The effect of school zone on housing prices: evidence from a quasi-natural experiment in New Zealand

Abstract

We analyse a quasi-experiment where a much sought-after state secondary school with no close substitutes unexpectedly reduced its enrolment zone twice over a three-year period. We use difference-in-differences to estimate the impact of the two downsizings on housing sales prices. We use controls for housing characteristics for pooled cross section or housing fixed effects for repeat sales, test for parallel trends, and conduct numerous robustness checks. In our main analysis, we find the first downsizing may decrease housing prices between 3.2% and 12.9%, with most estimates statistically significant, while the second downsizing may decrease prices between 2.1% and 7.2%, with most estimates insignificant. Tests in the pre-treatment period suggest parallel trends cannot be rejected, though some cross section interactions are significant when the two downsizings are analysed separately. We conclude the school zone’s first downsizing likely had a negative effect on housing prices of a small to moderate magnitude.