The Connection Between Renting and Education with Tom Mayock

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Travis

For many families, the location of their home has a direct connection to their children's education. Where you live often dictates the schools you can go to, and the quality of the schools can highly influence student achievement. That conversation alone is extremely interesting, but when you add in the dynamics of real estate, specifically what types of houses are allowed to be built in certain school districts, it becomes even more fascinating. So when I heard that Virginia Tech's Tom Mayock did research to study the intersection of single-family rentals and academic performance, I simply had to know more. And Tom was kind enough to join the podcast to answer all the questions that I had.

Tom is the Michael G. Miller, Professor of Real Estate in the Blackwood Department of Real Estate at Virginia Tech. His research interests include real estate, urban economics, public economics, and credit risk. So Tom helped me understand what single family rentals actually mean and kind of what the dynamics look like for those in neighborhoods across America. We talked about how he got interested in this specific research, studying how children who move into single-family rentals then achieve academically, and how he went about collecting the data and then assessing it over a long period of time in North Carolina. He of course shared the results that they found And he also shared some of the implications he believes that this research may have on informing public policy. So how much is education influenced by location? Well, you'll have to listen to the episode to find out. I'm Travis Williams and this is Virginia Tech's Curious Conversations.

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Travis

Travis Williams (01:32)

Well, I want to talk to you about this interesting work that you've done at the intersection of single-family rentals and education. I was just thinking of how to start that conversation And maybe a good place to start might just simply be to help us understand what are we talking about with single-family rentals and maybe what does it what do those look like right now across the country they are there more of them or they're fewer of them what's that landscape like

Tom

So I guess the background on this project, I've got a couple of other projects on that are related to you know, the education work was really coming out of financial crisis. There was a large uptick in the availability of single family rentals. A lot of it is coming directly out of the foreclosure crisis. So people losing their homes to foreclosure and there were not willing to enable buyers to purchase a lot of these. And at that point in time, what we saw was a lot of institutional investors start to come in and buy the single family rentals. And This over time, they ran out of these kind of distressed properties that turn into these SFRs as we refer to them. And this business model morphed into them buying non-distressed SFRs. And in some cases, you know, what we see now are built to rent communities where you have might have an entire subdivision that was built not to sell, but to rent out.

 

So that's kind of the picture of like the big landscape change, I guess, you know, lot of has received a lot of press recently, but I should still point out, even though the institutional guys get so much coverage in the press, they're by any reasonable measure, they're still a very small fraction of the rental stock. So this is long been kind of the realm the mom and pop investor that might have three houses that they rent out. Certainly here in Blacksburg, we see a lot of that. I meet a lot of landlords.

Travis

Yeah, well that's that's fascinating and I guess when we're talking about Single-family rentals are I guess we're talking about standalone houses. Are we talking about houses and Duplexes or townhouses? What are those?

Tom

Yeah, typically we would be thinking of a detached single-family rental. There's, in some places this may look more like townhouses, like it kind of depends on the market, but you know, especially with the types of units that we're looking at in our research that are going to be targeted by families with children, those tend to be detached homes.

Travis

Well, the most recent research that you're doing, what were you curious about? What led you down this road of academic achievement and its intersection with these rentals?

