Ace in the Hole: The Effects of Multiple-School Zoning Policies on Housing Prices

The effect of policies that promote educational equity on housing prices is inclusive. We first present a theoretical model to investigate the impact of policies that reduce the prestigious school entrance probability and derive testable predictions on housing prices. Then, we use a unique multi-school zoning policy in Beijing as a natural experiment to test the variation in the parental valuation of prestigious school entrance probability. To capture the potential anticipatory behavior, we employ a flexible event study model and find diminishing capitalization effects in both lead and post-treatment periods. The estimated average total sale price decreases by 1.8% and 3.3% monthly in these two periods, respectively. The heterogeneity analysis shows that the decline in housing prices is disproportionate across tiers of school attendance zones and floor areas; housing prices in the neighborhood around the most prestigious school experience the largest price drops, and small homes experience the most price reductions because of their limited residential attributes.