- Nearly half of Americans would be interested in renting more space in their home
- 32% of owners have experimented with various approaches to earning extra income from their properties
- 85% of homeowners would invest in creating additional space, with half willing to spend $30,000 or less
- 53% of owners would rent their home to boost their savings
Real estate markets experienced a period of recovery after the housing crisis of 2007-09, followed by a steady expansion during the years 2010-19. During this period, the largest demographic cohort in our country’s history has come of age, growing from their twenties to their thirties and embracing the markers of this stage of life – forming new households, marrying, having children. Notably, due to economic circumstances, millennials experienced delays throughout their journey as they faced the lingering impact of the Great Recession, rising student debt due to longer stays long in school and stagnating wages. However, as they entered their third decade of life, the majority of millennials embraced homeownership, shaking up a decade of misplaced labeling of the “renter generation.”
While demographics stimulated demand for housing, supply remained marred by the period of housing recession. Fewer and fewer homebuilders have taken a cautious approach to new construction, fearing a repeat of the oversupply situation of the early to mid-2000s, and also betting on the narrative that millennials won’t buy no houses. The result has been a decade of underbuilding that has led to a massive shortage of new homes starting in June 2021. With limited supply, new and existing home prices have outstripped most people’s incomes, which has resulted in lower affordability. The COVID pandemic has only accelerated these trends, as government-mandated quarantines in 2020 resulted in sudden and significant job losses.
The last decade has also seen the rise of the sharing economy. Whether it’s sharing trips around town, to the airport, or for the weekend in someone’s personal car (Uber, Lyft, Turo), sharing a room, house, or pool ( Airbnb, VRBO, HomeAway, Swimply), Americans have both offered and benefited from the services made possible by technology platforms. These apps have brought a much wider selection of services that leverage existing assets and in doing so have driven prices down.
The combination of the sharing economy and pandemic-induced financial pressures is opening consumers’ horizons to the potential benefits of using their homes creatively to earn extra income. Realtor.com polled more than 3,000 people across the country to find out how attitudes about home sharing are unfolding at the confluence of current events. The results indicate a growing interest in renting out parts of a home for extra cash, to offset rising monthly expenses, boost savings, or take advantage of extra spending funds.
Nearly half of Americans would be interested in renting more space in their home
In light of the economic and financial challenges existing this year, it is perhaps not surprising that 49% of American owners indicate that they would be interested in renting additional space in their house, especially if it had a separate entrance, as well as a separate kitchen. and bathroom. The share of recent sellers and recent buyers who would find the option to monetize the extra space is much higher, at 69% and 72%, respectively. Generationally, younger people seem more comfortable sharing space in exchange for money, with comparatively larger shares of Millennials (67%) and Gen Z (57%) showing interest . Interest in converting space into income is also higher in urban locations.
Landlords have a greater preference for renters in their own social network, with 52% saying they would feel comfortable renting from someone they know. A third of owners would feel comfortable trusting someone outside of their network, but who could be controlled either directly or through a third-party app. And having a long-term tenant (6 months or more) is better than a short-term tenant (less than a month). Interestingly, 16% of landlords said they would feel comfortable renting to anyone if they needed the income. The responses are relatively consistent across generations and regions, with some nuance. Young landlords in urban areas are more comfortable with short-term tenants.
Along these lines, financial considerations play a large role in landlord motivation and comfort level with renting the space. Top of the list of reasons is the desire to earn extra income to save, which accounts for 53% of homeowner responses. Wanting extra expense funds is the second most important reason, followed by the need to reduce the financial burden of existing monthly expenses, such as car and commuting costs, as well as higher food prices. Homeowners also cite the desire to offset major household expenses, such as mortgage and insurance, as well as the desire for money for a family vacation as key motivators. Younger generations are looking to increase their savings and earn pocket money, while older owners are looking to control their monthly expenses.
A third of homeowners have experimented with ways to generate income from their homes
Nationwide, 32% of owners have experimented with various approaches to earning extra income from their property. The shares are even larger for Millennials and Gen Z. Nearly half of every generation has rented space in their home, or an entire home, compared to a third of Gen Xers and less than 15% of baby generations. -boom or silent. Taking on a roommate or long-term tenant tops the list, followed by short-term rentals of spare rooms. Seven percent of homeowners rented out their garages or parking spaces, and 6% leveraged their backyard or swimming pool to earn extra income. Owners have also resorted to renting out the whole house, either for holidays or longer term, while living elsewhere. Comparatively larger shares of millennials have moved to renting their entire home or taking in roommates. Homeowners in urban neighborhoods also report a higher likelihood of turning available space into income.
85% of homeowners would spend money to add a separate living space to their home
We asked homeowners how much they would be willing to spend to add separate living space to their properties to generate additional income. Eighty-five percent would invest in creating additional space, with half willing to spend $30,000 or less. The investment would represent less than 10% of a median price home. Interestingly, 7% would be willing to invest more than $100,000 in improving their home for additional cash flow, a likely nod to the cost of homes in expensive urban markets. The share of homeowners in urban areas willing to invest more than $100,000 was three times that of homeowners in suburban or rural areas. Millennials and Gen Xers were also twice or more likely to invest higher sums for additional space.
Homeowners looking to increase their space for income place additional bedrooms at the top of the list (21%), followed by finished basements (17%). Office space and secondary suites (UDA) are also important projects that would improve the available space. These choices are similar from one generation to another and from one region to another.
As the next generation of homebuyers have embraced carpooling and short-term rentals, it’s only natural that they’ll start looking to their greatest asset – their home – as a potential source of income. Additionally, an even younger cohort is seeking home ownership and the benefits and opportunities it offers. For people looking to leverage the sharing economy, in addition to traditional approaches, it may be worth exploring creative solutions. Even a small amount of income each month can multiply over a year or more and can turn into bigger returns.
However, it is important for landlords to keep in mind that while today’s technology platforms and applications can make it easier to list a home or additional space for rent, there are many factors legal, financial and tax considerations to take into account before taking the plunge. Landlords should familiarize themselves with the regulations and tenant rights in their state and locality, and understand any community restrictions. Along with this, it is important to vet tenants well and take out home insurance that will cover any potential damage.
Methodology: real estate agent.com® commissioned HarrisX to conduct a national consumer survey. The total sample size was 3,026 adults. The survey was conducted online from July 21 to 23, 2021. The margin of sampling error for this survey is ±1.8 percentage points. The numbers represent a national view of American adults. Results were weighted by age, gender, region, race/ethnicity, and income, where applicable, to bring them into line with their true proportions in the population.