Public school enrollment and associated costs are top of mind for many community members and property owners when presented with housing development proposals.
During the 1990s, school enrollment was growing across Massachusetts due to the large number of children born to Boomer-headed families. Widespread subdivision development during this period accommodated many of these new families, and the resultant enrollment increases were attributed to the housing. Many growth policies and mindsets solidified during this period, often equating all growth with increased school enrollment and unrecovered municipal costs.
A variety of methods were developed to forecast the number of school-age children likely to occupy new housing or to estimate the ‘net fiscal impact’ of new housing. These calculations generally incorporated assumptions about anticipated tax revenue and the incremental cost of additional demand on municipal services, particularly public schools enrollment. Some methods are simple, others more complicated and town-specific. They all generally assume that the number of students living in existing homes is unchanging, so additional students living in new homes must necessarily result in enrollment increases from one year to the next.
This core assumption--that the number of families and schoolchildren is bound to continue growing—does not comport with demographic reality. Across Massachusetts, both the share of households and the number of families with children has been declining, and along with it the number of school children statewide. Since 2000, the number of children aged 5 -18 fell by 50,000, a decline of nearly 5%. This is driven by changing population size (there simply weren’t as many potential Gen X parents) as well as declining fertility rates, resulting in fewer and smaller families. In the 2004 – 2005 school year, there were 956,000 students in public schools in Massachusetts (including charter schools); that has declined to 887,000 students in the 2023 – 2024 school year, a drop of 6.3%.
Many districts in the Commonwealth are experiencing declining enrollment in their districts.1 As older children graduate from high school, there are fewer students in the classes behind them, and even fewer entering kindergarten. Homes that were recently occupied by families now house empty nesters. Even when new homes are built, new school-age residents may not be numerous enough to stem the decline in local school enrollment.
Some districts have seen notable enrollment increases over the past fifteen years, this has been concentrated in communities in the inner core of Greater Boston, excluding Boston. However, research has shown that new housing construction in Massachusetts is not correlated with increased enrollment in the local school district.2 Municipalities that added lots of new homes were not more likely to have experienced increased enrollment; and some of the districts with the fastest growth in enrollment had added very few new homes. This is because districts can grow rapidly if families move into existing homes that come onto the market.
It remains true that new development may house students who would not otherwise live in the district, or that seniors downsizing into a new development may free up homes for new families. But it is not true that these students necessarily result in a net fiscal impact, especially when enrollment is declining. The majority of state aid to public school districts is governed by Chapter 70 of Massachusetts General Laws and is based on an enrollment-based “foundation budget” that determines both state and local education spending. The intent of the policy is to ensure an equitable public education for all students. Districts are given a set amount per a student that is adjusted based on cost-assumptions for low-income students, English language learners, employee health insurance, and mental health services for students. These adjustments can lead to districts with similar numbers of students receiving different levels of funding from the state and different minimum local contributions. At its core the foundation budget is a function of enrollment and therefore districts with increased enrollment will often benefit from increased Chapter 70 state aid.
School districts with declining enrollment may benefit from the new property tax revenue generated by development. An analysis of the fiscal impacts of the development of new housing in Massachusetts from 2019 showed that, on net, most municipalities with increased housing production saw fiscal benefits, however, some communities, especially those where the schools were at or near capacity, saw modest increased costs that were not fully off-set by the increase in local revenues. At the same time, the state benefited fiscally from new development and there is potential for the state to allocate increases in state revenue to municipalities to help offset the impact of new development.3 More recent unpublished work by the Massachusetts Taxpayers Foundation compares communities that have maintained or lost population to those that have grown through new residential development and illustrates that communities that have experienced growth in population have also seen growth in home values, property tax revenue, and non-property tax revenues sources. In addition, the work illustrates that growing enrollment is associated with increased state aid for public schools.4
Attracting new families with children is important to help ensure that local schools continue to operate and offer consistent levels of educational services. Historically, enrollment declines in districts have led to reductions in offerings to students and families in areas such as foreign language, music, and the arts.
School budgets across the Commonwealth are facing challenges that are unrelated to enrollment. For example, there may be budget gaps due to increases in personnel costs, driven by inflation and rising health care costs which have exceeded growth in local revenue.5 In addition, pandemic-era federal assistance that buoyed local school budgets in recent years and allowed schools to offer necessary support services during an incredibly challenging time, have disappeared, even though the service needs of many students remain high.
New homes have the potential to increase the revenue available to fund schools and other municipal services. Schools in Massachusetts are funded primarily through local property tax levy. Proposition 21/2 puts a limit on how much a town or city can raise through property taxes (levy) and how much it can increase local property tax levy every year. No more than 2.5 percent of the value of all taxable real and personal property in a community can be collected annually, this is the levy ceiling. New growth increases the levy ceiling by increasing the total value of real property in a community. The levy limit is based on the prior year’s limit plus allowable increases. One allowable increase is a function of new growth. New development in a community increases not only the levy ceiling, but also the levy limit for the year. Thus, new homes increase potential property tax levy for communities, thus giving communities increased budget flexibility. Another consideration is the fact that as communities age more of the tax burden will be carried by senior households, who are often granted tax relief, shifting more the tax burden onto non-senior households. New housing developments for all ages are helpful in expanding the tax base.