Why "The Great Wealth Transfer" Won't Work For Black Folks
a Black Wealth Data Center & Urban Institute feature
Nationwide, a sizable transfer of wealth from older generations to younger generations has begun, sometimes referred to as the Great Wealth Transfer. Starting in this decade, the transfer will enrich younger generations by providing them with new opportunities for spending and investment. In turn, this intergenerational transfer of wealth has the potential to reshape the overall economy.
That’s not going to happen for everyone.
Senior families, those who are part of the baby boomer generation and older, hold a significant amount of wealth - and they are poised to transfer much or all of their wealth to those who are part of Generation X or younger. However, an analysis by the Urban Institute in partnership with the Black Wealth Data Center of the 2022 Survey of Consumer Finances suggests that a small share of younger families expect to receive a sizable estate, including a house and any other assets. And among younger families that expect to receive a sizable estate, White families are more likely to expect to receive an estate with housing assets than Black families. Across housing tenure, which distinguishes between whether one rents or owns their primary residence, younger homeowner families are more likely, within both Black and White racial groups, to expect to receive an inheritance compared with younger renter families.
These inheritance patterns suggest that younger Black renter families may benefit the least from the coming transfer in wealth. The patterns also suggest that, on its own, the Great Wealth Transfer is unlikely to help close the Black-White homeownership rate gap. Instead, the ongoing wealth transfer may further cement, or even widen, the Black-White homeownership rate gap. These potential outcomes suggest that policymakers need to act to improve supply and demand policies to ensure access to homeownership for all families.
Although senior households are more likely to own their home than younger households, senior Black households are less likely to own their primary residence than white senior households (figure 1). This suggests that a smaller proportion of homes will be transferred from senior Black families to younger Black families, compared with that of senior White families to younger White families.
Among younger families, White households are more likely than Black households to be homeowners. These findings are in alignment with data from the Black Wealth Data Center, which reveals that nationally, the Black homeownership rate is 43 percent compared to 71.1 percent for White persons. Moreover, White younger families are also more likely to expect to receive a substantial inheritance compared to Black younger families.
Researchers draw the following conclusions …
There are large racial disparities in the wealth held by senior (age 58+) families, with White seniors holding far more assets ($70.3 trillion) than Black seniors ($0.9 trillion) when excluding home equity.
The Great Wealth Transfer is unlikely to reduce racial homeownership inequity and could increase the White younger homeownership rate by 7.7 percentage points versus only 3.4 percentage points for Black younger families, potentially widening the homeownership gap.
The median amount of the largest inheritance received by White renter families thus far is almost 14 times more than Black renter families. The median inheritance among Black renter families was only $1,754 compared to $24,508 for White renter families.
The implications for Black renter families are not surprising, given that across the United States, 44.8 percent of counties with a Black population percentage of 13 percent or more have rent-burdened households. These households, the majority of which fall into the top 25 percent of geographies in terms of rental burden, spend 30 percent or more of their income on rent, with the majority concentrated in the southern and eastern United States.
Among younger families that have received an inheritance, the median amount received by White homeowner families exceeded that of White renter families and all Black families. Conditional on receiving an inheritance, the median amount received by younger White renter families and younger Black homeowner families was similar, though the typical White renter received more. However, as shown in figure 9, the median inheritance among younger Black renter families was only $1,754.14
These inheritance results suggest that the Great Wealth Transfer will significantly boost the wealth of younger White families compared with younger Black families. A larger share of younger White homeowner families is expected to receive an inheritance in the future and a larger amount if they do receive one. Younger White renter households may receive a smaller inheritance compared with younger White homeowner families, even if they are similarly likely to receive an inheritance. Younger Black homeowner families may be less likely to receive an inheritance compared with White families and may receive a smaller amount as well, but these families are already homeowners.
However, younger Black renter families are least likely to receive an inheritance, significantly limiting a potential financial resource that could support a home purchase. And, if current trends continue, the actual inheritances they receive will significantly lag their expectations and may not be enough to help them purchase a home. In contrast, the greater likelihood of receiving an inheritance among younger White renter families, combined with the possibility of receiving a larger inheritance, suggests that a larger share of younger White renter families will have more resources to achieve homeownership, aided by the intergenerational wealth transfer.
The Great Wealth Transfer risks exacerbating racial homeownership and wealth inequities unless paired with policy efforts to create more equitable homeownership opportunities.