September 27, 2010
Jesse and Ben Ladorimak, who are 34 and 37, commute to their remodeling business in San Francisco from tree-lined Palo Alto where they live in a Tudor-style home they share with their three-year old daughter. Ben’s mother has a one-bedroom apartment next door and Jesse’s parents occupy a cottage out back. Ben’s mother provides childcare, and Jesse and her mother manage the finances for the 7,500 square foot property, which includes a 2,800 square foot building and the smaller cottage.
“All our friends say, ‘I could never do it,’” says Jesse about their household, laughing. The housing boom flourished on the idea that home ownership is the American way and bigger is better. Now middle class, and even some wealthier families are coming together, as they face diminished savings, lower home values and rising costs. Living together pools resources and can provide security in uncertain times. “We need a declaration of interdependence in this country,” said John L. Graham, co-author of Together Again: A Creative Guide to Multigenerational Living with his sister, Sharon Graham Niederhaus.
According to Census figures from 2006, the most recent available, seven percent of American households with children included three generations. That number may have increased during the recent economic downturn, as people from both ends of the age spectrum joined relatives. About a third of Americans aged 18 to 34 now live with a parent. Sometimes a grandparent and grandchild come together. Reba Goodman invited her grandson, Sam Dash, 23, to join her last fall when he complained about bedbugs in his rental apartment. A year later, he continues to share her home in Englewood, New Jersey, rent-free while juggling two part-time jobs and paying off student loans.
Gaming the Housing Market
As foreclosures soared in California last year, one three-family household in Fairfield easily met its loan payments. When Joe Shilts developed Parkinson’s, his daughters Teresa Lavell and Bernadette Curry felt their mother needed help. Their childhood home was too big for their parents and both sisters had families that were outgrowing their own homes. They decided to sell all three houses and hired an architect to design a new 6,000 square-foot house to share. Each family has its own living area and deck overlooking a grassy hill and a pool. In their father’s last year, “we were here to do anything he needed,” said Lavell.
At $1.4 million for land and construction, the new home cost less than $500,000 per family, a deal in this pricy region north of San Francisco. They are paying slightly more on their joint loan than they were in their old homes, but living more comfortably. All agree they’re more financially secure. Although it was tough to convince a bank loan officer to gamble on the large idiosyncratic property they planned, they pointed out they had three breadwinners to carry the risk. Last year, when all three suffered drops in income of 10 percent or more, the household had a buffer in a joint savings account built up to cover any job loss.
The recession proved the strength of the Palo Alto clan as well, as sales in Jesse and Ben’s business, Teevan Restoration, dipped. The arrangement they designed helped make things easier. When Jesse’s parents, Bob and Marguerite Fletcher, a school teacher and artist, bought the family home, it included two rental apartments with separate entrances in the main building and another apartment over a three-car garage, which they also rented out. In 2002, Jesse and Ben took over one apartment and paid rent. Their income grew, their daughter arrived, and when Ben’s mother, Sylvia Seibert, retired from her job in Pennsylvania, she moved into another apartment, contributing childcare instead of cash. The Fletchers expanded the garage and moved into what became a two-bedroom, two-bath cottage. The Ladiromaks now occupy a four-bedroom space in the main building.
Plugging the Pitfalls
Merging households and generations can save a bundle of money, but there can be tension, starting with legal rights. Having a very clear, written ownership agreement could help, especially to clarify matters for siblings or other relatives who may not be included. The authors of Together Again advise families to hold regular meetings, however informal, and be candid when it comes to pets, parties, housekeeping, and childcare.
Last year, Jesse and Ben bought the whole property, taking advantage of low interest rates to assume their own mortgage. They previously had a contract with her parents for the younger couple to buy the property over time, making interest-only monthly payments at 6 percent, then a higher-than-market rate, and small annual principal payments.
A contract stipulation giving the Fletchers a lifetime right to remain on the property for free still holds. The Fletchers, who are 63 and 62, now hope to retire in a few years. Marguerite also says she feels more secure knowing her own 92-year old mother, who chose an assisted living facility nearby, has the option of joining them if her money runs out.
Authors Graham and Niederhaus report that when it works, extended-family life makes people happier as well as potentially more secure. Anna Lebowitz, for example, had lived alone most of her life before she found herself in an assisted-living facility after a fall. Her pension as a nurse covered only half the monthly cost and her savings ran out after a year. She now lives in Teaneck, N.J., with her niece, Ellen Schwartz, and Ellen’s husband, Al. They had planned to help her pay for assisted living but “the fall in the stock market really killed us,” said Al Schwartz. “We would have had to sell our house.” They asked, “Do you want to live with us?” he recalls. “She said, ‘When do I pack?’” Lebowitz turned 90 in August. “It was the best birthday I ever had,” she said.