The Impact of Schooling on the Housing Market

When a family decides to buy a house, there are many factors that could step in, such as; the total floor area, number of bedrooms, number of bathrooms, environment, availability of public transport, etc. One of the most interesting areas, is to see if schooling has any impact on housing prices. The key aim of this research is to assess how much a family is willing to pay to live in an area, which has a better performing school.

There are many studies trying to investigate this link. The literature varies in terms of the empirical methods. Most of the literature is based on the regression based estimates, parametric and non-parametric modelling of unobservable factors, and instrumental variables methods (see Brasington and Haurin, 2006, Cheshire and Sheppard 2004, and Rosenthal, 2003). However, these studies suffer from the omitted variable bias. More recent works use discontinuity methods, difference-in-difference methods and combined different methods, such as Davidoff and Leigh (2008), Clapp et al. (2008) and Bayer et al. (2007), etc. The impact of schooling on house prices is significant in these studies. Kane et al. (2006) even found the schooling could affect house prices by 10% in Mecklenberg, US.

Proposed Methods

We will base the research on the traditional hedonic housing price model, including the characteristics of the house. Then a measure of schooling will be added to the model. We also need to control the policy changes in recent years, such as stamp duty, help to buy, etc. We will use regional data to show the effects of this link.