Schools and the housing market

The Fair Education Alliance, a laudable campaign which seeks to narrow educational inequality in the UK, recently released its ‘Report Card 2015’. Based on their five agreed ‘impact goals’, the report analyses differing levels of achievement between more and less advantaged students from primary school all the way through to university.

The report makes a number of observations and recommendations, some of which echo previous Policy Exchange work – including greater quality in early-years education and improved utilisation of existing Children’s Centres, more focus on numeracy in primary schools, and more effective use of higher education outreach.

However, one of the recommendations – that mortgage deposit support should be trialled as a way of encouraging teachers to commit long-term to underperforming areas – misdiagnoses the issue and the relationship between house prices and school quality. The FEA argument is that teachers need financial support to move to areas where they are needed, and particularly those areas of underperforming schools. The trouble is that the relationship between house prices and schools works precisely the other way around – it is house prices close to the highest performing schools which are unaffordable for teachers, and those close to low performing schools which are the most attainable.

To show this, below we present some analysis based upon the Department for Education’s recently released ‘Achieving Excellence Areas’data. This takes the average and lower quartile house prices for each district council area, and constructs a house-price to income ratio for each of them for three sets of teacher incomes. The councils are grouped into the six composite groups which the Department of Education uses to identify areas with the highest and lowest capacities to deliver high quality education (with group 6 being the worst performing schools and group 1 being the best), and the combined house-price to income ratio is then weighted by pupil numbers in each district. For the purpose of our analysis, we have made the assumption that teachers would not be buying alone, and that they have a spouse, partner, friend, colleague or other form of support which provides an income equal to the teacher’s own salary.

The table shows conclusively that the most affordable houses (as defined by the lowest ratio between house prices and income) are in district council areas in Group 6, defined by the DfE as the areas in need of most support to “Achieve Educational Excellence”. In fact, there is a strong linear relationship across all districts, for all levels of teacher salaries – the better the local area’s schools, the more unaffordable the house prices are.

The FEA is right to point to the problem that such areas are often unattractive for teachers to go and work in. But this is likely to be for a number of other reasons. Such areas are often isolated from major urban areas, a situation which makes them less attractive to younger teachers. They can often be far from a teacher’s existing friends and family, and they may not offer a wide range of highly skilled graduate job opportunities for teachers’ families (the “trailing spouse” problem). Geography aside, schools with more entrenched issues are less attractive for many teachers to work in because of the worries of increased workload, poorer behaviour, and a lack of future career opportunities (an issue which Teach First has researched before). But none of these are affordability based reasons. It therefore seems unnecessary to allocate government funds to support mortgages for schools in Group 6, where houses are already very much within the reach of most teachers.

Notes on Data Table:

1. New teacher salary taken from M1 of the main 2016 pay scale at £22,224. It also includes London weighting for eligible teachers, giving a salary of £27,819. This data does not include any ‘teaching and learning responsibilities’ payments (TLR). 
2. Average teacher salary taken as £37,400, as set out in the 2014 School Census datapublished by the Department for Education in 2015 (Table 8). This data does not include any TLR, but does include teachers on leadership pay scales including non-classroom roles.
3. Highest paid classroom salary taken as UPS3 from the 2016 pay-scale, and does not include any TLR.
4. Average house prices for each district council taken from ONS dataon quarterly rolling-year mean house prices for subnational geographies, published in 2016 with information up to Q3 2015.
5. Lowest quartile house prices for each district council price taken from ONS dataon quarterly rolling-year lower-quartile house prices for subnational geographies, published in 2016 with information up to Q3 2015.
6. When districts are grouped into areas, a weighted house price average is constructed. For example, Westminster has an average house price of £1.4m, while the same figure for Redbridge is nearer £375k. A simple average might suggest house prices of £887,500. However, because Westminster has only 28,000 pupils while Redbridge has 55,000, it makes sense that there are more teachers working in Redbridge. Balancing the averages accordingly yields an average house price faced by teachers of around £720,800. We carried out this process for all of the districts together in each group of six, and did the same for teacher pay where it was affected by London weighting. It is therefore true to say that for some districts within each group, houses will be more or less affordable than this simplified average.
7. Shading represents a broad estimate of affordability. Houses with a price-to-income ratio of less than 3.5 are shaded green and deemed the most affordable. Those between 3.5 and 4.5 are shaded amber. Those above 4.5 are shaded red and deemed most unaffordable. This approach is based on previous estimates used by banks and mortgage providers before more detailed affordability indices were recently introduced.

Data processing undertaken by Tom Galloway