This paper shows that the condition of school facilities has an important impact on student performance and teacher effectiveness. In particular, research demonstrates that comfortable classroom temperature and noise level are very important to efficient student performance. The age of school buildings is a useful proxy in this regard, since older facilities often have problems with thermal environment and noise level. A number of studies have measured overall building condition and its connection to student performance; these have consistently shown that students attending schools in better condition outperform students in substandard buildings by several percentage points. School building conditions also influence teacher effectiveness. Teachers report that physical improvements greatly enhance the teaching environment. Finally, school overcrowding also makes it harder for students to learn; this effect is greater for students from families of low socioeconomic status. Analyses show that class size reduction leads to higher student achievement.