The Humble Granny Flat: The Bridge Between Asset Rich and Asset Poor Generations
December 2019
With recent research revealing that Australians aged over 65 have the highest rate of rental poverty, it is understandable that this key demographic is acutely aware of the importance of homeownership. However, many have found themselves in the pool of the “asset rich”, who own their own home outright yet struggle to make ends meet. With the pension not improving at a relative rate of the increased cost of living, many older homeowners are searching for ways alleviate financial pressure so they can remain in their family home.
In addition, these older Australians are often sensitive to the seemingly impossible task of their children saving for their own home. So for many, there seems only one clear way to build a mutually beneficial bridge between the asset rich and the asset poor generations of their family.
This bridge is the beloved granny flat. They are the ultimate extension of the Australian dream. There is a security to owning a small rental property, granted you have the plans and permits to do so. It is a one-stop-shop way to increase incomes of older Australians, while providing affordable housing for their younger family members.
However, something that seems simple naturally comes with potential pitfalls as well. If a granny flat arrangement between family members goes awry, it can seriously compromise the financial stability of the original homeowners. It is important, even with family, to have a legal document that records the financial input of each party member at the time of construction. If not, these disputes can take a great deal of time to resolve in court, resulting in a financial and emotional hardship.
But done properly, cohabitating with family can be the greatest gift to both parties. It can provide company and care for older Australians that are often isolated. It can also be a way for non-homeowners to save money and stay in sought-after areas they could not afford otherwise. Providing a potential win-win financially and emotionally for many families, the humble granny flat may be your best investment yet.
