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School improvement and urban renewal:
The impact of a turn-around school’s performance on real property values in its
surrounding community
Stephen L. Jacobson & Jill Szczesek
University at Buffalo – State University of New York
To be presented at the 37th annual conference of the Association for Education Finance
and Policy, March 15-17, 2012, Boston, Massachusetts
Session 6.10 – Sociological, Developmental and Economic Interactions in Education
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School improvement and urban renewal: The impact of a turn-around school’s
performance on real property values in its surrounding community
Stephen L. Jacobson & Jill Szczesek
University at Buffalo – State University of New York
Abstract
This study investigates the economic impact of a ‘turn-around’ school on real
property values in its surrounding community. What began as anecdotal
information from interviews first conducted in 2001 during the initial phase of a
study on successful leadership in a high poverty, high need school, led to the
current investigation, which examined the community’s property rolls. Using
single-family home sales found on the Multiple Listing System in the region and
data from the region’s Realist Tax Record database, we examined property
ownership and financing and found that property values in the school’s
enrollment catchment area were higher than in comparable, nearby
neighborhoods that fed other public schools. Moreover, the houses in the
school’s community were selling much closer to the initial asking price and were
on the market for a shorter time, on average, than in comparable neighborhoods.
Introduction and overview
This study further investigates the effects of school improvement on community renewal
as initially reported by Jacobson, Johnson, Ylimaki & Giles, (2009)1, in “Sustaining
school success: A case for governance change”. Specifically, in this paper we report the
economic impacts of a ‘turn-around’ school on real property values in the school’s
surrounding community.
What began as anecdotal information first obtained during interviews conducted in 2001
as part of the first phase of a study on successful leadership in a high poverty, high need
school, led to the current investigation focused on finding supportive empirical evidence.
In those initial interviews, teachers and parents from the school told us that as the
school’s reputation improved, there were parents who had begun buying homes in the
surrounding neighborhood so that their children would have access to the school. We
found preliminary support for this claim in the 2000 U.S. census data, which revealed
that the community was one of only three neighborhoods in the entire school system that
had experienced an in-migration of African Americans subsequent to the 1990 census,
and the only one of the three being primarily families with children. This demographic
movement is significant because it began after the school’s turn-around, which itself had
started shortly after the school entered into a partnership with a regional bank and had
appointed a new principal in 1994.
1
Further detail about the school’s academic ‘turn-around’ can be found in Giles,
Johnson, Brooks & Jacobson (2005) and Jacobson, Brooks, Giles, Johnson & Ylimaki
(2007).
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The school and its community
Fraser Academy (a pseudonym), is a K-8 public school in New York State’s second
largest district, which is also the most heavily state subsidized as a percentage of
revenues. At the time of the partnership with the bank in 1994, Fraser was considered to
be the poorest performing school in the entire district, a district with a reputation for
under-performing schools. The bank sought to develop the partnership in compliance
with the Housing and Community Development Act of 1977/Title VIII2. More commonly
known as the Community Reinvestment Act of 1977, this law requires that financial
institutions demonstrate they serve the convenience and needs of the communities in
which they are chartered to do business. Such compliance becomes especially important
when banks are considering mergers, consolidations and/or acquisitions of other financial
institutions, i.e., expansions of the type the bank in question was embarking upon.
Between 1990 and 2000, the city in which Fraser is situated experienced a decline in
population, an increase in unemployment and a lowering of its median household income.
Yet, inconsistent with these conditions of the time period, a bit of anecdotal information
gleaned from the initial interviews was the claim that subsequent to the school’s
partnership with the bank, some parents had actually paid more than the seller’s original
asking price for houses located in Fraser’s enrollment neighborhood. The occurrence of
home sale prices exceeding asking price is not unusual in more affluent communities
where potential homeowners may bid up the price as they compete for access for their
children to schools held in high regard. But in a low-income neighborhood, such as the
one surrounding Fraser, the phenomenon is atypical; therefore we needed to examine
local property rolls to see if there was any empirical support for this claim.
The community surrounding Fraser would best be described as ‘inner-city’, i.e., a
residential, but deteriorating urban environment with mixed-use properties including
single family and multi-family unit homes, housing predominately low income, African
American families. The community also has a few commercial properties with retail
businesses and small manufacturing sites. Physically, the neighborhood within walking
vicinity of the school resembles many other such ‘inner-city’ neighborhoods in the same
municipality, with neglected and abandoned properties, often having graffiti covered
walls.
