Capital Ideas Blog

how the housing boom led to a bust in college attendance

By Dee Gill

From: Blog

The US housing boom that lasted from the late 1990s to the late 2000s may have helped boost the economy, but it led many young adults to choose jobs over going to college, meaning college attendance rates were lower than they would have been had house prices been more stable, according to research by Kerwin Kofi Charles of Chicago Harris, Chicago Booth’s Erik Hurst, and Northwestern’s Matthew J. Notowidigdo. Their findings suggest that the housing boom may have permanently diverted potential students away from higher education by temporarily improving pay prospects for workers without college degrees.

The housing boom profoundly lowered enrollment growth at two-year colleges between 1994 and 2014, Charles, Hurst, and Notowidigdo find, using data from the US Census Bureau’s Current Population Survey. Although attendance returned roughly to prehousing-boom levels by 2012, after housing prices crashed, the study finds ongoing declines in education attendance for people who came of college-going age during the boom. In contrast, the boom had little effect on enrollment or achievement at four-year colleges and universities.

The share of persons aged 18–29 who report having attended college has risen steadily since 1980, the researchers note. But the trend slowed noticeably in the 1990s, when a nationwide housing boom began, and stayed slow through its peak in 2006. College attainment among young men and women still hadn’t fully reverted to previous growth levels by 2013. The housing boom explains roughly 30 percent of the slowdown in college attainment, according to the study.

The researchers compared college attainment for young adults of college age in markets with particularly soaring housing values with that of college-aged people living in cooler housing markets. At the start of the housing boom, 18-year-olds (born in 1979) attended college at the lowest rates and were much more likely to be working by age 20, they find.

Kerwin Kofi Charles, Erik Hurst, and Matthew J. Notowidigdo, “Housing Booms and Busts, Labor Market Opportunities, and College Attendance,” Working paper, September 2015.


Latest Comments