PFM Articles 
School Finance Reform and Housing Values
ERIC J. BRUNNER, JAMES MURDOCH AND MARK THAYER
PFM, Vol. 2 No. 4,
(2002)
Over the past 25 years California has transformed its system of
public school finance from one of the least equitable in the nation to one
of the most equitable. This paper examines the impact of that
transformation on housing values. Specifically, we use data on
residential housing sales from Los Angeles County for the years 1975,
1980, 1985, and 1990, to answer three fundamental questions related to
the impact of school finance reform on housing values. First, were
reform-induced changes in district resources capitalized into housing
values? Second, did the equalization of resources across districts lead to
a convergence in school district housing price premiums? Third, and
perhaps most importantly, if so, was the convergence in school district
housing price premiums the result of a leveling-up or a leveling-down of
school district quality? Our results indicate that the answers to the first
two questions are both yes – reform-induced changes in spending per
pupil were capitalized into housing values and resource equalization has
led to a convergence in housing values. Perhaps most importantly,
however, our results indicate that the convergence in school district
housing price premiums was the result of a leveling-down of school
district quality.
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