Heir Property and Economic Mobility: Tools for Policy and Practice

Heir Property and Economic Mobility: Tools for Policy and Practice

A Definition of Heir Property: It’s Complicated

Families with assets experience greater financial stability and economic mobility as compared to families with the same income but without significant assets. These critical assets, notably savings, not only provide a cushion against economic shocks, facilitating financial stability, but can also provide the feeder capital necessary to get a college education, job training, or a home, factors associated with upward economic mobility.

There is, however, at least one asset type that often requires a significant secondary investment before families can use it for those purposes. Heir property is family owned, inherited land owned by multiple heirs with undivided interests.  As such, it is also “the most unstable form of land ownership” in the United States. Families with resources have the means to hire legal counsel and avoid or remediate this complex and often untenable status. However families with low or moderate wealth are often unable to make the secondary investment in managing the land that would unlock its value, even though they are the very families that need it most.


Where You Live Matters: Concentrated Wealth Affects Mobility

Where you start in life affects where you get—educationally and economically—in a big way. In sprawling metros of the South, residential segregation influences school quality, housing options, and transportation, and a disconnect often exists between low- and moderate-income neighborhoods and the location of good jobs. Economic segregation is deeply intertwined with racial segregation in the South, so the impact of this geographic divide disproportionately affects people of color.

An Equality of Opportunity Project study on the geography of economic mobility found that areas with low mobility tend to have high levels of residential economic segregation, and last week, the Martin Prosperity Institute released a report on residential economic segregation in U.S. metros. They found that economic segregation is generally higher in big, dense cities, and it’s also higher in knowledge economies. In these cities, there are rarely pathways for workers to move into high-wage jobs, and residential segregation by educational level and occupation worsens social isolation. Physical and geographic distance makes it harder for people to identify job openings and training opportunities; with this information gap, it’s even hard to figure out what skills are required for those jobs. Job requirements change rapidly, especially in high-tech and knowledge economies, making it especially important for young people to be connected to social networks with information about emerging skill requirements—and opportunities to develop them.


Rural Economic Mobility and Wealth Building

Despite the general economic recovery in the United States, income inequality and wealth inequality are expanding.  Perhaps more critically, it is becoming more and more difficult for families with lower wealth or income to achieve upward economic mobility. These two facts, that the wealth and income gaps are large and growing and that the relative economic position of families is becoming more fixed, chip away at the common notion of the American Dream – our ideal of equal opportunity. This is especially true in the South, the region with the lowest upward economic mobility.

In part because of this, many of the “hardest places to live” are in the South and almost all of the counties are rural. Low population density and population outmigration can make housing development, business development, and access to fairly priced financial services more challenging to provide even though those homes, jobs, and savings are critically needed. This occurs in part because of lack of access to capital which is often due to the loss of traditional financial institutions in rural areas.

Southern Bancorp Community Partners  was founded in response to that need. Southern is a development finance organization that works to improve family and community net worth in order to promote economic opportunity. Southern and its bank partner, Southern Bancorp, are US Treasury certified Community Development Financial Institutions and, as such, offer lending, banking, and financial development services and promote policies that improve upward economic mobility in the rural Mid-South. These services make a real difference not only in the daily lives of the people in our communities but also the in the trajectories of their families and neighborhoods.


Build Wealth to Build Equitable Mobility

We talk a lot about gaps—achievement gaps, wage gaps, opportunity gaps. When it comes to economic mobility, one that has major implications for equitable mobility for young people is the racial wealth gap. A true infrastructure of opportunity gives reliable options to all young people regardless of race and ethnicity, gender, class, or neighborhood. As data show, that is not currently the case, and race specifically remains a significant factor in the economic outcomes of individuals across the South:

  • An analysis of income mobility by Brookings found that more than half of black children raised in the lowest quintile remain there as adults. Only 23 percent of white children do.
  • More distressing, the Brookings data show a third of black children raised in the middle income quintile—not a bad place to be—end up in the lowest quintile as adults. Another third end up in the second lowest quintile. Only 14 percent of white kids slide from the middle to the lowest quintile.

When we talk about economic mobility, we aren’t just talking about income: wealth building is critical to improving intergenerational economic mobility. Wealth builds across generations, so family wealth is a key predictor of the economic success of children, including educational attainment, earnings, and how early those children begin to invest in their own assets. Families with wealth are better able to remain economically stable during unexpected events, such as a layoff or a health crisis, and they have resources to prepare their children for education and employment. As the costs of higher education increase, a family’s ability to financially support a student is even more important for postsecondary success and completion.