Ranking Up by Moving Out: The Effect of the Texas Top 10% Plan on Property Values

Abstract

Texas engaged in a large-scale policy experiment when it instituted the Top 10% Plan. This policy guarantees automatic admission to their state university of choice for all high school seniors who graduate in the top decile of their high school class. We find evidence that households reacted strategically to this policy by moving to neighborhoods with lower-performing schools, increasing property values in those areas. The effect is strongest among schools that were very low-performing before the change in policy; and weaken as the previous performance of the school district increases. We also find evidence that these strategic reactions were influenced by the number of local schooling options available: areas that had fewer school choices showed no reaction to the Top 10% Plan.JEL Classifications: H31, H41, H73, I20

Jockeying for position: Strategic high school choice under Texas' top ten percent plan

“…Large districts also offer a variety of formal and informal intra-district school choice programs, such as magnet schools/programs and transfers to schools with underutilized space.16 The policy change should increase house prices in communities with low quality schools, since it is these schools where access to selective higher education institutions is improved the most. Broadly consistent with expectations, though also perhaps attributable to correlated school finance and accountability reforms,Cortes and Friedson (2010) find property tax values rose in previously low-performing districts. These types of capitalization effects would reduce incentives for gaming via residential relocation over time.…”

The Capitalization of School Quality into Renter and Owner Housing

“…Boustan () argues that desegregation of public schools in central cities reduces demand for urban residences causing purchase and rent prices to decline relative to neighboring suburbs. Cortes and Friedson () postulate and show movement to lower performing schools in response to the top 10% Texas plan (automatic admission to state university of choice), which increased property values in these school districts. Other studies also try to shed light on whether homeownership by itself affects children's outcomes.…”

The effect of banning affirmative action on human capital accumulation prior to college entry

“…Evidence that students' human capital investment decisions respond to the incentives created by college admissions policies is evident in Cortes and Friedson (2014) and Cullen et al (2013), both of which find evidence of students moving to lower quality high schools after Texas introduced its top ten percent plan, which guaranteed admission to any public university in Texas for students who graduated in the top ten percent of their high school class.…”