Are Commercial Housing Prices Affected by the Quality of Nearby Educational Institutions?

by 19 Oct 2012

The relationship between the pricing of commercial homes and the quality of the schools and education centers nearby is probably not something that is thought about everyday; but it has become apparent that these two entities have a direct influence on each other.

Commercial housing available close to high quality schools are obviously in demand. Not only because parents want to cut on traveling and after care costs, but also because their children will have a better chance of being accepted into the school if they live nearby. This seems to be a problem in numerous cities all over the country. In effect this will mean that only certain areas and ‘rich’ families will be able to afford their children going to these quality institutions. This will lead to segregation within the school system as well leave behind those families that cannot afford over-priced commercial homes.

Why is this happening?

“The most recent CEP research for England shows that a primary school one standard deviation above the average in terms of the performance of its pupils in key stage 2 tests (at age 11) attracts a house price premium of around 3%. This means that a school right at the top of the league tables attracts a premium of around 12% relative to the one at the bottom”. – LSE

It is in the nature of the parent to send their children to the best schools possible, and quality schools attract the most students. Parents with a low income not only have to worry about affording the school fees, but if they want to live close to their children they have to worry about housing prices as well. Not only quality schools affect the prices of the housing, but the other benefits going hand in hand with it. These houses will also be near quality leisure centers, ample green living space, easy access to motorways, beautiful views or access to nature as well as being relatively safe from crime. The entire living cost of such a family will then rise.

Is it worth it to spend more?

The question of the matter then is, is it worth it to spend more on a house nearby a reputable school in order for your children to get an above average education? Living further away from the school in an area with no efficient public transport might add up to a hefty amount of travel expenses and safety issues. Some parents might argue that they will spend more on their living costs to ensure that their children are safe and getting the best education possible.

The problem in itself does not necessarily lie with the prospect of paying more, but rather the broader effects of this issue. Children should have equal opportunity to become educated and there should be enough bursaries or schooling programs available to those less fortunate.

The Public Policy Problem

Education Economists are interested in finding out on what level families or parents value education. Are they willing to pay more on their living costs to secure better education? Will the education from a top school benefit the individual in a later stage of their life so that the previous expenses would be worth it?

“These numbers make a great deal of sense in terms of investment in children’s future labour market skills. The potential earnings benefits in later life from a good state primary education outstrip the costs of buying a house near a good school” - LSE

It is also important for the government to calculate how much money should be spent on the educations system. The Policy should focus on narrowing the relation between accommodation and acceptance in schools. Just because some students live closer they should not receive preference.

What can be done?

If the government takes these factors into account they can come up with a range of solutions. To break down the direct relationship between the pricing of houses near quality schools more schools of high quality should be erected in the area. Not only will this help the community but the competition between these schools will lead to excellence in all different fields of performance.

At the end of the day there are numerous factors affecting the commercial housing prices but if the policies regarding the education systems don’t adapt to these changes this might lead to unequal education as a whole, where the gap between rich and poor will continue to grow.

This guest post was written by Endre R., a real estate guru and commercial property realtor. He is also a freelance writer for companies that make a difference, such as Classes and Careers, an online hub providing prospective students with online college schools.

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