Property value increases: another short-run benefit of early childhood programs

Several of my blog posts have addressed the political problem that much of the benefits from early childhood programs are long-term. These programs’ benefits are long-term because most of the economic benefits associated with former child participants don’t occur until they become adults. The long-term nature of program benefits is a problem because political leaders often focus on the short-term.

I have already mentioned one benefit of early childhood programs that is short-term: savings in special education costs. Today’s blog post discusses another benefit that is short-term: increased property values.

We know from research that higher test scores in early elementary school will increase local property values. This research compares the prices of houses that are similar in all respects except for the test scores of the local elementary school. The research compares similar houses in the same neighborhood that are divided by an elementary school attendance zone boundary.  Parents presumably are willing to pay more for houses that are associated with higher elementary test scores because they expect this to result in more achievement for their child.

We also know from research that high-quality preschool affects early elementary test scores. If we combine these two lines of research, we can calculate the effects of universal pre-k on property values that would occur simply through the “transmission mechanism” of higher elementary test scores. These higher property values do not assume that parents DIRECTLY put any value on preschool. It simply assumes that parents are willing to pay for higher elementary test scores, regardless of why these higher test scores occur.

In chapter 7 of Investing in Kids, I present this calculation. I find that property value increases due to higher elementary test score effects of preschool could plausibly be 13 times the annual program costs for universal pre-k.

These property value increases would occur in the short-term. After a universal pre-k program was begun, we would expect test score increases in early elementary school to occur within a few years.  Property value increases should occur when the test score increases become visible. Property value effects would occur within 5 years, whereas the increases in adult earnings of former child participants won’t occur for at least 15 years.

Are these property value increases high enough that preschool ends up hurting the poor, due to higher rents? No.   In these calculations, the percentage increase in property values (and in housing rents) is less than one percent. Property values are large enough, and annual costs of universal pre-k are small enough, that even this small percentage increase in property values is equal to about 13 times annual program costs of universal pre-k.  Furthermore, as I calculate in chapter 8 of Investing in Kids, the benefits of universal pre-k are a substantially higher percentage of income for lower income families. Even with a slight increase in housing prices, universal pre-k has “progressive” effects on the income distribution, that is, universal pre-k provides greater percentage benefits for lower income families.

Even political leaders who focus only on the short-term should be interested in property value increases that occur within 5 years.  These property value increases will increase property tax receipts.  These property value increases also represent substantial increases in the wealth of homeowners, who constitute a majority of voters.

In a subsequent post, I will provide more thoughts on the political implication of property value increases due to universal pre-k.

About timbartik

Tim Bartik is a senior economist at the Upjohn Institute for Employment Research, a non-profit and non-partisan research organization in Kalamazoo, Michigan. His research specializes in state and local economic development policies and local labor markets.
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2 Responses to Property value increases: another short-run benefit of early childhood programs

  1. Pingback: More political implications of property value increases due to pre-k | investinginkids

  2. Pingback: A possible short-term benefit of early childhood programs: packaging them with adult job training programs | investinginkids

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