In order to afford a down payment on a home in the increasingly inaccessible housing market, 38 percent of recent homebuyers under age 30 relied on a cash gift from a family member or an inheritance, according to a Redfin survey in Spring 2023. 

As a result, a large share of young homeowners can be labeled “nepo-homebuyers,” wrote Daryl Fairweather, chief economist of Redfin, in a Forbes column. “Meaning they received family money to purchase a home. This phenomenon contributes to intergenerational wealth inequality.” 

White households, on average, consistently inherit about five times more than Black families, according to surveys since 2001. These disparities of inheritances by race reflect the racial wealth gap, according to a Penn Wharton blog.

And the gap is wider now than in 2011 between Black homeownership rates and other races or ethnic groups, according to a new analysis by the National Association of Realtors.

Economists and housing advocates say the racial homeownership gap between the share of Black and white families that own homes is now 29 percent, compared to 26 percent in 2011.

There are about 9.2 million more homeowners today than in 2011, but Black Americans have seen the smallest share of that growth, up 0.4 percent in a decade.

Homeownership persists across generations, Fairweather wrote for Forbes.

Research from economists at the University of Chicago found that children born to homeowner parents are significantly more likely to be homeowners themselves. Seventy-nine percent of about 1,500 homeowners people who responded to a 2021 Redfin survey had a parent who owned their home, and 67 percent had a grandparent who owned a home.

Racist policies such as redlining created generational barriers to homebuying for Black families with long-lasting effects that persist today. Redlining is a discriminatory practice since the 1930s in which federal programs providing government-insured mortgages for homeowners avoided giving aid in neighborhoods where property values were likely to decrease — largely low-income areas where Black people lived.

Many young people buying homes today had grandparents who bought homes before the Fair Housing Act of 1968, which made it illegal to discriminate against homebuyers on the basis of race.

Fairweather said her parents bought their first home in the 1980s.

“Still, my Black father was rejected by white home sellers. It wasn’t until my white mother started touring homes solo that they had an offer accepted,” Fairweather wrote. “Without the advantage of having a white mother, I might never have had the benefits of homeowner parents, and I may not have become a homeowner myself.”

Fairweather is calling for policies to make homeownership more affordable for first-generation homebuyers, including downpayment assistance for first-time homebuyers who don’t have help from family, rental assistance to help families save for a downpayment and reformed zoning laws that allow for more starter homes to be built in areas of high economic opportunity.

“To undo the inequities of the past, we must prioritize these policies. Or else, homeownership may become a birthright instead of an attainable economic aspiration,” she wrote.

A Colorado lender is heeding the call.

The Dearfield Fund for Black Wealth provides up to $40,000 in down-payment assistance to first-time Black and African American homebuyers in the Denver area. The downpayment assistance is like a loan, but homeowners do not make monthly payments or pay interest. Instead, they repay the downpayment plus 5 percent of their home’s appreciation when they sell or refinance.

“We know (the racial wealth gap is) due, in part, to historic housing discrimination, particularly redlining and the ramifications that have resulted as a result of federal housing policy that prevented Black and African American families from amassing wealth and being able to transfer it to the next generation,” said Aisha T. Weeks, managing director of the Dearfield Fund.

“The system was never designed for us to be successful. Understanding how to navigate that world is so critically important to the successful building of wealth over time, so we’re lifting the veil.”