Mobility, housing markets, and schools: Estimating the effects of inter-district choice programs

In theoretical models of residential sorting, a household's location decision is closely linked to its demand for local public services, such as schooling. Since school choice programs weaken the link between residential location and schooling options, they have the potential to affect both property values and residential location choices. Results derived from computable general equilibrium models suggest these effects could be large, but there is limited empirical evidence concerning whether they actually occur. This paper develops and tests predictions concerning the impact of inter-district choice programs on housing values and residential location decisions. Our empirical results strongly confirm our theoretical predictions and the findings of the computable general equilibrium literature: after their states adopt inter-district choice programs, districts with desirable nearby, out-of-district schooling options experience relatively large increases in housing values, residential income, and population density.

► School choice programs may affect residential sorting and house values.
► We test whether states' inter-district choice programs affect sorting and house values.
► House values rise if there are desirable out-of-district options nearby.
► Population density and mean household income also rise.
► Residential homogeneity increases when excludable public goods become less exclusive.