Homeownership’s Promise and Pitfalls in Transferring Wealth Across Generations

Homeownership has long been a cornerstone of wealth-building in the United States. A home can offer stability and security, but it can also provide the financial opportunity to create assets that can be passed on to future generations. 

In the coming decades, trillions of dollars in assets, primarily held by the baby boomer generation, will be passed to their children and grandchildren. This “Great Wealth Transfer” will have profound implications for upward mobility for generations. 

Unfortunately, our latest research reveals that without a bold new policy vision, the impending Great Wealth Transfer will exacerbate existing racial and economic inequality because of our country’s long history of unequal access to housing and homeownership. Left unaddressed, this inequity threatens not only marginalized communities but also the stability of the broader economy as our population continues to diversify. 

We know that systemic and historic racism and discrimination have created barriers to homeownership for people in the Black and Hispanic communities. But despite this, most folks want the American Dream and strive to build intergenerational wealth through homeownership. 

Our work found that homeowners are indeed 1.3 times more likely than renters to anticipate leaving an inheritance, even when accounting for financial wealth, student debt, and income. Notably, Black and Hispanic households, for whom housing makes up a large portion of their total wealth, felt even stronger about the potential of leaving money behind because of owning a home.

This reinforces the idea that increasing access to homeownership is critical for reducing wealth inequities. One way to reduce wealth inequities is to champion programs like first-generation down payment assistance, which has proven to support future expectations of inheritance for people historically left out of the wealth-building cycle. 

Today, the reality is that race — and the racial wealth gap — still play a large role in who can access homeownership. People with generational wealth built during and as a result of this history of discrimination and exclusion, who are disproportionately white, have a leg up in the homebuying process.  

Hispanic and Black homeowners who received an inheritance of at least $5,000 were 7 times and 5.4 times, respectively, as likely to be homeowners as those who didn’t. However, Black and Hispanic households are less likely to receive familial assistance at all. Opening up homeownership access to Black and Hispanic buyers by implementing policies like expanding access to credit can create a virtuous cycle. For instance, Black and Hispanic homeowners will be able to transfer wealth and inspire the next generation to buy a home with an inheritance. 

Property value and home quality also play a significant role in wealth transfer. A wide body of work finds that white homeowners generally have more opportunities to build home equity. They tend to own higher-valued homes and owe less mortgage debt than their Black and Hispanic counterparts. White households are also more likely to buy their first home at a younger age, which better positions them to build home equity over the course of their lifetime. Ultimately, this cycle of who accesses, builds, and transfers wealth compounds across generations, lifting up some while leaving others further behind. 

It’s also important to note that given the massive impending transfer of wealth from predominantly white households, homeownership cannot be our only policy tool to create opportunities for all households to truly build wealth. 

Creating new pathways to wealth, like matched savings accounts and improving opportunities for entrepreneurship in communities of color, are other tools to use. The research also shows that it’s time to give real attention to reparative actions. Moreover, using the tax system to increase equity and prevent the same families from hoarding wealth and opportunity can curb intergenerationally compounding inequality and provide funding for innovative wealth-building initiatives. 

Policymakers at all levels need to take note. While past housing policies contributed to widening racial wealth gaps, today’s legislature has an opportunity to stop a negative cycle and bolster wealth-building activities for historically marginalized groups. Through interventions we’ve outlined in our research like, zoning changes, expanding flexible underwriting through the use of alternative data, and offering down-payment assistance, households of color can sustain and benefit fully from homeownership. 

This not only helps homeowners of color transfer hard-won housing wealth across generations, but it will also help to grow our national economy. Racial wealth disparities are complex and persistent and can hinder generations from thriving. To take meaningful steps towards reducing inequalities and creating more opportunities for intergenerational wealth transfers, we must widen our toolbox and incorporate a multipronged approach that will examine the history of wealth and the mechanisms used to segment it.