Are Ohio's Charter Schools Damaging Property Values? Study Says Yes

A new study by Jason B. Cook of Cornell University, titled With “The Effect of Charter Competition on Unionized District Revenues and Resource Allocation,” finds not only does charter "competition" reduce federal and state funding for district schools, it also finds that charter competition has driven down local funding by depressing valuations of residential property.

The reduction is drastic. For every one percent of students transferring to a low quality charter school, property owners see the value of their properties plummet by 2.5% - or $2,500 per $100,000 of home valuation.

From section 4 of the study (emphasis added)

Unlike the effects of charter competition on federal and state revenues, the negative effect on local revenues is unexpected. I explore potential mechanisms in Panel C by decomposing local revenues into the contribution of local property taxes, school lunch funding, and all other local revenues in columns 8 through 10. While local revenues are decreasing across all three measures, I focus my discussion on local property taxes because they comprise 96.5 percent of local revenues (LSC, 2011). Charter competition can affect local property taxes through two main channels. First, competition can directly decrease appraised property values and, in turn, the base valuation being taxed. Second, charters can decrease the levied millage rates (i.e., one-tenth of one percent) that determine the fraction of the base property values being taxed.

I test these potential mechanisms in columns 11 through 13 of Panel D. In column 11, I present the effect of charter competition directly on the total appraised property values within the TPSD (Traditional Public School District). My estimates suggest that a percentage point increase in the fraction of TPSD students transferring to charters decreases real appraised property values by 2.5 percent. This property value measure aggregates residential, agricultural, commercial, industrial, and mineral properties, as well as other public properties (LSC, 2011).

Column 12 presents the effect of competition solely on appraised residential property values. Charter competition generates nearly identical percent losses for both total property values and residential property values. In column 13, I find that the millage rates tend to decrease as charter competition increases. A simple back-of-the-envelope decomposition reveals that a majority of the decrease in total revenues is driven by the change in total property values.

Here's the full study