In the world of real estate, the old adage "location, location, location" still rings true, but with a modern twist. For many parents, the "location" of choice is now centered around top-rated schools, and the premium they're willing to pay for it is staggering. This trend is reshaping the housing market, with parents willing to stretch their budgets and even sacrifice square footage to secure a spot in a highly-rated school district. But what does this mean for the broader housing market and the value of education? Let's take a closer look at this phenomenon and its implications.
The School Premium
In Toronto, the impact of living near top-rated schools is evident. Realtor Sean Mayers observes that homebuyers now prioritize school quality over commute times, with many willing to pay a premium for smaller, older homes within their desired school catchment. This premium can range from $60,000 to $70,000 for detached homes and $40,000 to $60,000 for attached homes, equivalent to 5-7% and 4-6% of the home's value, respectively. In British Columbia, this premium can be even higher, reaching up to 10.5%.
The Decline of Starter Homes
The rise of the school premium coincides with the decline of starter homes, making it harder for first-time buyers to enter the market. This shift is particularly challenging for those without children, who may be willing to wait for the right school district before starting a family. As a result, some homebuyers are stretching their budgets further and earlier in life to secure housing in well-rated districts.
The Impact on Public Schools
The demand for top-rated schools is also impacting public schools. While standardized test scores in reading, science, and math have been declining across Canada, parents are increasingly seeking out schools with higher ratings. This trend is particularly evident in Ontario, where only half of Grade 6 students met provincial math standards in 2024-25, compared to 60% two decades ago. In British Columbia, around one-third of students were not meeting literacy expectations just before the pandemic, with that number rising to 40% from 2021-22 onward.
The Role of School Ratings
School ratings, largely based on standardized test scores, play a significant role in this trend. The Fraser Institute's annual ratings, which consider factors like gaps in performance between girls and boys and school improvement over time, are particularly influential. However, the wealthiest homeowners often enroll their kids in private schools, which can skew the perceived value of public schools.
The Exception: Ultra-Affluent Neighborhoods
Interestingly, some ultra-affluent neighborhoods in central Toronto and North York have middling-to-low school scores. This is likely due to the fact that the wealthiest homeowners overwhelmingly enroll their kids in private schools, which are not reflected in school rankings. However, a few communities do report both premium home prices and higher school scores, such as Bridle Path-Sunnybrook-York Mills in Toronto and British Properties in West Vancouver.
The Future of Education
As the demand for top-rated schools continues to grow, it raises questions about the future of education. Will the focus on school ratings lead to a further decline in public school quality? Will the gap between public and private schools widen? These are complex questions that require careful consideration and further analysis.
Conclusion
In my opinion, the school premium is a fascinating and complex trend that is reshaping the housing market and the value of education. While it may provide some parents with a sense of security and opportunity for their children, it also raises important questions about equity and access. As we continue to navigate this evolving landscape, it is crucial to consider the broader implications and work towards a more inclusive and equitable education system. Personally, I think that the focus on school ratings should be balanced with a broader view of educational quality, and that we should strive to create a system that supports all students, regardless of their neighborhood or socioeconomic status.
