Analysts and housing experts this week balked at what some are calling California’s “landed gentry” system for passing on wealth to younger generations.
Residents of the Golden State may feel they have to become California Dreamin’ if they are to afford a home in an expensive area. And that may be one reason why many homeowners pass on their real estate assets to the next generation after they pass away.
Nearly one in five real estate transfers in the state last year (18%, or the equivalent of about 60,000 homes) took place through inheritance, according to Kotality data reported by The Wall Street Journal.
This inheritance transfer rate is approximately twice the national level. This is also a record for California, according to data dating back to at least 1995.
A variety of factors contribute to California’s high inheritance rates, including years of skyrocketing home prices and tax policies such as Prop. 13, which lowers property taxes the longer residents live. When homeowners die, descendants who inherit those properties also inherit that lower property tax under the law. Similarly, you can sell real estate and keep the proceeds without paying capital gains taxes under California law.
The incentive for older generations to hold on to these properties until the end of their lives has made the state’s inventory market extremely tight, and both supply and cost constraints have made it increasingly difficult for first-time buyers to enter the market.
Wild statistic: “About 18% of all property transfers in California last year were through inheritance.” https://t.co/LPI84VU4Uh pic.twitter.com/oHzRbjVzOn
— Rick Palacios Jr. (@RickPalaciosJr) March 1, 2026
Analysts and other housing experts took to social media to react to the report and its somewhat negative implications for a state that has traditionally prided itself on a liberal reputation.
“Californians tend to hold on to their homes until they die, and they never put those homes on the open market, which limits the supply of housing,” Redfin chief economist Darryl Fairweather said in a response to a report posted on X. “And being able to inherit a $1 million home without having to work is a huge benefit for heirs, while others struggle to earn enough money to buy a home through normal means, even though most people can’t afford it.” “There is home ownership, but some people can inherit their homes without much effort. We don’t have a housing market and we have a caste system determined by family wealth.”
Fairweather and California YIMBY Senior Director of Legislative Research M. Nolan Gray criticized California’s law on property inheritance and its similarities to the landowning aristocracy of the distant past.
“California, on the other hand, considers itself the most progressive state,” Gray wrote to X. “On the other hand, it created a tax-exempt hereditary landowning aristocracy that cost seven figures to acquire large parts of the state.”
Arpit Gupta, an associate professor of finance at New York University’s Stern School of Business, likened the policy to feudalism, a social and economic system that emerged in Western Europe during the Middle Ages, in which landowners or feudal lords granted land to subordinate vassals, who in return pledged loyalty to the feudal lord.
“California has reinvented feudalism from the ground up,” Gupta wrote on X.
Email Lillian Dickerson
