Homeownership has the potential to build a family’s wealth for generations. But this isn’t true for everyone. Our recent research finds that senior homeowners of color—especially senior Black and Hispanic homeowners—are often at risk of creating tangled property titles that don’t accurately reflect who owns their home. This can result in heirs’ property, or property that is passed between generations of family members without formal legal proceedings. It is an unstable form of homeownership because owners often have limited rights over that property, which can limit transfers of property and wealth across generations.
Previous research has found that Black families and Hispanic families are disproportionately likely to own heirs’ properties. In our own work, we found that Black and Hispanic homeowners are less likely than white homeowners to have a will or estate plan and are more likely to have multiple descendants who would inherit an interest in the property, putting them at risk of creating heirs’ property among their children.
Breaking down financial and cultural barriers to estate planning would improve property transfers across generations, ultimately helping shrink racial and ethnic homeownership gaps and broader wealth gaps.
But our new results provide some nuance. We find that owner-occupied homes acquired through an inheritance or a gift are more likely than other homes to be in physically inadequate condition, which limits property values, even after controlling for occupants’ demographic characteristics, property features, and neighborhood characteristics. This suggests that simply improving the flow of properties across generations alone may not be enough to reduce racial and ethnic disparities in housing wealth.
This means that to effectively address heirs’ properties, policymakers should go beyond helping households fully take ownership of inherited property and should provide resources for the home to be safe and livable. Doing so will ensure that all households living in inherited homes can experience stability while optimizing the wealth transferred to subsequent generations.
Homeowners who inherit their houses (or receive them as a gift) are more likely than other households to live in physically inadequate conditions
Living in a poor-quality home can undermine residents’ wealth and health outcomes. A home is considered “inadequate” if it does not meet certain standards, including having hot and cold running water, plumbing facilities, electricity, and structural soundness.
Compared with renters, homeowners are significantly less likely to live in homes that are considered “inadequate.” But this is not true for homeowners who received their home as a gift or inheritance.
These results suggest that homeownership’s wealth benefits might not extend to homeowners living in inherited, or gifted, homes.
The disparity in home adequacy might be driven in part by the age of inherited homes. Owner-occupied inherited homes are more likely to be older, and older homes typically require more improvements to maintain livability.
Black homeowners are disproportionately likely to live in inherited homes, which may contribute to the racial inequities documented in home values and overall wealth.
Untangling property titles alone might not reduce racial gaps in home values and wealth
As policymakers and practitioners consider how to address heirs’ property, providing mechanisms and funding to untangle a property’s title should be a first step so that future generations can build wealth. Several states have already taken this first step and passed Uniform Partition of Heirs’ Property Act legislation to protect tenants in common and ensure each receives their fair share of the inheritance.
This alone is not enough to address racial wealth and homeownership gaps. The risk of exclusion from the traditional financial system is higher for heirs’ property owners because of the uncertainty associated with ownership that, in turn, limits access to many housing-related financial products and services. This can be detrimental for people who inherit poor-quality homes. Additionally, Black households have far less cash savings than white households to spend on their homes. Thus, policymakers should also consider providing financial assistance for improvements if the inherited properties are in disrepair.
In addition to ensuring access to existing renovation and rehabilitation assistance, expanding access for heirs’ property owners and developing new products that meet their needs is critical. Policymakers can provide this support by disbursing no-interest or low-interest financial assistance after the resolution of a tangled title to avoid confusion over the owner responsible for supervising the renovation activity. Policymakers could target such assistance to first-time homeowners and those with low incomes living in an inherited property.
Policymakers have an opportunity to ensure that recipients of these property inheritances enjoy the benefits of homeownership and the wealth it can bring. And given that Black homeowners are more likely to live in inherited homes, expanding financial inclusion could reduce racial wealth gaps.
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