Study: homeowners lose when overrides fail

Thanks to Kim Becker for pointing me to an editorial from yesterday’s Boston Globe that puts some numbers around the perennial debate about whether homeowners benefit from passing override that fund schools through increased home values. According to a study of 176 Bay State communities by Barry Bluestone, dean of the School of Public Policy and Urban Affairs at Northeastern University and Ph.D student Anna Gartsman, the answer is decidedly “yes.”

Northeastern: failed overrides hurt home values

Writing in the Globe, Bluestone and Gartsman talk about a simulation they ran on the impact on home values of a change in school spending due to a Prop. 2½ override. That’s a difficult data point to isolate. What the two researchers did was to look at data on housing values in 2005, then look at the change in housing values between 2005 and 2010, as compared to two measures of perceived school quality: school-wide SAT scores and per pupil expenditures.

What the researchers found was that municipalities with SAT scores and per pupil spending levels 20 percent higher than average experienced a 24 percent increase in nominal home value between 2005 and 2010. In contrast, those with SAT scores and per pupil spending 20 percent below average experienced a loss in home value of 11 percent.

Taking the town of Hull as an example, Bluestone noted that the town (like Belmont) recently rejected a small Prop 2 1/2 override ($1.9m) directed towards restoring AP classes at the high school and extracurricular activities. (There’s a warning here for Belmont about how far south things really can go, if you’re inclined to reason to yourself “oh, they’d never cut that!”) Hull, with average SAT scores below the average of communities they studied (961 compared with an average of 1047) and per pupil costs above the average ($11,491, some $1,500 higher than average), saw an increase in home values of 3.85 percent. The override, if passed in 2005, would have cost the average Hull tax payer  $2,530 over five years. Based on their analysis, however, the extra per pupil spending that a successful override would have generated would have correlated to an increase in home values of 6.5% – which translates into $9,970 in added value for the average Hull homeowner. In short: homeowners – even those without kids in the school – lost out on approximately $7,400 in added value on their home by voting down the override instead of passing it. Oops!!

There are issues here,clearly. Each town is different and there’s no guarantee that increasing school funding and programs will translate to increased property values. There are larger forces at play that might affect a local real estate market (the loss of a large employer, for example).

Also, the connection between per pupil spending and SAT scores is tenuous at best. School systems with much higher per pupil costs than Belmont (like Boston or Watertown) don’t come near towns like Belmont in average SAT scores, so its possible to get high performance without high per pupil expenditures. Belmont , most educators agree, exemplifies this.

However, if you believe that young families looking at comparable homes – one in a town that offers AP classes and sports, and one in a town that doesn’t won’t choose the former, you’re dreaming. And, if you believe (as I do) that, in the long term, starving your schools of resources to buy books, cutting class offerings and other support services (psychological, guidance, curriculum support), ceasing to offer accelerated instruction to advanced students and remedial instruction to struggling students will eventually bring down academic performance (which it will), then you should worry about the long term trends for the BPS and for Belmont home owners (like me!)

There’s a belief by many in town that Belmont doesn’t have to observe the laws of gravity -that we can short change our school system and still achieve stellar results.

In past years, that’s seemed to be the case and the exemplary performance of this year’s seniors has cemented that belief in the minds of many. But the effects of cuts are trailing and I predict that  we’ll soon start to see them in decreasing scores and standing for Belmont in the Bay State rankings, as well as the national rankings that Belmont has recently topped. If the study out of Northeastern is to be believed, homeowners who lament the needs of “freeloaders” (aka young families with school age children) and our professional educators may eventually realize that the price of being “right” is higher than they think.

  • Tim M.

    “What the researchers found was that municipalities with SAT scores and per pupil spending levels 20 percent higher than average experienced a 24 percent increase in nominal home value between 2005 and 2010.”

    Something is wrong with this study. I don't what happened here, but I can tell you that the average home value in Belmont has not increased 24% between 2005 (the height of the bubble) and 2010. I can't think of a single city or town in MA that has a 24% increase in nominal home value.

    • bloggingbelmont

      height of the bubble was actually 2007, Tim, not 2005. And, “no” the average home in Belmont hasn't gone up by that much — but that's the point. But look at Wellesley, Weston, Lexington, Concord, where overrides have passed…you might find a different story. Zillow.com is a good source.

  • Fred

    I tried to buy groceries at the super market with the equity I had in my home due to the good schools, but they refused and insisted on cash. Can you believe that? And then my boss told me that I lose my health insurance when I retire. Why is it that municipal employees keep theirs until they die? And my 401K plan keeps losing money, but the municipal employees have a different kind of plan that doesn't lose money. I'm confused by all this, but the nice people at the teachers union tell me I should vote for the overrides.

    • bloggingbelmont

      Yeah Fred – your response pretty much epitomizes the attitude of many NO folks – – you resent public sector employees for enjoying benefits that we should all enjoy, but which have been systematically stripped from the vast majority of private sector workers in the last thirty years. Defined benefit pension plans that don't fluctuate with the stock market (eliminated at most companies in favor of much cheaper, employee-managed 401ks), good and affordable healthcare, etc. (And you're wrong Fred – Belmont municipal employees are required to switch from the Town's plan to Medicare at age 65. That's just one of the many steps the Town has taken to lower its costs.) Rather than asking the big question: why did these benefits that most workers in the U.S. enjoyed thirty or fourty years ago disappear? Why is my safety net so tattered? What policies/politicians can I put my weight and vote behind to strengthen those protections and my security in later life, you'd prefer to punch holes in the safety net of public employees. We should all be beggared, you seem to be arguing, rather than “We should all be lifted up.” And why? Ask yourself who benefits? What you'll see is that large corporations benefit and their executives, who now make 200 times what their average employees make. Pretty pathetic, in my opinion. But keep on hating on those public school teachers, who make 1/100 what your average CEO is pulling down and, by the way, educate our next generation of teachers, scientists, entrepreneurs. They really are a pretty despicable bunch, aren't they. Not.

  • Tim M.

    You are correct that the height of the bubble was 2007, but that is nationally. The height in Massachusetts was 2005. We peaked first and started to recover first. A good source of information on this is the Case-Schiller index compiled by Standard & Poor's. The housing market in greater Boston peaked in May 2005 and the prices in the largest 20 markets, on average, peaked in May 2006. I don't think you could name a single town in the Massachusetts that has seen a 24% average increase since 2005.

    http://www.standardandpoors.com/indices/sp-case

  • Paulie Want a Cracker

    Paulie:
    I hope all is swell.
    How are you progressing with your local chapter of freegaza.org?
    We look forward to your further humanitarian efforts.
    Kind regards,
    WHS

  • Lifeinbalance

    Hi, Paulie:
    It is sad to hear you will not continue on as a school committee member. It is tough to work FT, with family obligations, and hobbies to balance life on the school committee. I hope your reading of the “every other thursday” blog have shed light on how to balance those things (even on the sensitive subject which few discuss 🙂 I wish you well.
    Best,