Kathy (left) and Christine Daddo, both in their 60s, have opted for communal living.
Baby Boomer tenants are rewriting the rules on renting and starting a trend that could shake up the rental and retirement markets, say housing specialists and architects.
Kathy Daddo, 60, a medical specialist, has for the first time in nearly 40 years returned to a shared house, which was something she last did as a nursing student in Sydney’s western suburbs.
Daddo reckons it makes financial sense for someone coming up to retirement and would much prefer to build a new lifestyle as a tenant in her sister Christine’s home.
“It works for both of us,” said Daddo, who has a 28-year old son.
Her sister wants to remain in the empty-nester family home, welcomes the rental income and enjoys the communal lifestyle.
Other Baby Boomers are also returning to a communal lifestyle rather than selling the family home and in the process spending tens of thousands relocating to a smaller house or apartment, often in an unfamiliar postcode.
Many of the house sharers are Baby Boomers who because of divorce, redundancy or inadequate pension do not have the resources to buy a new property, particularly in expensive cities like Melbourne and Sydney. Others enjoy a communal lifestyle and want to spend their late middle-age in a shared house.
Australian home ownership is at the lowest level in 70 years with just under one in three now renting, according to official numbers.
Daddo says she had to reconsider leasing a two-bedroom apartment when the rent more than doubled to $385 a week and other costs, such as power and heating, continued to rise.
“I was a single parent and never had the opportunity to buy,” the special needs nurse says.
Daddo says she is saving more than $600 a month by renting with her sister. “This wouldn’t work for everyone – it has to be the right person,” she says.
They are recreating the communal, familial style of their youth with a household where meals are eaten together and chores and living costs are shared.
Older house sharers
Andrew Colagiuri, founder of Sydney-based Bright Residential and FLK IT OVER, a digital device allowing agents to send tenants a link to their lease agreements via SMS, says there has been a 40 per cent growth in house sharers aged between 60 and 64 during the past 12 months.
“We are also seeing an increase in people aged over 55 finding a flatmate to rent a two- or three-bedroom home, because once you split the cost it is cheaper than a one-bedroom,” he says.
“Some people who have lived in their own home for most of their life have been forced out of the property market through a messy divorce, redundancy or sadly they’ve become a widow and they’ve got no choice but to become a tenant again to remain in the same neighbourhood.”
Kate McMahon, an architect with McMahon and Nerlich, says: “This is an emerging trend. Many people want to retain the family home, or are comfortable recreating the communal lifestyle of their youth.”
The nation is at a demographic turning point as 5.5 million Baby Boomers – those born between 1946 and 1965 – move into retirement.
It’s a generation that claims a big chunk of the nation’s $2 trillion super savings and includes many who are beneficiaries of property booms.
Room for improvement
McMahon says some concessions, additions or renovations, will better accommodate older tenants.
For example, she would recommend every tenant has their own bathroom, typically an ensuite.
She also recommends bedroom sizes should be roughly equally, which might also require some renovations, and to refresh fixtures and furnishings, such as replacing carpet.
“It’s probably a good idea to create a second living space, so that tenants have the option of more privacy,” she adds.
Tax treatment of income and expenses for the house owner who rents out part of a house is the same as for any residential rental property, according to the Australian Taxation Office.
Rental income must be included in tax returns and deductions can be claimed for associated expenses, such as interest on a home loan.
“If you are only renting part of your home, for example a single room, you can only claim expenses related to renting out that part of the house. This means you cannot claim the total amount of the expenses – you need to apportion the expenses,” says an ATO spokesman.
Generally, capital gains tax is not paid on a family home. But those whorent out part of their home are not entitled to the full exemption. Reductions are based on calculations such as proportion of the floor area used to produce income and the rental term.