One of the simplest and most practical ways to help solve Denver’s shortage of affordable housing may be found down the hall in a typical home, in that unused room with the door closed.
Spare bedrooms typically rent for as little as half the cost of a one-bedroom apartment. Getting some of that extra supply into the market could bring down rents and ease the pressure on home prices, while also boosting the income of homeowners.
But accomplishing that goal could take a shift in thinking among homeowners — particularly older ones who have extra space and could use the rental income — and efforts so far have had limited success.
Of the 723,000 homes that are owner-occupied in the metro area, about 442,000 have spare bedrooms, according to an estimate from John Burns Real Estate Consulting. And of those, up to 142,000 are owned by retirees, who typically live in households of one or two and who might benefit from rent income. Real estate website Trulia is more conservative, estimating that older homeowners in the metro area have about 72,000 available spare rooms.
“The biggest supply of vacant housing is empty bedrooms in existing homes. There might be an opportunity to make that match between retirees looking for extra income with a younger adult who doesn’t want to pay a ton on rent,” said Chris Porter, a demographer with John Burns, a real estate research firm based in Irvine, Calif., with a Denver office.
The number of spare rooms is climbing as baby boomers, who own homes at a higher rate than other age groups, retire and adjust to reduced incomes. Many prefer to “age in place,” rather than selling and moving to a smaller residence, and a tight housing market is encouraging them to stay. Also, a Colorado property tax break for senior homeowners doesn’t help, penalizing those who move.
“A lot of older adults are in that perfect house when they were starting their families. And that house, while older, would still be perfect for the next generation starting their family,” said Marilyn Berry, senior director of sales and marketing with Christian Living Communities.
Denver-based Silvernest, which has been offering that service online for three years, has nearly 40,000 users, with renters outnumbering homeowners by a ratio of 10 to 1. Perhaps that’s not so surprising — older homeowners may be uncomfortable inviting strangers to live in their homes and less inclined to use online matching services.
There also are faith-based and non-profit sponsored matching services, such as Providence Home Share and Sunshine Homeshare of Colorado, which have matched a small number of hosts with renters at below-market rates. And there are other online marketplace where room seekers and those seeking to rent out space usually meet, such as Craigslist.
Apartment alternative
Wisconsin native Sally Farris, 65, moved to Colorado a decade ago after losing her husband of 18 years. She went from being a homeowner in an affordable market to an apartment dweller in an expensive one. Over time, she found she liked living in her apartment complex in northern Colorado Springs less and less.
“Colorado has gone insane, and I don’t know what for,” she said. Her daughter let her know about Silvernest, which matched her up with John Yates, an 85-year-old who owned a four-bedroom home in Monument’s bucolic Woodmoor neighborhood.
Yates, who moved into the house in 1972 with his family, still works at home as a business consultant after a career that included time with the Denver Metro Chamber of Commerce.
In December 2015 he passed out and fell in his home. When he returned home from rehabilitation, his daughter’s family lived with him and then his daughter’s friend, until they decided taking on a roommate was the best move.
“It was an easy decision for me,” Yates said. Both he and Farris lost a spouse to cancer, and she shared his wife’s first name, Sally. They also shared a Christian faith and similar political views and get along well.
“I would like to stay here as long as I can,” he said. “The rents are helpful.”
While Farris isn’t a caretaker, knowing she is in the house provides a sense of comfort, said Lisa Kautz, Yates’ daughter.
Between rent and utilities, Farris estimates she pays about a quarter less than what she was paying in apartment rent. While she doesn’t know how long she will stay in Colorado, she likes her new living arrangement.
“It has worked out really well as far as the living situation. It is a nice neighborhood, quiet and very livable,” she said.
Rooms for rent
A recent study by the Colorado Futures Center at Colorado State University and Shift Research Lab found a shortage of about 32,000 housing units in metro Denver caused by a set of factors including labor and land shortages and an inefficient construction industry.
Given that homebuilders are unlikely to catch up to demand anytime soon, more will need to be done to use whatever is out there more efficiently, warns Phyllis Resnick, lead economist for the center.
Trulia estimates one-bedroom apartment rents in metro Denver topped $1,200 last year, while rooms in homes rented for more than $660 a month. Using those numbers, renters could save $6,400 a year taking a spare room, while a home owner could generate about $8,000 in extra income.
“It is not necessarily something that is normal right now. Seeing other people doing it will encourage others to do it,” said Mikaela Sharp, a research analyst with John Burns, of room sharing.
When Silvernest first started, the thinking was that older adults would want roommates of the same age, but that wasn’t the demographic looking to rent, said Wendi Burkhardt, co-founder and CEO.
Given the hard time young adults have in finding affordable housing, pairing them with older adults was considered another area to focus on. But the wide generational gap proved hard to bridge, and many young people didn’t escape their parents’ homes to live with someone who was their grandparents’ age.
Silvernest has found that participating homeowners are most often in the age range of 55 to 65, while the people they are renting to are about 10 to 20 years younger, Burkhardt said.
Job losses, divorces and the early death of a spouse can upset the best-laid plans. And in markets where housing costs are rising rapidly, as along Colorado’s Front Range, middle-aged adults increasingly are finding themselves priced-out.
A longer-term answer
Matching seniors who have available space to tenants who need a lower rent may benefit each side, but it isn’t necessarily a long-term fix to the region’s housing shortages, especially for young families.
Renters in programs like Silvernest tend to be single or couples. The rooms in the homes they are renting, not to mention the communities surrounding them, were designed to accommodate families with children.
“All those homes used to have kids,” said Jennifer Newcomer, a research principal at Shift Research Lab.
New schools are built in new communities, consuming constrained land and construction labor resources and triggering higher property taxes. Meanwhile, homes in communities with aging populations go underused to the point some are shut down.
There are several hurdles, both financial and social, that keep older adults in homes that are no longer a good fit for them. In the mind of some older adults, moving into a retirement community or making a big change represents a failure.
“What I see is that people just need to be better educated on current housing options. They don’t know how far senior housing has come,” said Berry, who markets senior communities.
Nor is it will understood how few affordable family homes builders are providing, meaning young families today don’t have the advantages that they enjoyed.
The push to get as much square footage on a lot as possible has builders going up with their homes, which means stairs. Builders also aren’t providing enough ranch-style homes that better fit an aging population, she said.
Also, most of the land available for construction is on the fringes of the metro area. Developers are putting up patio homes and other senior-focused products on the periphery where longer driving times are required, rather than in walkable communities.
A legislative fix that could help would be to allow older owners to transfer a break on property taxes they receive called the Colorado Homestead Exemption, Resnick said.
The exemption allows adults over age 65 who have lived in their homes for 10 consecutive years to have their property taxes cut in half, up to certain limits. But if that owner wants to downsize or otherwise move, they will lose that exemption. State policy effectively penalizes any older homeowner who frees up a larger home that could benefit a young family.
“It makes no sense to have a law that encourages you to stay in a home that isn’t appropriate or the home you want to be in,” Resnick said. “You are staying in there because you want to get a tax break?”