Tom

Well, really many years ago, I started working on related projects in Florida, kind of at the peak of the financial crisis. So yeah, I this was when the foreclosure rate was at historic highs. Foreclosures were really the big issue. But we had heard anecdotes about where...really these single-family rentals becoming available in neighborhoods where they didn't exist before. So what I've looked at previously in that line of work was really where are these houses located in terms of the quality of the schools, right? Because some of the investor documents and anecdotes that we had heard was that a lot of investors were interested in getting more rentals in these school zones for high performing schools because they knew that there was going to be a lot of demand from families with kids to move into detached houses owned for a good school. So the work that we did back then, we were able to say something about like on net owl changes in the housing stock effectively and changes in the SFR stock influenced the economic composition of schools and racial composition of schools just using aggregate measures. But what was a little unsatisfying about that was that we really could not see because of our data, like the types of exactly what student was moving in, like who's moving into this better school? Were they a higher income renter or a lower income renter? Because that has interesting policy implications there. And really where this work takes off the recent publication with Kelly is whether there was a benefit that the children received in terms of improved academic performance. Because you really, you we would hope to see is that if parents move to a neighborhood zone for better schools and their kids move to these better schools, we hope those kids also do better in the classroom, right? Like typically, like that's kind of the follow on expectation there But if you look at the literature on like move-in and school performance, it's not necessarily a foregone conclusion that just throwing you in a classroom with higher performing peers is going to make you perform better. You've got the disruption of move-in, you've lost all your friends from the old school, and you've got a new curriculum to deal with. Like there's all sorts of issues that on net may not result in you seeing an increase in test scores. I guess it's a long answer to your question, but it was kind of an idea that got planted in my head probably circa 2009 or 2010. But being able to get data that linked really student level moves back to housing data, back to housing stock data, back to education data, that took a long time to be able to put together.

Travis

Yeah, it sounds like that if I was to kind of paraphrase that, that you wanted to figure out if parents move into areas that are supposed to have better schools, if it actually was better for the students, what they were selling, is it actually true? Well, how did you go about figuring that out?

Tom

You know. So the first step of the process, and it's always the least glamorous, but takes the most time for all this. In this case, I think it was close to two years, was trying to figure out how to link housing data back to student records. And after we got all the permissions and worked through all the merge issues with that, really what we were able to do is put together this interesting data set that linked administrative data on students that Believe now all states record this kind of stuff, but if in the public school, you know, you take your standardized math test, standardized English test, typically between third and eighth grade and other stuff in high school. We were able to link that kind of data back to administrative records on the type of house that you lived in so we could identify that you moved into, for instance, a single family rental. And then we were also able to use that same housing data to put together pictures of what the single-family brown stock looked in the location that you moved to. that part took a bit. But after that, I was really applying a lot of panel data econometric techniques to try to tease out whether moving to that better school actually improved a child's performance.

Travis

Yeah, so you mostly looked at third through eighth graders and I believe were these in the state of North Carolina?

Tom

Yes, this North Carolina, we worked specifically with the Education Data Agency there to link their records up to the administrative housing records. So we only had data for students that were in North Carolina, but for us, one of the reasons that wasn't necessarily a huge limitation was that places like Charlotte, Raleigh, to lesser extent once in Winston Salem. Like they've seen a lot of action in the single family rental market over the course of the last 10 or 15 years. So in a way it was actually a very good place to focus even if the original focus was dictated by data availability.

Travis

did you look across the entire state or is it just those localities?

Tom

⁓ So

 

I don't know how deep into the weeds you want to get on the data merging stuff, but so the education data is fine for the entire state, but the quality of the administrative housing records, especially in more rural places, they're not updating this annually. Some of this is coming from how that data is collected and standardized and so on. If I were to describe it succinctly, this tilted towards urban and suburban North Carolina. The numbers are in the paper. I believe we covered more than those. The counties we focused on covered more than half the population. I think it was in 60ish percent, but certainly do not quote me on that. yeah, it's a suburban story typically with single family rentals. I've talked to other folks about this work and obviously this is not a New York City story. But we see this, especially in the Sunbelt, it's not something that was unique to Charlotte. We see this in Las Vegas, we see this in Atlanta, we see this in other parts of North Carolina and South Carolina and so on. So that was North Carolina suburban areas were really the lens we were kind of using to look at what we think is going on in that broader part of the market.

Travis

Yeah, it sounds really interesting. feel like North Carolina, just my impression of it has been that it has a lot of really interesting areas anyway that feel like a lot of other places that I've been to and live in. So that makes a lot of sense to me. I'm burying, I guess, the lead though. And that is, what would you find from this research?

