Exclusionary Zoning and Exclusionary Schools: Two Sides of Same Coin?

A new paper by Jacob Krimmel at the University of Pennsylvania explores a novel connection between residential zoning and the broader landscape of segregation in the United States: school funding formulae.

Key takeaways:

  1. When municipal governments in California lost control over school funding in the early 1970s, they resorted to exclusionary zoning to raise home prices and maintain segregated communities.
  2. Their strategy worked: communities that implemented housing supply restrictions remained whiter and wealthier.
  3. In the 20 years following school funding equalization, wealthier local governments continued to implement housing supply restrictions, even further exacerbating inequality. 

The 1971 decision by the California Supreme Court in Serrano v. Priest serves as an instrumental variable in Krimmel’s research, offering a look into how public school financing affects incentives for wealthy white homeowners to enforce segregation. In its ruling, the Court found “that the quality of public education may not be a function of district property wealth, equating education quality to per-pupil revenue”— and the resulting equalization of public school funding provoked a strong backlash. 

Prior to Serrano, school districts were funded by local property taxes, meaning that communities with higher property values enjoyed better public schools. This enforced a vicious feedback loop in which communities with lower property values received worse educational outcomes, and their residents were more likely to be trapped in poverty. 

After Serrano, the legislature was forced to design a school funding equalization policy that was implemented in the 1973-74 school year. In part, “Revenues in property-poor, low-spending districts would increase over time while funding for property-rich, high-spending districts would be constrained by the state-imposed revenue limits.” The new system also prevented school districts from setting their own property tax rates. Poorer communities would now have a chance to see as much funding per pupil as richer ones.

Using Census data and administrative data on school funding, Krimmel finds strong evidence that exclusionary zoning emerged as a response to the loss of local fiscal autonomy. When wealthier districts could no longer raise or spend disproportionately more revenue than poorer ones, they saw “a 52% increase in likelihood of housing supply restriction in the post period among revenue-constrained school districts.” 

But the period directly after Serrano saw an increase in land use regulations in general, suggesting that “loss of fiscal autonomy in general causes localities to restrict land use.” Housing prices increased 6.8% more in “constrained” districts in the decade following Serrano, a divergence that widened to 11.2% by 1990. This data indicates a strong causal relationship: communities that lost control over school funding were increasingly likely to use zoning as a tool for maintaining exclusion.