October 25 2008
While politicians focus on the minority of Americans who face foreclosure or are behind in their mortgage payments, it isn't just this small minority who feel financially vulnerable and insecure about their financial future. A poll conducted by Gallup in January 2008 found that more than a third of Americans were worried about money "yesterday."1 In June 2006 Public Opinion Strategies found that nearly half of Americans worry about the possibility of not having enough money to pay bills.2 Even then, before the subprime mortgage crisis made headlines, more than eight in ten Americans described the issue of household debt (defined as debt on credit cards, car loans, home mortgages, and payday loans) as a problem for the country.
Policymaker and media coverage of the increase in foreclosures has focused on subprime mortgages and lending practices which have allowed borrowers with poor credit ratings to obtain high interest rate loans leaving them at risk of default. In addition to these lending practices, policymakers should consider other factors that have contributed to rising home prices and increased financial vulnerability among homeowners.
For example, few policymakers consider how education policy contributes to the family budget crunch. Yet parents' ability to choose where their children attend school plays a significant role in a family's financial fortunes.
This report examines the role that school assignment policies play in family finances, in particular how families pay a premium to buy housing in districts with higher quality public schools. In short, since where a child attends school is often a function of where he lives, families often pursue expensive homes in locations that qualify their children for higher quality public schools. These high housing costs strain finances, and encourage both parents to earn income to help pay these bills. With both spouses working, families are more vulnerable to financial hardship since they build their family budgets with the expectation of having two incomes. They also have to find alternative arrangements for their children's care. This has consequences, not only for these individual families but also for communities.
School choice programs, that give parents an alternative to moving when seeking new educational opportunities for their children, are one way policymakers can ease financial pressures on families. Such programs will be of benefit to individual families and their communities.