Tom

So, yeah, I guess it was primarily good news. I should emphasize, one of the big reasons that we wanted to use this data was that it follows kids over time. Because if you only work with a picture of like the children that moved in, for instance, you can't account for the fact that maybe it was the higher performers that were making these moves anyway. So what we were working with was a panel of students so I could see the students' test scores before they moved and the test scores after they moved. So, and for statistical reasons, that is very helpful for trying to tease out whether we were really just seeing, you know, a certain type of student moving into these units or if that move was actually resulting in the test score change. So, with those panel data methods, we did find that, you know, there were significant gains in test scores for All the renters that moved and then a reasonable question is whether, know, were these just high income renters that realize these gains or everybody? There's measures in the school data that you can use. It's basically qualification for the federal free and reduced lunch program to identify like lower income students based on that flag. And we saw, you know, significant gains for those students as well. So. It appeared to be not just a high-income renter story, which is something we thought might be driving the results initially, but yeah, it was almost the exact same story for the lower-income runners.

Travis

Yeah, that sounds, I mean, that does sound like good news and it looking at scores across a long span like that makes a lot of sense to me. I am a former teacher. So looking at growth versus just in result scores is always, you know, where you start from, it makes a big difference where you end, where you start from. I guess I should say, so that makes a lot of sense to me. Well, with, with looking at these, how do you, how do you hope that maybe leaders that talk about housing policy, decide housing policy. How do you hope that they're able to use this research that you're doing?

Tom

Well, mean, a lot of policy in the US tends to really, really push up ownership, but for a decent subset of the population, they either cannot financially or in some cases simply do not want to own a house. providing options for those Americans to choose where their children go to school and the neighborhoods that they live in. I think that's something that is important and has been overlooked. I there's a lot of pushback recently on specifically the institutional investors that are involved in the SFR market and the built to rent market and so on. And they're constantly being painted as the bad guys, but it's not...describe this as renters are people too. It's not a controversial statement there. And a lot of these renters have kids. And if you look in, we talked about this a little bit in the paper, but you know, in the American Community Survey, if you look at like the yield of children per housing unit, like it is just off the charts for single family rentals relative to any other type of housing. So families with kids that do not or cannot afford a home, like this is a type of housing unit that they target very clearly in the data. So allowing or encouraging an expansion of the SFR stock in all types of neighborhoods, right? Including those zoned for good schools. I view that as positive and something that we certainly should not be trying to...to discourage.

Travis

Yeah, it sounds like maybe just being open to providing access to all kinds of people of all different situations might be something to consider.

Tom

Yeah, and I don't think I mentioned this before, but a lot of the emphasis from that earlier paper on Florida, the early anecdotes that we were hearing was that, you know, we're seeing rentals in these attendance boundaries where there was literally no rental stock before. And it is very interesting when you look at, know, especially in the maps that we've worked with, both in North Carolina and Florida, but...I mean, you can find elementary schools where it's literally just single family housing that is zoned for those elementary schools. So unless there happened to be a rental in that school boundary, there's no way for a renter to actually have their kids attend that school. So ownership becomes this sort of de facto cost of entry to using a particular public school. So really, regardless of whether it's institutional investors or mom and pop folks that are running these homes out, making an option available for those schools where that wasn't something feasible before, I think is a big deal.

Travis

Yeah, it sounds like that, and I know this isn't necessarily where your research was, but it sounds like that might also ensure that those schools have a steady flow of children. Because I don't know how often people move out of their homes, but I feel like you kind of limit, you only have so many kids, and then once they kind of grow up and go through, I don't know that you immediately want to exit a lot of times.

Tom

Yes, and I mean, that's been completely unrelated to the stuff that we're doing here. But I mean, you're seeing a lot of folks now aging in place. And that's a big story on the housing side. But yeah, one of the implications of that is that that house that maybe 20 years ago had two kids in it, or two and a half kids, whatever the statistical number would have been. Now it's zero. yeah, they're...I haven't looked at this personally, but yeah, you would expect that to have an impact on enrollment for sure.

Travis

Yeah, well, similarly, I'm curious as a parent and maybe some other parents will listen to this, what do you think maybe a good takeaway might be for parents when they're considering maybe where they should live and where their kid can go to school?

