If you want to cut your housing costs, one way to do that is by splitting them with roommates or taking in boarders to help out with the rent or mortgage. With rents and home prices rising and affordable housing in short supply, it's an enticing option for many people.
But they need to watch out for legal, tax and other issues that could be troublesome.
Jess Landgraf and her wife, Katrina Nichols, are veterans of home-sharing.
Ever since they moved to the Twin Cities about four years ago, the couple has had roommates. They started out sharing a rented house with up to three other people in St. Paul's Como Park neighborhood.
Nichols said money was tight after she graduated from college with a degree in elementary education in 2015.
"I was a first-year teacher and just didn't have a job yet," she recalled.
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Landgraf said that for $300 each, she and Nichols got a lot more house than they could afford on their own.
"We had access to two living spaces, a huge kitchen. That was nice, the affordability part, but also, the ability to have a built-in social network. We could come home and have a chat with friends," she said.
Since they bought their own home a little more than a year ago in Como Park, the couple has continued their home-sharing tradition. Their current roommate is Thomas Hvizdos. After two years as a software developer, he's now working with AmeriCorps, the public service program that recruits people to mentor youth, fight poverty, sustain national parks and address other critical community needs. "I make way less money than I used to, and I need a place to live that's way less money than my single-bedroom apartment," he said.
Taking roommates increasingly common
Nationwide, researchers at Harvard University estimate more than 6 million adults between the ages of 20 and 35 live with unrelated adults. That's about 1 in every 11 and the rate is rising.
And a growing share of senior citizens are also sharing homes.
In 2017, 1.9 percent of people age 65 and over resided with a roommate, boarder or housemate. In 2006, that rate was 1.3 percent. The count includes only people who are living with nonrelatives. So, a mother and daughter living together who take in a housemate are not counted.
Informal — to a point
Landgraf, Nichols and Hvizdos knew each other previously. That helped them assess if they could share a home. Hvizdos told them he doesn't feel like a tenant, even though he is. "I can't say I think of you as a landlord, basically ever, except when I'm writing my rent check," he said.
That's just fine with Landgraf. "Excellent, excellent. That's how I want it," she laughed.
Landgraf said the three of them communicate well and have clearly defined ground rules, roles and expectations.
Nichols said the important elements are in writing — to protect everyone.
"It feels informal. But we had Thomas sign a lease," she said.
Written agreements can protect both parties
Some homeowners may feel comfortable taking in roommates or boarders without any written agreements in place. But real estate attorney Chris Huntley said that's risky because they're creating a landlord-tenant relationship. And without a written agreement in place, it can be difficult to resolve disputes with people who are effectively tenants.
"Do you even have the right to evict them? You do. But under what circumstances and what steps do you have to take," he said. "I'm remembering a time when I was in the housing court and someone had that problem. They'd been trying for three or four months to get this person out of their house. And they just couldn't do it because they didn't have any written agreement."
Without a written agreement, Huntley said that even a grandparent could have trouble giving the boot to a once-welcome but now-unwanted grandchild in residence. "Makes Christmas a little bit awkward," he said. "But that's the problem."
With an apartment rental, Huntley said all roommates should be on a lease. Anyone who isn't could be evicted.
"I believe that a lot of these people are just taking on a roommate, without actually putting them on the lease," he said. "That would probably be a violation of the lease terms because the lease (typically) said they can't allow anyone else to live in the premises than who is listed on the lease."
Taxes are 'always tricky'
And then there's the matter of taxes. There are no taxes for people simply splitting the rent on a house or apartment. But if homeowners have rental income, that revenue may be taxable.
One noteworthy exception is income from property rented for less than 15 days. That is tax-free, if a few conditions are met. You must treat the property as a personal residence and personally use it for more than 14 days.
Of course, if you have taxable rental income, you'll likely have rental expenses. Brenda Lowe, a CPA based in White Bear Lake, said you can reduce the tax owed on rental income with deductions for a portion of mortgage interest, real estate taxes, utilities and other expenses.
"You can't take a loss," she said. "But you could reduce the income to zero."
It can all get complicated, of course. Lowe said rental income can affect property tax refunds and other tax deductions.
"It's just always tricky with rentals, whether it be just in your home or rental of a separate unit, maybe a carriage house behind the house, there's just a lot of rules to follow," she said.
Zoning rules, too. Many communities limit how many unrelated adults can live together.
Help is available
For people looking for help finding someone to share housing costs, there is a wide array of matchmaking services. Many target specific groups, such as millennials.
Massachusetts-based Nesterlyconnects empty-nester seniors with students needing a cheap place to live.
Most hosts on the platform have been charging $700 or less per month in the Boston-Cambridge area, utilities included. Students can lower their rent by doing chores.
The business has the blessing of the city of Boston. In a post on the city's website, Mayor Martin Walsh wrote, "We know that many of our older residents want to stay in their homes — but need companionship and some simple home maintenance. By matching established adults with extra space with students who are eager to engage with their communities, we're creating an innovative housing pilot that provides more affordable options for everyone."
Meanwhile, Denver-based Silvernest focuses on making roommates out of people age 50 and older. CEO Wendi Burkhardt said the company has paired up some 15,000 people. And it's putting money in their pockets. She said the economics can be compelling on both sides of the rent check.
The average rent for a decent one-bedroom apartment in Denver is about $1,400 a month. But a single rented room in a house goes for about $800.
"So, as a homeowner, you can recognize $10,000 a year in extra income," she said. "And as the renter, you can actually recognize (about) a 50 percent savings on what it would cost you to rent that single bedroom apartment."
Burkhardt thinks the government should consider tax breaks to encourage people to share living spaces as a way to boost the supply of affordable housing.