The Coming K-12 Crunch
K-12 enrollment is falling rapidly. As cities grapple with school closures and property tax revolts, what does this mean for real estate?
Macro
The Coming K-12 Crunch
K-12 enrollment is falling rapidly. As cities grapple with school closures and property tax revolts, what does this mean for real estate?
8 min read
Near the end of Ellerbe Road in southern Caddo Parish, Louisiana, sits a school that's been abandoned for decades. The local climate, unforgiving to anything that isn’t regularly maintained, long ago opened the door to the vines, trees, and critters that now dominate the place.
It’s the former George Washington Carver High School, opened in 1957 as a school for Black students during segregation. When integration forced local officials to combine White and Black student bodies, Carver was deemed unnecessary and shuttered in 1973. I went to high school about 20 miles up the road, and the abandoned “Ellerbe Road School” always held a special mystique to the local kids.
Unfortunately, the US is on track for many more Ellerbe Road Schools. A decline in fertility that began in 2007 is now showing up in public K-12 enrollment, which has fallen to 49.6 million students from its 2019 peak of 50.8 million. But given the lag between fertility and enrollment, the worst is yet to come: school populations are projected to drop precipitously to 46.9 million by 2031, a 7.7% decline from the peak years. And it’ll only keep dropping from there.
This has put many cities, especially those where the losses have been most severe, in an awkward position. Closing schools is politically unpopular, but officials’ hands are increasingly forced by tough financial conditions compounded by a growing property tax revolt.
Today’s letter will explore the coming K-12 crunch, including:
- Where it’s hitting hardest, and the places that have been spared;
- Go-forward projections;
- How cities are dealing with the budgetary implications and political fallout;
- Why this matters to real estate, including convertibility of old schools and implications for multifamily unit mix.
Demographic Realities
As regular Thesis Driven readers know, I've been tracking the impact of demographic declines for some time. It's a problem the real estate industry finds easy to ignore, because the effects of falling fertility take decades to surface. A baby born today won't rent an apartment for at least twenty years, and even then, the total number of renters could keep climbing for another decade before the decline shows up.
But post-pandemic trends have shifted the nation’s demographic problems from a serious concern to a five-alarm fire. To start, fertility has continued to fall: it now sits at 1.56 children per woman, about 25% below the replacement rate. And immigration, long America's demographic hedge, has grown politically unpalatable and effectively ceased over the past two years.
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