Tom

I mean, I don't think any great insights here on, the parents don't have already. I think we know there's a ton of research, parents tend to take school quality very seriously when they make the move decision. Really, we're just kind of contributing, I think, to that literature in the sense that, you know, if parents were using the...Measures like for us good schools are defined as those where you've got high performance on a math test and these are the types of things that like feed into all the Stuff you'll see splashed on Zillow and realtor.com or with like the great schools ratings and all this is one of the components that go in into that so if you're Moving to a place because you want to give your kid access to a higher performing classroom We're finding that that results in improvement

Travis

Yeah, and maybe that negates some of the kind of other, maybe negative impressions that you might have from moving a kid. I know you mentioned before, you get a move from your friend's group and that type of stuff. So maybe it negates a little bit of that.

Tom

Yeah, yeah, absolutely. I mean, not all moves are equal, right? So in this, and that was honestly one of the most fascinating parts of the study, because you could see it, we are not looking just at people making these improving moves, right? We've, in a statistical sense, we need a comparison group. So the comparison group, and there's a lot of this in the data, like you're just making these lateral moves between, in a lot of cases, low performing schools for renters, for instance, in Charlotte. you would see, you asked earlier about how frequently people move. Well, I don't think it's surprising. Renters move a lot more than owners. Like you've got transaction costs and all kinds of other reasons why owners aren't going to want to think of it move all the time. there are things that sort of expedite moving for renters, like lease changes owners selling homes and things like that. But a lot of the moves that we saw were really just kind of bouncing back and forth between lower performing schools. And when that happened, there's no gain. There's no test score gain for that. So they're, in a sense, the control group that we're referencing. We compare the moves to the better schools to see how that impacts the child's performance.

Travis

Well, what are you curious about next? What other things in this area would you like to figure out?

Tom

There's all kinds of stuff. I mean we really would like to be able to update the data that's proven to be challenging But you something that we are currently working on now is trying to figure out a little bit about how how much it really costs to get access to these better schools Unlike home sale data, which is widely available Like you can go on your local assessor site and just download this stuff half the time. It is very difficult to get rent data because it's just kind of scattered all about. So we're working on some things now to try to pull in rent data and associate that with the same school quality measures we're looking at. Because again, our paper, we're able to do some back of the envelope work where we're kind of triangulating between different data sets, put together. I'll call it a guesstimate of what these particular units might rent for. And based on those guesstimates, even within the same neighborhood, the single-family rentals are probably renting for a lot less than it would cost to buy a home and finance it through a mortgage. But we would like a more satisfying answer. I think to that question and some of the stuff that we're looking at now, we should be able to just say, here's the cost of admission monthly if you're an owner buying into this school zone versus here's what it costs to rent one of these SFRs. And then depending on what we find there that could have implications for how expanding the availability of these SFRs affects the economic composition of the neighborhood and things like that.

Travis

Yeah, when you, I was gonna have that be the last question, but I'm really, I'm really curious when you got into studying and real estate, did you think that you would be also be studying so much related to education?

Tom

So in terms of my background, so I'm an economist by trade or training, however you want to define that. So you get to a point in your PhD program where you have to figure out, am I going to do with myself after I get through the comprehensive exams? And this is Florida circa 2006. So I'm at Florida State there and housing is just all anybody can can talk about, but at the same time, I'm working with a lot of people that had previously done work in just urban economics and in general, a field that touches education as well as local public finance and labor issues and all kinds of other things. in terms of my background, I definitely didn't view this as much of a branch out from things that I've been really doing for. guess close to 20 years now.

Travis

Well, it's really cool and it's really insightful and I'm sure it will be for a lot of people. So I appreciate the work that you're doing and I hope that you're able to keep going and answer some more of these

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Travis

Thanks to Tom for helping us better understand the intersection of single-family rentals and academic performance. If you or someone you know would make for a great curious conversation, email me at traviskw at vt.edu. I'm Travis Williams and this has been Virginia Tech's Curious Conversations.

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Travis