Why Do Households Without Children Support Local Public Schools? Linking House Price Capitalization to School Spending

While residents receive similar benefits from many local government programs, only about one-third of all households have children in public schools. We argue that capitalization of school spending into house prices can encourage residents to support spending on schools, even if the residents themselves will never have children in schools. We identify a proxy for the extent of capitalization based on the supply of land available for new development. Using a plausibly exogenous shock to local spending in Massachusetts, we show that house prices change more strongly in response to the demand shock in areas with little undeveloped land than in areas with plenty of undeveloped land and that communities with little available land also spend more on schools. We then extend these results using national data from school districts, showing that per pupil spending is positively related to the percentage of developed land and that this positive correlation persists only in locations with high homeownership rates and is stronger in districts with more elderly residents, who do not use school services and have a shorter expected duration in their property. These results hold with alternative measures of capitalization. Our findings support models in which house price capitalization encourages more efficient provision of public services and provide an alternative explanation for why some elderly residents might support local spending on schools.