Gentrifying with family wealth: Parental gifts and neighbourhood sorting among young adult owner occupants

Previous studies have shown that young adults receiving gifts purchase more expensive housing. However, little is known about the role of parental gifts in where young adults buy. In our new paper, we investigate whether receiving parental gifts affect mobility behaviour of 18-40 years old young adults going into different types of neighbourhoods. In other words, we want to know if we see spatial sorting. We specifically look at low-status; low-status upgrading (between 2006 and 2015), and high-status neighbourhoods, in and outside the central cities (the core municipality) of the urban metropolitan areas of Amsterdam and of Rotterdam/The Hague in the Netherlands.

From theory, we expect young adults to orient themselves on centrally located areas in urban metropolises. Urban living offers them access to higher education, but also to career opportunities and to cultural amenities. Whether such an orientation will succeed, however, depends on the amount of economic capital that is at someone’s disposal. Yet, like many cities, housing costs have been increasing rapidly, creating affordability issues for young adults. In addition, the younger generation are confronted by flexibilization of employment and stricter lending rules, making it more difficult to obtain a mortgage. Within this context it makes sense for parents who have the means to do so, to help their offspring out by providing gifts, loans and guarantees. They may see such support as an interesting investment opportunity to increase family capital.

Based on an analysis of high-quality individual-level registry data combined with the most recent available individual level fiscally reported parental gifts data (2013, 2014, only gifts above 5,000 Euros) for all individuals in the two metropolitan areas we find that parental gifts flow into the housing market in a spatially-uneven way. In the analysis, we controlled for a wide range of individual, household, parental and housing attributes. Figure 1 shows the spatial distribution of moves made by young adults towards owner-occupied housing supported by parental gifts. Movers supported by substantial parental gifts are more likely to enter owner-occupied housing in high-status and gentrifying urban neighbourhoods compared to movers without gifts.

This can only partially be explained by household and parental characteristics and by the uneven distribution of housing values. The remaining effect is still significant and suggests that parental gifts play a role in trade-offs regarding spatial residential decision-making. Even after controlling for house price, parental and household background, young adults receiving parental gifts of over 50,000 euros are more likely to move towards urban upgrading neighbourhoods and are less likely to move towards regional low-status neighbourhoods. Additionally, households receiving 100,000 euro or more are more likely to move to high-status urban neighbourhoods compared to households receiving less than 50,000 euro. These outcomes were most pronounced in the Amsterdam region.

The conclusion reactivates debates on the (re)production of class and intragenerational inequalities through residential behaviour. We suggest that the unexplained sorting may be tied to unobserved social and cultural capital. Young adults who belong to urban-oriented fractions of middle class may push hard to get into central urban – gentrified – neighbourhoods. If their parents also possess such urban cultural capital, they may be more willing to assist their children (economically) to settle in gentrifying urban neighbourhoods.

Regardless, the spatially uneven development of housing values will likely exacerbate housing wealth inequalities between those who receive parental support and those who do not, as well as between those who are able to buy and those who have to rent. Our study was able to trace actual financial gift transfers into specific neighbourhood types and showed that, next to households and housing, neighbourhoods matter.

Read the accompanying article on Urban Studies OnlineFirst here.