Why the Great Wealth Transfer isn't all that great
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The gap in homeownership rates between white and Black Americans could widen further in the coming decades, finds a new analysis from the Urban Institute.
Why it matters: The U.S. is at the starting gates of The Great Wealth Transfer — in which the boomer generation will pass down an estimated $84 trillion between now and 2045 — but only a small share of families will get a sizable inheritance.
Catch up fast: The current 30-point gap between the homeownership rates for Black and white Americans is wider now than it was in 1960, before the passage of civil rights laws prohibiting the housing discrimination that helped create that gulf.
- Even without blatant redlining, the disparity sustained itself as wealth changed hands intergenerationally. Parents who built their wealth by owning homes could pass down houses or money.
State of play: Older white Americans have much more wealth to pass down to the next generation — much of it tied up in their homes. Nearly 83% of white Americans aged 58 and up are homeowners compared with about 59% of Black people 58+, per data cited by the Urban Institute.
- Homeownership for those under 58 is lower: 40% for Black households compared to 64.6% for white households.
How they did it: Using data from a Federal Reserve survey, the researchers look at how much wealth younger families (those headed by someone under age 58) expect to inherit in the coming years.
- They looked at young renter households specifically to estimate how many of these folks could make the leap into homeownership after they receive an inheritance.
- The researchers estimated the number of renter households expecting an inheritance substantial enough to enable them to afford a down payment on a home.
What they found: The Great Wealth Transfer would increase homeownership rates for both Black and white households — but the increase for young white households is an estimated 7.7 percentage points compared to 3.4 percentage points for Black households.
- The paper projects that the young white homeownership would rise to 72.2% and for young Black families it would increase to 43.4%
By the numbers: Far fewer Black renters under 58 expect to receive an inheritance. And, the expected size of these inheritances is lower. The median Black renter who expects an inheritance estimates they'll see $48,000 compared to $200,000 for white renters.
The intrigue: The research could be underestimating the effects of wealth transfers on the homeownership gap because the analysis leaves out all the money older Americans — particularly the wealthy — pass on during their lifetime.
The bottom line: The Great Wealth Transfer isn't so great after all.
