Online home sharing match-up programs are helping to match seniors with compatible individuals seeking safe, affordable housing. Home sharing agreements can sometimes include provision of some assistance (such as meal preparation or driving) in exchange for some of the rent. For many aging homeowners and their families, renting out a portion of the family home can seem like a way to keep mortgage and housing costs more manageable. Some families may also worry about their mother or dad living alone after the death of a spouse. In addition, almost everyone worries about the cost of assisted living options which can be cost prohibitive. But how well does it work?
Certainly, the need for affordable senior housing is growing. According to TSCL’s recent Senior Survey, almost one-out-of-four survey participants hunted for affordable rent over the past year. Email that we receive cites spare bedrooms, basement, or spare “granny units,”, as the most that some retirees can afford.
But before deciding to let a tenant move in, there’s a lot to consider. While home sharing can enable older homeowners to stay independent longer, this would be so only if potential housemates help with some sort of household duty such as transportation to medical appointments, laundry, outdoor and other routine chores to reduce the rent. But home sharing tenants are not primary caregivers. Having someone to interact with may provide valuable companionship. On the other hand, the homeowner needs to thoroughly perform background checks of potential tenants, get references, and to think how difficult it might be to adjust to a stranger moving in. If the homeowner or the tenant has some sort of disability (such as early stages of Alzheimer’s) it may be difficult for both.
There’s a long list of other important considerations, because renting out a spare room can backfire. Here are a few of the major things to think about:
- Rental income is taxable. In figuring out the amount of income you would need to collect in rent, you will need to factor in the amount of additional taxes you would pay for each dollar of additional income. The additional income could potentially push you into a higher tax backet, and it would increase the taxable amount of your Social Security benefits. If your income is over the threshold, you could also wind up paying higher income-related Medicare premium surcharges for your Part B and Part D premiums. Before settling on a monthly rental amount, you may need to discuss the idea with a tax advisor. You would be allowed to deduct costs that you have, such as repairs and depreciation which could potentially offset some of the extra income.
- Rental increases may not match inflation. A lease often states whether there is an automatic annual increase. Five percent is routinely charged, but what happens in a year when inflation is higher than 5% and you need to make costly repairs, such as getting rid of a moldy area in the bathroom, or fixing leaky plumbing? Where would the money come from?
- Check your state and local laws that pertain to renting rooms in your house. Some areas limit how many unrelated people can occupy a house, and you may be legally responsible for maintenance of the property. If you are part of a homeowners’ association (HOA), check the bylaws of your HOA before accepting a tenant.
- Talk to your insurance agency. Renting out a room increases the risk of property damage and your liability. Check your homeowner’s policy to see if you need to add any coverage, such as landlord insurance. Insurance companies can prohibit renting or may charge a higher rate if you have tenants.
- Your health or financial situation may change. Your lease needs to stipulate what happens if the arrangement doesn’t work out or if other changes were to occur, such as selling your home. How would the lease end and the tenant move out? How would emergencies be handled? What happens if you need to go to the hospital and stay in rehab? Will your tenant pay full rent and utilities while you are gone?
It can be daunting to work out a housing plan as you age, let alone to become a live-in landlord. Before making any arrangements if may be helpful to discuss your lease with an attorney.
Sources: “What’s Senior Home Sharing? Pros, Cons, How it works”, Amanda Lambert, MS, CMC, ALCP, Cake.com. Senior Home Sharing, Valerie Keene, Attorney, NOLO.com, April 28, 2022.
