Thursday, January 14, 2010

Is it good to have a college in town?

Suppose the following experiment. A town has some open space and can choose to develop it following the pattern of the existing town or attract a college campus. Is the campus worth it? On the plus side, it should attract more educate residents and bring amenities the town does not have to pay for. On the negative side, and that is a big negative, the town will get no taxes directly from this college (the recent attempt of Pittsburgh to tax tuition has failed, sort of). And college students tend to be rowdy.

Donald Vandegrift, Amanda Lockshiss and Michael Lahr perform the kind of hedonic regressions that have been used to value various amenities and add college dummies. It turns out size matters. A college raises house values by 11%, but larger enrollments reduce house value. And in any case, the presence of a college increases the tax base by 24%. While college towns will always complain about the non0-taxable real estate, they should be happy about the general equilibrium effect from colleges, which are strongly beneficial.

1 comment:

Problem Is said...

"On the negative side, and that is a big negative, the town will get no taxes directly from this college...

I live in such a town. 60k population, major state university campus, one of ten in the system, 30k students predominately from other areas of the state. The campus land was always adjacent to but not part of the town. The surrounding towns are smaller, poorer, lower in median income and yes less educated.

But the economic activity from the campus and payroll in the pocket of employees (9k employees I believe) provides solid sales tax benefit to the city. The campus provides an extremely stable well paid work force that consume large quantities of goods and services from the local businesses. The surrounding towns have significantly lower paid jobs and weak availability in terms of job markets.

Not to mention the higher property values (read: higher property taxes) and pro education population together forge a public school district that neighboring city's families fight to try and get their kids into. The excellent schools again add to the desirability of housing and property values.

Subtract the campus (and this is completely speculative and probably not measurable) and you have a much smaller town, a fraction of the jobs and yes much lower property values. Without the campus this town could not support 10-15k people.

I think your premise is mistaken.