Many families buying these homes have several children. Property tax scales only loosely with family size, but tuition is typically linear.

Perhaps. Seems like the interest on an 800K loan would be about 30K in the first year, which is less then private school tuition around here. But you can't really compare the full amount as you've got to live somewhere, and you get a tax deduction as well.

And once you have 2 kids...