Boarding houses have long been intertwined with American culture. The living situation allows property owners to sublet a room in their home and then tenants share common living spaces. The trend was incredibly popular for families struggling to make ends meet during the Great Depression and the activity picked up steam again during the tumulus times surrounding WWII. What is old is new again and McMansion owners are jumping on the subletting bandwagon as a way to avoid foreclosure and as a way to survive the Great Recession.
During the height of the real estate boom in the mid 2000s, a scant 1 percent of borrowers with jumbo mortgages around the million-dollar mark were delinquent with their payments. However, courtesy of the nation's economic slowdown approximately 14 percent of jumbo loan borrowers are now late on their monthly payments (CoreLogic). Instead of this demographic of financially struggling homeowners relying on strategic default to save face, they are opting to open the doors of their sprawling properties to boarders and are using that revenue stream to stay afloat.
Subletting to Stem Mortgage Default
According to apartment sector data provided by MPF Research, renter occupied rates increased by 215,000 in 64 of the largest U.S. metro markets in 2010 and those numbers reflect a doubling of the trend since 2009. This movement is being influenced by the fact that millions of homes have been lost to foreclosure over the past few years and individuals are now opting to rent out of necessity. Owner's of luxury properties are working diligently to avoid become the next statistic and instead are opting to sublet extra space as a way to avoid mortgage default.
Regardless of the market, subletting and boarder activity has grown in popularity. Smart Money reported on the expanding craze and noted that private homeowners in West Palm Beach, Florida as well as Seattle, Washington and Providence, Rhode Island are living like it is 1805 and are taking on boarders as a way to make ends meet. While their are no concrete statistics on how many well-to-do owners have converted to landlord status, Smart Money reports, "Real estate agents say homeowners like the arrangement because they can keep up outward appearances while keeping financial woes hush-hush. Indeed, many homeowners we spoke with didn't want to be written about for fear of neighbors or friends learning they've fallen on hard times."
According to the Wall Street Journal Las Vegas, Nevada (dubbed the "Riskiest Cities for Homeowners" by Forbes.com) local homeowners are taking a different spin on the approach. Financially strapped homeowners in town have opted to become Section 8 housing providers to generate additional revenue in order to make their mortgage payments on time. In Sin City, low-income tenants are able to move into luxury homes that are new, spacious and feature amenities such as swimming pools and granite counter-tops.
Boarders Force Changes in HOA Rules
While some proprieties of over sized single-family detached homes are free to convert their properties into subletting opportunities, those who are choosing to do so within gated communities are forcing the governing homeowners association to change the rules. Living with a homeowners association requires community members to pay their HOA dues and follow the rules laid out by the board. That ruling body governs community behaviors such as quiet hours, exterior decor and even guest privileges. Many HOAs are now looking to tweak the rules to protect their communities.
According to Pia Trigiani, a property association attorney in Alexandria, Virginia, "...restrictions on rentals—including minimum-stay requirements—are now among the most popular new rules within homeowners' associations," (Smart Money). These changes are considered necessary to maintain the ambiance of the gated communities. Some rules being implemented by various boards including maximum time limits, capping the number of boarders and requiring landlords to pay for background checks on tenants similar to the law just passed by the Banyan Lakes Property Owners' Association (Smart Money).
Become a Mansion Tenant
Shelter is a basic necessity and for those lacking the income to purchase a luxury property out-right, renting a room in a mansion can be a close second. Depending on the boarding house in question, amenities include private viewing rooms, swimming pools, gourmet kitchens, hot tubs and other perks associated with living large. Individuals interested in taking advantage of the opportunity simply need to scour rental advertisements on listing websites and apply for the honor.
It is important to note that despite the opulent environment being a boarder is not for everyone. While living spaces may exorbitant the spaces are communal. Some homeowners have opted to install closed circuit security systems to monitor their tenants activities. Generally, individuals will have to forfeit a bit of their privacy for the experience of being a mansion boarder. Additionally, since many times the landlord is living on site, boarders will have to live by their rules regardless of if it is an over night guest policy or a no smoking rule.
