School Choice Programs: The Impacts on Housing Values

We review both the theoretical and empirical literature relating to the impact of school choice programs, particularly voucher programs, on residential property values. Beginning with the seminal works of Charles Tiebout (1956) and Thomas Nechyba (1999, 2000, 2003), we describe the sorting equilibrium theories that arise in the context of public school assignments based strictly on geographic catchment areas. We then consider the implications of allowing students to attend schools other than those to which they are assigned, particularly in a school voucher context. Finally, we review the empirical tests of these theories to date. The important concepts addressed in this paper are: (1) assigned schools lead to a separating equilibrium that results in segregation on the basis of income, school quality, and property values; and (2) school choice programs undermine this separating equilibrium by severing the link between place of residence and school assignment.