Subsequent to the bank partnership and the principal’s arrival, Fraser experienced a
remarkable turnaround in student performance as evidenced by New York State
Education Department (NYSED) school report card data (Jacobson et al. 2007). In fact,
Fraser had gone from being one of the worst to one of the best schools in the district.
Comparing the percent of students achieving mastery at Fraser with the district average in
1998-99, 2002-03, and 2007-08, Fraser exceeds the district average in 20 out of 21
comparisons, over 95% of the time (Table 1). In 1993-94, the year prior to the
partnership, Fraser exceeded the district in only 20% (2 out of 10) of comparable
comparisons. Moreover, the average difference in the percent of mastery learning at
2
For more details about the Community Reinvestment Act go to :
http://www.federalreserve.gov/communitydev/cra_about.htm
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Fraser, as compared to the district, grew from 12.6% in 1998-99 to 29.4% in 2002-03,
dipping just slightly to 27.8% in 2007-08 (more recent data is currently being examined).
In other words, Fraser managed to sustain very laudable student achievement scores,
when compared to the rest of the district, even in the face of the district’s budget crisis.
Grade 4 ELA
1998-1999
2002-2003
2007-2008
FCCS
26
56
59
District
29
34
42
Grade 4 Math
1998-1999
2002-2003
2007-2008
FCCS
60
95
72
District
54
58
53
Grade 4 Science
1999-2000
2002-2003
2007-2008
FCCS
76
84
79
District
47
51
63
Grade 5 Social Studies
2002-2003
2007-2008
FCCS
92
79
District
50
53
Grade 8 ELA
1998-1999
2002-2003
2007-2008
FCCS
41
30
66
District
31
22
28
Grade 8 Math
1998-1999
2002-2003
2007-2008
FCCS
43
70
77
District
22
32
34
Grade 8 Science (Regents)
2002-2003
2007-2008
FCCS
96
80
District
65
50
Grade 8 Social Studies
2002-2003
2007-2008
FCCS
66
64
District
40
31
29.4
27.8
AVE. (%) Diff.
12.6
In 2004, Fraser Academy became a conversion charter school – Fraser Community
Charter School (FCCS) – in order to stave off some of the human resource problems
created by the district’s budget crisis3. The key point is that by becoming a conversion
charter school, FCCS remained in the same building under the jurisdiction of the district,
Detail about the district crisis and the school’s response can be found in Jacobson et
al. 2009
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but with greater fiscal and human resource autonomy4. FCCS was able to keep those
teachers who wanted to stay, as well as all of its neighborhood students. The transition to
charter school required a majority of parental support and the election that was authorized
produced a parent turnout of over 80%, with almost 100% voting for conversion; another
measure of the support the school had from its parents. Although the lottery system it
now employs for enrollment allows students to enter FCCS even if they live outside of
the old enrollment catchment area, over 90% of the school’s student population still live
within the old boundaries, in part because the school gives priority to siblings of students
who are currently in, or who have graduated from Fraser, which extends the benefit
initially sought by their parents.
It is also important to note that subsequent to the bank partnership there have been
improvements to the school facility itself and its surrounding grounds, including the
annexation and renovation of an abandoned branch of the county library, the addition of
an early child care facility and community health center, a renovated park with a
basketball court and a play space for FCCS students during school hours and
neighborhood youth afterwards. As a result, FCCS has become the centerpiece of the
neighborhood having established a more positive presence in the community.
Research methods
For the purpose of this study, we examined property value indicators in the Fraser
Academy enrolment catchment and in a neighboring area using data collected for real
estate transactions recorded between 2001 to mid-2011. We restricted our analysis to
single-family homes, the predominant style of housing in the area. For each property sold
during those 10 years, we recorded list price, sale price, number of days on the market,
and sale price per square foot. A total of 247 homes met our criteria and then the
aggregated sales data in the two areas were analyzed and compared. Sales were defined
as homes that had been listed on the market through the Multiple Listing System in the
region and had resulted in a real estate closing. Data for homes that had been sold by the
owner, independent of a real estate office were not included as this data was inaccessible.
Data was also collected from the region’s Realist Tax Record database. These records
were examined for qualitative information pertaining to property ownership and
financing. We compared the data for sales in two groups: those within the Fraser
catchment area (n = 167), and those in a comparable neighbourhood just outside of it (n =
80), along three key measures: (1) the number of days a house was on the market; (2) the
list to sale price ratio (LSPR); and (3) the sales price per square foot (PSF).
