What can we do to reduce the house price barrier to accessing top performing state schools in England? – Business and Economics

There is considerable evidence that house prices tend to be higher around good state schools. In our recently released report, we have added to this evidence base by updating and extending research published by the government in 2017. In line with this research, we have estimated the additional cost of living near to one of England’s highest performing state schools (i.e. in the top 10% based on attainment data). 

We refer to this additional cost as the ‘house price premium’ and find that, in 2017/18, this averaged around £27,000 (7%) for primary schools and around £25,000 for secondary schools across England. 

We also found that this premium varies significantly between regions. The largest percentage house price premium for primary schools is 12% in Yorkshire and the Humber, equal to about £27,000. The secondary school house price premium varies more between regions, with a premium of £47,000 (19%) in the West Midlands, for example, while we estimate there is no premium in the East of England.

Figure 1: % house price premia by region (2018)

The high cost of living close to, and so potentially within the prime catchment area of, a high performing school has potentially serious adverse implications for social mobility. In particular, children of poorer families may be locked out of the best education, which negatively impacts on their later career prospects and life opportunities. Research by The Sutton Trust suggests that improving social mobility could benefit individuals, businesses, and the economy. As such, reducing the house price barriers to the best schools could be critical to improving equality of access to education and opportunity, unlocking improvements to productivity and in turn economic growth.

What should be done?

Both business and government can take action to help to unlock these benefits, but some policies are likely to take longer to achieve than others. In the shorter term, policy options could include:

• Investing in under-performing schools: The government has recently announced plans to increase real day-to-day spending on schools by £1.8bn in 2020/21, building up to around £4.3bn by 2022/23 (at current prices). A report by the IFS suggests this additional spending should be sufficient by 2022/23 to reverse most of the 8% cut in real schools spending per pupil seen during the period of austerity between 2009/10 and 2018/19. However, to maximise its impact, the government could seek to target this increase in funding particularly on lower performing schools in order to bring them up to a higher standard.
• Changing how pupils are admitted to schools: Where a state school is oversubscribed, places are typically offered to children who live nearest to the school. As such, proximity becomes increasingly important the better the school, which may contribute to a higher house price premium. To help level the playing field, the government could seek to redraw catchment areas or implement alternative criteria for admittance to schools, for example, lottery systems. Some areas have already tried such alternatives. For example, Brighton and Hove introduced a lottery system over 10 years ago, but kept local catchment areas to prevent families having to travel long distances. While this system has faced challenges associated with the varying quality of housing stock and the how the boundaries are drawn, it is possible that such a system could be more successful through further refinement and other facilitating policies, such as transport schemes.

In the longer term, housing policy could be used to reduce the size of the house price premium, while businesses could invest in new programmes for school leavers. Actions and policies could include:

• Investing in school-leaver schemes: Businesses could offer apprenticeship programmes and other school-leaver programmes that contribute to a qualification and allow young people to gain practical experience. This could provide an alternative to University for many young people and should contribute positively to social mobility as long as the application process considers potential and not just the grades achieved during school.  

• Building affordable family housing close to good schools. Building new houses in the area around good schools, which are both affordable and of a size fit for families, could improve accessibility to the country’s best schools. In our previous work with the World Economic Forum (WEF), we identified a number of housing policies that may be relevant and support this action. For example, the government could require that there are multiple tenures types in new developments (i.e. a mix of social, affordable and private housing), while affordable housing could be made more attractive to developers by allowing the use of modern construction materials and techniques, which reduce both the time and cost of developing such schemes.

• Increasing availability of existing property. There may be some vacant property around good schools, and older homeowners may hold on to their family properties even when they are too big for their needs. This reduces the supply of housing available to lower income families near the best schools. To help address this, the government could incentivise developers to redevelop vacant properties through relaxed planning regulations, as well as encouraging older homeowners to consider downsizing by supporting the development of high quality smaller or retirement properties.

The house price premium is a potentially significant barrier to social mobility, but the actions and policy outlined above could help to level the playing field. Through central and local government and businesses working together, these policies and actions have the potential to generate large benefits including: more people achieving their potential, businesses benefiting from greater diversity of staff from a range of socio-economic backgrounds and better matching of staff to roles. These then have the potential to benefit the economy through improved productivity, equality, and in the long run, living standards.