Under One Roof: What to Consider When Setting up a Multigenerational Household

Debra Washington, Relationship Manager, First Republic Bank
October 15, 2019

Imagine this scenario: A retired grandmother and her husband look forward to spending uninterrupted time with their two young grandchildren. The children’s parents enjoy using this time for date nights, reminiscent of the free time they had before expanding their family.

Fortunately for this family, organizing date nights are easier for them than for many of their parent friends. They never need to bring their children’s favorite toys or food to the grandparents’ house, and they don’t need to catch them up on their grandkids’ latest ground rules. Why? All three generations of this family live together in the same, roomy New York City brownstone.

Interestingly, this hypothetical family is part of a growing U.S. trend toward multigenerational housing. According to a recent Pew Research Center survey, a record 20% of American adults — 64 million people — now live in homes with more than one generation of their families. It’s also becoming more common for young people to move in with their parents or grandparents rather than for seniors to move in with their kids.

Why multigenerational housing is on the rise

There are a number of reasons why families may opt to cozy up in the same residences:

  • Single-family housing is expensive for many young families. Although the multigenerational living trend picked up steam around the time of the 2009 financial downturn, according to The New York Times, this phenomenon is continuing. Homeownership is an increasingly elusive financial goal for many young people. Even millennials who lived on their own for a while after high school or college may end up moving back home because of financial challenges, as explained below.
  • Younger family members may have full financial plates. For instance, they may be paying off student loans or trying to save toward financial goals. In addition, younger family members could be unemployed, underemployed or struggling with hefty expenses such as childcare or health insurance. As a result, sharing a home with other family members can seem like a practical solution.
  • Parents/grandparents often have extra room in their “empty nester” homes. Many older Americans live in paid-off (or nearly so) homes. They may not be ready to downsize but may be considering how to do a better job of stewarding their resources. Instead of filling their big houses with stuff, some families may decide to fill their homes with relatives.
  • Cultural background can make a difference. Non-white U.S. families are more likely to include multiple generations in a single household, according to Pew. In addition, sharing a household is a common cultural tradition among foreign-born extended families, says Pew. The organization’s research indicates that almost a third (29%) of Asians live together with two or more family generations, followed closely by Hispanics (27%) and African Americans (26%).

Communicate early and often

Even when a multigenerational living situation makes perfect sense, families would want to ask themselves some thoughtful questions before moving in together. Talking upfront can help avoid a lot of awkward financial and interpersonal challenges later. The nonprofit organization Generations United offers many ideas on its website.

A few good starter questions to discuss include:

  • Can you easily modify a current home to fit additional family members? Perhaps you can make some minor renovations to better accommodate an additional generation. For instance, could you add a shower to an existing powder room? Could a main-floor family room be turned into an extra bedroom? Or does the house already offer separate entrances that can help provide privacy?

    If it’s more practical, you could consider moving into a different home that better suits your needs — but only if it’s also a smart financial move. For instance, a retired couple may not want to take on a bigger mortgage just to help out the younger generation, especially if the cohousing situation may only be temporary.
  • How will household bills be divided? In my experience, the most successful arrangements include everyone paying their fair share of living expenses. For example, it makes sense for the official homeowners to make house payments and pay insurance premiums and property taxes, reaping any related tax deductions. Other family members could pay for a share of utilities that have increased due to them moving in, such as extra water charges, faster-speed Internet, streaming entertainment services they use and their own groceries.
  • Which house rules are important, and how will you divide chores? It’s not unreasonable to agree to guidelines like quiet hours, how often the older generation will babysit, who will clean what and whether you’ll fix meals together or separately. There’s no single right answer for these issues — it’s all about what works best for your extended family. Consider monthly or quarterly family meetings to discuss how the arrangement is working and problem-solve any issues that arise.
  • Have you talked openly with other family members about your idea? If you’re inviting just one child and their family or just one set of parents-in-law to move in with you, talk ahead of time with the rest of your family so they don’t feel slighted. If you’re the parent, consider offering occasional financial help to the children who aren’t living with you. There may be less family resentment if your children don’t feel like one sibling is getting preferential treatment.
  • Do you have a plan for giving each other personal space and private time? This may become a bigger issue than you think. You may want to plan for certain family members to eat out once a week to give others a breather. You could also set a rule that you don’t interrupt certain family members after a set time each night.
  • Have you talked about future living arrangements? For example, if adult kids are moving in with their parents, does the older generation expect the younger family members to provide in-home elder care in the future? Or is there a plan to eventually move elders into assisted living? Is there a timeline for the younger family members to eventually move into their own space? Be wary of automatically assuming that all family members are on the same page.

Safeguard your financial future

Setting up a multigenerational household can be a great way for a family to save on living expenses. However, if you’re part of the senior generation (such as parent or grandparent), be sure you’re still contributing to your retirement plan or making reasonable withdrawals. You don’t want to compromise your own financial future by covering too many expenses for younger family members. You’re not in this alone, your financial planner or banker is always happy to take a look at your finances with you.

The strategies mentioned in this article may have tax and legal consequences; therefore, you should consult your own attorneys and/or tax advisors to understand the tax and legal consequences of any strategies mentioned in this document. This information is governed by our Terms and Conditions of Use.