These indicators can often fluctuate from one neighborhood to the next in the same
municipality as supply and demand influence each other. Homes in greater demand
will typically spend fewer days on the market; have a higher LSPR, since owner’s can
hold out for a more desirable price as a result of the increased interest; and they will
often have a higher PSF, a further indicator of demand and perceived home
desirability.
Findings
Details about NY’s Charter Schools Act can be found at:
http://www.nycsa.org/Legislation/CSLaws/CS%20law.pdf).
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Before reviewing our findings, it is important we place the neighborhoods we are
examining into their municipal context, as well as the housing market context for the
period being studied. Fraser Academy is situated in a region who’s housing market is
an anomaly compared to other mid-sized markets in the United States. Prices in the
community neither ‘boomed’ nor ‘busted’ with the national housing fluctuations from
2002 till 2008. Immunity from these volatile conditions established a market that is
stable within its own confines, but one that is not oblivious, nor impervious to the
conditions beyond it. Leading up till 2008 the Fraser market did experience an
increase in unit sales (BNAR, 2011), consistent with high home sales activity across
the country. However, pertaining to home values, the Fraser community has been less
subject to the artificially increased property values that other communities have seen.
With the community’s property tax burden being in the top 10% in the country
(Forbes, 2009), a significant increase in sales price and ‘value’ would, in many
respects, have been impossible with the tax burden on its homeowners. Higher sale
prices correlate to increased property taxes and the market is at a tax threshold that, if
increased, would potentially prohibit home ownership.
Following the onset of the housing crisis in 2008, the local market did see a ripple
effect evidenced in declines in annual unit sales and stagnancy in home sales in the
top 10% of sale prices in the region. Median sale price for a single family home in
the area in 2010 was $110,000 (BNAR, 2010). Homes well above this threshold have
seen delayed sales with evidence that the average time from list to sale for a home
equivalent to the median is 51 days (NYS Mlxchange, 2011), but homes above this
price take an average of a month longer to sell at 76 days. As well, there has been and
increased demand for rental properties as conditions for mortgage credit become more
constrained.
Homes on the market in the Fraser community that are reflective of, or below, the
region’s average sales price have been impacted as well by the national crisis, but
ever so minimally. Average LSPR, an indicator of stability in a market, has been
stable even as the national market was in a tumultuous position. These homes during
the upswing of the housing market were appreciating in value in a range of 3-5% per
year (Buffalo Niagara Association of Realtors, 2010); in 2010 they maintained value
without appreciation, yet many other cities across the country were still seeing
declining values. The neighborhoods surrounding the ‘Fraser’ school when compared
to average home values in its local market would be lower than the mean, and this
category as well has not seen decline in value.
With those factors in mind, our data reveal that home sales in the school’s catchment
neighborhood, which are all within walking distance of the school, differ from sales
on streets nearby but not within the school’s neighborhood. For example, the number
of days a home stays on the market for sale is an indicator of demand, or lack thereof.
The number of days it takes to sell a property is fixed. From its initial listing, real
estate records will count the number of days it takes to achieve a valid and executable
offer. We found that the median number of days a home stayed on the market on
streets surrounding the school was less than half that of homes on streets beyond the
school’s boundaries, 58 as compared to 129 days (See Figure 1). It is also notable
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that the Fraser catchment area had some homes selling the same day they were listed,
another indicator of high demand. The higher frequency of closed transactions in our
data set for the Fraser streets is also indicative of a higher demand for the homes in
that area.
Home values in Fraser’s neighborhood also differ from those on similar streets outside
the school boundary. Again, the two indicators we used to establish property value were:
(1) a list to sale price ratio (LSPR), and (2) the sale price per square foot (PSF).
LSPR can be adjusted for a property by lowering sales price periodically until a property
finds enough activity to generate a sale at an appropriate list price. A two bedroom home
in the Fraser market would probably see little activity if listed at $500,000, but if priced
at $50,000 might sell for 100% of the listing price. Streets in the school’s catchment
neighborhood reveal numerous cases of homes selling for 100% of the list to sale price; a
ratio more comparable to conditions in the marketplace for homes outside of the ‘innercity’ for that the same time period. In contrast, similar one-family homes on district
streets outside the catchment of the school reveal a far lower LSPR. On average, Fraser
properties were selling for 93.14% of the asking price as compared to only 73.55% in
bordering comparable properties (See Table 2).
