Post-crisis developments in young adults’ housing wealth

How has housing wealth inequality changed for young-adult households in the post-financial crisis period, and what is driving such change? We chart a path for subsequent studies by analysing the previously unexamined post-crisis housing wealth profile of young adults via different angles and using multiple inequality measures. Using household micro-data for 11 European countries ( Household Finance and Consumption Survey, 2010–2017) and the United States ( Survey of Consumer Finances, 2010–2016), we find that the accumulation of housing assets for 22–44 year olds is unevenly concentrated among high-income homeowners, over and above what would be expected given the well-known decline in homeownership. We describe and assess several potential drivers for these wealth profile changes, finding that the current explanations offered in the literature do not adequately account for the unequal wealth profile of young people. We conclude that a mix of dynamics, including housing market volatility, housing market configurations leading to uneven capital gains and losses, and the increased social selectivity of homeownership intersect to shape the ways that young adults navigate the housing market in post-crisis times.

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The uneven distribution of capital gains in times of socio-spatial inequality: Evidence from Swedish housing pathways between 1995 and 2010

Urban Studies ◽

10.1177/0042098017730520 ◽

2017 ◽

Vol 55 (12) ◽

pp. 2721-2742 ◽

Cited By ~ 7

Author(s):

Barend Wind ◽

Lina Hedman

Keyword(s):

Housing Market ◽

House Price ◽

Spatial Inequality ◽

Capital Gains ◽

Uneven Distribution ◽

Market Dynamics ◽

Housing Wealth ◽

Investment Capital ◽

Gains And Losses ◽

Housing Pathways

Housing wealth is the largest component of wealth for a majority of Swedish households. Whereas investments in housing are merely defined by income, the returns on this investment (capital gains) are dependent on local housing market dynamics. Since the 1990s, local housing market dynamics in Swedish cities have been altered by the upswing in levels of socio-spatial inequality. The simultaneous up- and downgrading of neighbourhoods is reflected in house price developments and exacerbates the magnitude of capital gains and losses. This article proposes that the selective redirection of housing pathways that causes an upswing in socio-spatial inequality translates into an uneven distribution of capital gains as well. A sequence analysis of the housing pathways of one Swedish birth cohort (1970–1975), based on population-wide register data (GeoSweden), is used to explain differences in capital gains between different social groups in the period 1995–2010. The results indicate higher capital gains for individuals with higher incomes and lower gains for migrants. When socio-spatial inequality increases, the more resourceful groups can use their economic and cultural capital to navigate through the housing market in a more profitable way.

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Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Tax Data *

The Quarterly Journal of Economics ◽

10.1093/qje/qjw004 ◽

2016 ◽

Vol 131 (2) ◽

pp. 519-578 ◽

Cited By ~ 347

Author(s):

Emmanuel Saez ◽

Gabriel Zucman

Keyword(s):

United States ◽

Income Tax ◽

Wealth Inequality ◽

The United States ◽

Balance Sheets ◽

Distribution Of Wealth ◽

Consumer Finances ◽

Wealth Concentration ◽

Top Incomes ◽

Tax Returns

Abstract This paper combines income tax returns with macroeconomic household balance sheets to estimate the distribution of wealth in the United States since 1913. We estimate wealth by capitalizing the incomes reported by individual taxpayers, accounting for assets that do not generate taxable income. We successfully test our capitalization method in three micro datasets where we can observe both income and wealth: the Survey of Consumer Finance, linked estate and income tax returns, and foundations’ tax records. We find that wealth concentration was high in the beginning of the twentieth century, fell from 1929 to 1978, and has continuously increased since then. The top 0.1% wealth share has risen from 7% in 1978 to 22% in 2012, a level almost as high as in 1929. Top wealth-holders are younger today than in the 1960s and earn a higher fraction of the economy’s labor income. The bottom 90% wealth share first increased up to the mid-1980s and then steadily declined. The increase in wealth inequality in recent decades is due to the upsurge of top incomes combined with an increase in saving rate inequality. We explain how our findings can be reconciled with Survey of Consumer Finances and estate tax data.

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Universal Baby Bonds Reduce Black-White Wealth Inequality, Progressively Raise Net Worth of All Young Adults

The Review of Black Political Economy ◽

10.1177/0034644619885321 ◽

2019 ◽

Vol 47 (1) ◽

pp. 3-19 ◽

Cited By ~ 1

Author(s):

Naomi Zewde

Keyword(s):

Young Adults ◽

Panel Study ◽

Wealth Inequality ◽

The United States ◽

Household Wealth ◽

Racial Inequalities ◽

Net Worth ◽

Distribution Of Wealth ◽

Wealth Inequalities ◽

Racial Lines

The distribution of wealth has grown increasingly unequal, especially along racial lines. Lawmakers and researchers propose to address the issue with universal “baby bonds,” paid to every newborn and preserved until young adulthood. Bond values are tied inversely to wealth up to a $50,000 maximum investment. This study uses longitudinal data from the Panel Study of Income Dynamics on the assets of young adults to simulate contemporary racial inequalities under a counterfactual policy environment in which the United States had administered baby bonds when the current cohort of young adults were newborns. Initial bond values are defined categorically by quintiles of household wealth observed in 1989 and 1994, smoothed across the inverse hyperbolic sine of household wealth, and then assumed to grow at 2% per year through 2015. Without baby bonds, young White Americans hold approximately 16 times the wealth of young Black Americans at the median ($46,000 vs. $2,900). Baby bonds reduce the disparity to a factor of 1.4 ($79,143 vs. $57,845), in the absence of intervening behavioral responses to the policy. The share held by the top decile decreases from 72% to 65%, marginally approaching the more egalitarian societies. Baby bonds considerably narrow wealth inequalities while simultaneously improving the net asset position of young adults and alleviating asset concentration.

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Deconstructing Income and Income Inequality Measures: A Crosswalk from Market Income to Comprehensive Income

The American Economic Review ◽

10.1257/aer.103.3.173 ◽

2013 ◽

Vol 103 (3) ◽

pp. 173-177 ◽

Cited By ~ 31

Author(s):

Philip Armour ◽

Richard V Burkhauser ◽

Jeff Larrimore

Keyword(s):

United States ◽

Income Inequality ◽

Household Income ◽

The United States ◽

Capital Gains ◽

Income Growth ◽

Data Set ◽

Inequality Measures ◽

Market Income ◽

Return Data

Recent research on levels and trends in the United States in income inequality vary substantially in how they measure income. We show the sensitivity of alternative income measures in capturing income trends using a unified data set. Focusing solely on market income or including realized taxable capital gains based on IRS tax return data in more comprehensive household income measures will dramatically increase inequality growth compared to capital gains measures more in keeping with Haig-Simons principles. Using a measure of yearly accrued capital gains dramatically reduces observed growth in income inequality across the distribution, but also equalizes income growth since 1989.

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