Multigenerational Homes (MH) are defined as a household with two or more adult generations residing under the same roof. This could be, for example, a grown adult still residing with their parents or an adult who has moved in with their elderly parents to provide living assistance and care. This is not a new trend or occurrence; however, the trend is increasing.
In 1940, approximately 25% of the population lived with 3 or more generations in a single home. This percent began declining after WWII and ultimately settled at 12% in the 1980s. Today, the percentage has increased to approximately 20%, that’s 64 million Americans living in multigenerational homes and this number is continuing to rise.
The coming 2020 Census should shed more accurate statistics on the dynamics of this trend. In the meantime, we can pinpoint four factors that are influencing adults to combine households. For many, transitioning to multigenerational homes is a necessity to maintain their lifestyles and quality of living.
Why More Families Are Living in Multigenerational Homes
Cost of Long-Term Care:
According to a recent article by Morningstar, the 2017 median cost for an assisted-living facility was $45,000 and $85,775 for a semi-private room in a nursing home. The average 2019 annual premium for a long term care policy for a 55 year old male is $2,050 and $2,700 for a female. A combined couple’s policy would cost 3,050. The premium for a long term care policy increases dramatically based on age. Many are unwilling to pay the cost associated with long term care or unable to afford it and opt for multigenerational living instead.
A greater number of college graduates are moving back in with there parents because of the monthly cost of their student loan. For the undergraduate class of 2019, the average debt is $28,450 or
- $393 per month. Many students have considerably more depending on the university they attend.
Rental Housing Costs:
Increases in rental rates has been cost prohibitive for many leading them to opt for multigenerational housing, especially those students leaving college with student loan debt and unable to find adequate employment. Recently published by Apartment List Inc., the national median monthly rental for a 1 and 2
bedroom apartment is $959 and $1,190 respectfully. In California, the state median is $1,448 and $1,846. In San Mateo, CA, residents can expect to pay $3,569 and $4,483 respectfully.
Even though the inflation rate is 1.6% as of June 2019, that is not the case for elderly retirees who are impacted by increased health care and especially prescription drug costs.
Opportunities in Multigenerational Housing for Real Estate Investors
Realtors Lead the Way:
Realtors now have a new designation to pursue if they would like to stay on the cutting edge of this trend. The National Association of Realtors has created the designation “Seniors Real Estate Specialist”. This designation allows qualified agents to assist aging individuals and couples to identify their needs in listing, selling and relocating into a home that will meet their families’ needs. Interested agents must take educational courses so that they can render the best advice possible.
As more families transition into multigenerational housing, requests are being made for modifications to existing building codes and zoning requirements and pressure is being put on local politicians to allow for small detached homes to be built on a homeowner existing lot. Realtors can expect to see more activity in this area as the need continues to grows.
Renovations and Additions:
Expect to see an increased need for planning when it comes to addressing the need for providing elder care. Common features desired in a multigenerational home include a separate entrance, bathroom, kitchen, walk-in closet, stackable washer/dryer room and private living quarters. Renovations or home additions will be a significant feature to offer when the need no longer exists and the family decides to sell and/or downsize.
Builders are Catching On:
Builders are beginning to recognize this increasing need and are addressing options with buyers when designing a new home. By allowing for additional capped plumbing fixtures, electrical, and HVA/C unit capacity sizing, future expansions should be significantly less costly. Other builders are building homes with expanded living quarters and finding it quite profitable to do so.
In summary, with more baby boomers and retirees coming online each month, we will see an increasing demand and need for homes that can be easily expanded or added on to accommodate this ever-expanding trend. It should be noted that Realtors are recognizing that homes that offer these features don’t stay on the market very long.