Boost housing market with education investment
Nationwide, the housing market is showing signs of life — home sales rose in July rose by 2.3 percent over June and by 10.4 percent over July of last year. These gains came largely on the back of July’s record-low 3.55 percent interest rates on 30-year fixed-rate mortgages.
On Wednesday, the National Association of Realtors announced that the median home for sale in America spends 69 days on the market, down nearly 30 percent from this time last year.
While this evidence may point to a modest national housing recovery, the improvements are not being felt uniformly throughout the country. The National Association of Home Builders publishes a monthly list of the American housing markets in which growth is concentrated. August’s list included 80 cities such as Phoenix, Detroit, Miami, and, yes, Iowa City.
When measured against post-recession lows, the housing association found that in Iowa City more home-building permits are being issued, housing prices are rising, and unemployment is falling. The median sale price for a home in Iowa City peaked at $252,000 this summer, up from $145,000 in February 2009.
Much of the housing recovery is driven by some pretty esoteric factors, such as interest rates determined (partially) by secondary mortgage markets and quantitative easing at the Federal Reserve that are, more or less, beyond our control. There are, however, some important steps we can and should take on a local level to continue Iowa City’s housing recovery.
In particular, investment in Iowa City’s schools could have a substantial positive effect on the housing market by raising local home values.
A study released in mid 2010 by the Federal Reserve Bank of St. Louis Review found that quality public schools substantially increased home prices in their attendance zones. In a place such as Iowa City, with “inelastic” attendance zones, demand for housing near good schools would shrink the housing supply, thereby adding a sort of “educational premium” to the average home price.
In a town with schools already performing well (students at the Iowa City School District’s high schools beat the state average on the ACT by more than 3 points), any educational improvement would mean an exponential increase in the value of the educational premium on Iowa City real estate.
As the Iowa City School Board mulls whether to spend millions of dollars in set-aside tax revenue on a new North Liberty high school or elementary school upgrades in Iowa City, it should keep in mind the potential economic impact of its decision.
A 2002 study by UCLA’s Institute for Democracy, Education and Access found that students who attend school in more modern, less crowded schools consistently outperformed their counterparts stuck in aging buildings and overcrowded classrooms.
While a proposed third high school in North Liberty would ease some crowding issues at West High, a plan to ease overcrowding and renovate aging facilities in Iowa City’s elementary schools could increase student performance and provide a direct economic boost to many residents in the process.
If Iowa City wants to take a proactive step toward continued housing recovery, investment in our aging schools is the place to start.
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