 percent -- or $9,000 -- over houses in B-rated school neighborhoods.
  • A similar effect was noted between B and C school neighborhoods.
  • However, the price impact did tend to diminish over time.
  • The study controlled for neighborhood quality, past price trends and home improvements.

Source: David N. Figlio (University of Florida) and Maurice E. Lucas (Alachua County School Board), "What's in a Grade? School Report Cards and House Prices," NBER Working Paper No. W8019, November 2000, National Bureau of Economic Research, 1050 Massachusetts Avenue, Cambridge, Mass. 02138, (617) 868-3900; Gene Koretz, "Economic Trends: When Schools Get Graded...," Business Week, January 29, 2001.

For NBER abstract


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