Multi-generational living as a way to save money is popular, but proper agreements must be in place
The multi-generational living trend continues to increase throughout the world as families look to pool living costs in a world which is becoming more and more expensive.
Lack of retirement accommodation and/or an inability to afford that which is available, escalating costs of childcare and the need for security are also contributing factors.
According to a Washington Post article, 20% of Americans, or 64 million people, lived in multi-generational homes in 2016. In 2009, at the height of the recession, this number was 51 million.
In South Africa, multi-generational living continues to gain appeal, with figures released by Stats SA in March – based on the 2015 Living Conditions Survey – showing that 36% of South African households were made up of extended families, with 49.9% of these headed by females. At 39%, nuclear families were only in a slight majority.
Although multi-generational living arrangements can include parents, grandparents, aunts and other relatives, the most common arrangement is for young adults to live with their parents as this provides mutual benefits. Elderly parents can be cared for by their adult children, and can assist with household duties and looking after their grandchildren.
Another sub-trend of the multi-generational living movement is more young adults are not only moving in with parents, but are buying their parents’ homes; often their own childhood homes.
Apart from this often making sense from a financial and investment point of view, the idea of raising their children in the same homes they grew up in appeals to many young parents on an emotional level.
Many first-time property buyers are in their mid-30s and prepared to settle down, and this coincides with their parents edging closer to retirement age, says Berry Everitt, chief executive of the Chas Everitt International Property Group.
Not only does the setup make sense from a lifestyle perspective, but also offers the opportunity for these young buyers to purchase their childhood home.
However, buying their childhood home is not a decision buyers should make for sentimental reasons. Neither should it be made in haste, Everitt warns.
“Lifestyles have changed so you need to think clearly about whether this is your ideal home. You also need to seek professional advice from an experienced estate agent, a reputable mortgage originator and your accountant or tax attorney before you sign an offer to purchase.”
Richard Gray, chief executive of Harcourts Africa, says many carry nostalgia for their childhood homes and it is often a factor behind their gravitating to a particular suburb or property.
He quotes from the book Returning Home: Reconnecting with Our Childhoods, by Jerry M Burger, a professor of psychology at Santa Clara University in the US.
“One’s home is a part of personal identity for many people; ie an extension of their selves. It is during these early years that children develop a sense of self independent of their families. Homes also are almost always the place where children spend the largest part of their time, as well as the location for many of their most emotional experiences.”
Gray says it is important for property professionals to take these emotional elements into consideration when entering into a financial transaction.
“A certain amount of finesse and understanding is needed. Despite the obvious large investment aspect and stress buying a home can bring, the human factor is a big part of it.”
Everitt says buyers of their parents’ homes must consider the same things they would with any other home purchase, and one of these is location.
They should ask themselves: Is it close to work or reliable public transport? Is it located close to shops, schools and other amenities? Is it safe, or would it be better to buy in a more secure area or development?
The condition of the property must also be considered.
The fact that your parents are senior citizens may mean there are “deferred” maintenance issues. To avoid the possibility of disputes later, you will need to identify these and reach agreement about who will do the work and who will pay for repairs before you buy, Everitt says.
The potential resale value of the property, as well as whether they can actually afford to buy should also be kept in mind.
“The biggest obstacle for most first-time buyers is the deposit, and your parents may be willing to help you with that, but you must agree on how you are going to pay it back, especially if the loan comes out of their retirement funds.
“Similarly, you will need to agree on a fair purchase price, bearing in mind that if your parents’ set price is too far below market value in an attempt to help you qualify for a loan, the SA Revenue Service could view the transaction as an attempt to avoid paying transfer duty.”
Furthermore, buyers will still need to qualify for a home loan in the usual way.
Choices for multiple residents
Multi-generational living has become such a global trend that builders and architects are designing homes suited to such arrangements.
Many say these new-age homes, and the families living within them, strongly resemble those of the early generations of last century, before they made way for smaller homes designed for nuclear families.
Designing homes to suit a number of family members includes incorporating elements that allow areas to be cordoned off. These include:
* Living spaces with sliding doors to separate areas and section off parts of a home.
* Quiet spaces to give family members places to escape.
* Covered outdoor areas, like verandahs or terraces, which open up a home and add extensions for leisure and entertainment. They can also link separated spaces.
* Annexes allow people to share communal areas in a home, but provide separate sleeping or leisure rooms.
* Separate entrances for privacy.
* Large kitchens mean everyone can get together while cooking and eating.