How Much Do Public Schools Really Cost? Estimating the Relationship Between House Prices and School Quality

This paper investigates the relationship between housing prices and the quality of public schools in the Australian Capital Territory. To disentangle the effects of schools and other neighbourhood characteristics on the value of residential properties, we compare sale prices of homes on either side of high school attendance boundaries. We find that a 5 percent increase in test scores (approximately one standard deviation) is associated with a 3.5 percent increase in house prices. Our result is in line with private school tuition costs, and accords with prior research from Britain and the United States. Estimating the effect of school quality on house prices provides a possible measure of the extent to which parents value better educational outcomes.