More than half of young home buyers would consider renting out all or a portion of their home to produce additional income, a new report from Zillow shows.
Young home buyers, who more often struggle to afford a down payment and mortgage, are leading the surge in “house hacking” – renting out part or all of a home for extra cash.
A recent Zillow survey shows most Millennial (55%) and Gen Z (51%) buyers find it very or extremely important to have the opportunity to rent out part of their home for extra income while living in it.
That’s compared to 39% of all homebuyers, which is up eight percentage points in the past two years.
“Younger homebuyers — mostly Gen Z and Millennials — are especially into the idea of rental income as a key factor in their home buying decisions,” says Manny Garcia, senior population scientist for Zillow, in a release. “For those first-time buyers navigating the ‘side hustle culture,’ where a regular 9-to-5 might not quite cut it for homeownership dreams, rental income can step in to help with mortgage qualification and smoothing out those monthly payments.”
Zillows research shows that Latinx buyers are more strongly inclined to rent out a portion of their homes than all other racial groups.
Among Latinx buyers, 51% expressed interest in renting a portion of the home for additional income while residing in it, followed by 46% of Black buyers and 40% of white buyers.
To empower homeowners looking to generate income, Zillow developed a suite of tools, available through Zillow Rental Manager, including free listings, pricing suggestions, background checks, online applications, and state-specific lease generation.
These resources provide comprehensive support for those seeking rental income from their single-family or multi-unit properties.
In October the Federal Housing Administration (FHA) announced that mortgage lenders can now count income from accessory dwellings when underwriting Federal Housing Administration (FHA) loans.
The new policy aims to “help households of more modest means maximize the potential benefits of homeownership to build wealth,” says Julia Gordon, assistant secretary for housing and federal housing commissioner for the U.S. Department of Housing and Urban Development, in a statement. “This new policy also contributes to the supply of affordable housing in many neighborhoods where it’s most needed and least available.”
The new rule allows lenders to count income from small units of housing built inside, attached to, or on the same property as a primary residence.
By allowing the inclusion of rental income from the accessory dwelling unit (ADU) in the borrower’s qualifying income, more borrowers will be able to qualify for FHA financing.
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