Although less indicative of demand and more closely related to the value of a home is
sale price per square foot (PSF). The cost of new construction PSF fluctuates annually
and is influenced by many factors including labor costs, cost of materials, and the size of
a home to be constructed. Existing homes do not see variances as a result of these
factors, but will differ based on condition of the property, functionality of the structure
and any enhanced features such as a garage or yard. When examining the comparable
neighborhood homes, differences in the average PSF were stunning, with the average
high PSF in the Fraser neighborhood being almost four times higher ($41.32 to $11.62).
In fact, the average low PSF of homes in the school’s neighborhood actually exceeded
the average high PSF in the bordering neighborhoods - $12.61 to $11.62 (See Figure 2).
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This provides a further indicator of the higher demand and improved condition of
these homes. Clearly they were being purchased more readily and were more highly
valued.
Finally, in our review of the area property records, additional evidence was found that
demonstrates the effects of increasing property values, specifically the relative
activity by investors into an area. Real estate investors purchase properties in areas
they are confident they can easily rent for fair market value. In reviewing the tax
records for the properties within our defined boundaries, multiple examples were
found of homes that had been purchased after the school had been recognized as
successful by incorporated businesses, or by individuals who do not use the property
as a primary residence. The tax records also indicate that the property taxes for the
Fraser area are higher than those in the comparable neighborhood. As these homes
are selling with greater frequency and for higher sales prices, assessments have
improved on the tax roll generating additional funds for the municipality (NYS
Realist, 2011).
Each tax record also notes the lending party for the mortgages awarded. Though very
few examples were found of the mortgagee being the financial institution that had
initially partnered with the school, many other local lenders were the beneficiaries of
loans resulting from the purchase of homes in Fraser’s enrolment catchment area.
Conclusions and suggestions for future research
Many factors investigated based on the first phase of this research point to the
improved school as having positive effects on its neighborhood beyond offering better
academic opportunities for students. The influence of improvement in scholastics has
attracted families to the neighborhood. Our current data support earlier anecdotal
reports that the bank partnership’s investment in the school and the school’s
subsequent improvement generated an increased interest in real estate in a community
that would otherwise be declining. The school has drawn new community members
to its vicinity, which was reflected in a revitalized housing market in the process.
Families pursuing better prospects for their youngsters, by moving into the vicinity of
the school, may ultimately see payoffs financially as well. Our research reveals that
homes in the Fraser community are maintaining their value and appreciating at a
greater rate than comparable properties. The anecdotal information gathered initially
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had examples of families purchasing homes motivated less by concern for getting the
best discount on a property and more for its proximity and access to a school that was
beginning to excel as compared to other schools in the district. This investment and
decision on their part has enabled these families to build equity more rapidly than
what market conditions would permit. This equity may be an investment that families
can draw from and build on in the future, perhaps in terms of furthering their
children’s higher education.
Our research has demonstrated that the Fraser school through the course of its ‘turnaround’ has had a similar transformative effect on its surrounding community.
However, all forces of this makeover should be considered. Suggestions for further
investigation would be to examine the effects the accumulated equity has on a
family’s upward social mobility, and its implications both short and long-term.
Though many of the effects have demonstrated to be positive, research and thoughtful
consideration should also be given to what result the increased home prices have had
on accessibility to the neighbourhood. Has the average sales price in the community
reached a threshold no longer enabling many to purchase in it? With mortgage
requirements, have prices escalated beyond what is attainable for a working class
family with good credit? All of these effects could then be weighed against the
positive effects the school’s transformation has had and considered for future
modelling.
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Giles, C., Johnson, L., Brooks, S. & Jacobson, S. (2005). Building bridges, building
community: Transformational leadership in a challenging urban context. Journal of
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Hurd, M., & Rohwedder, S. (2010). Effects of the Financial Crisis and Great Recession
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Jacobson, S., Johnson, L., Ylimaki, R. & Giles, C. (2009). Sustaining school success:
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Jacobson, S., Brooks, S., Giles, C., Johnson, L. & Ylimaki, R. (2007). Successful
leadership in three high poverty urban elementary schools. Leadership and Policy in
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NYS Mlxchange. (2011, December 5). Comparative Market Analysis. Buffalo, NY,
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NYS Realist. (2011). 2011 Tax Data.
Simon, R., & Hagerty, J. (2009, November 22). One in four borrowers is underwater.
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