According to analysis from John Burns Real Estate Consulting, there about 442,000 homes with a spare bedroom, more than half of the roughly 725,000 owner-occupied homes in Denver. Now, not all these spare bedrooms are rental-ready, but there are more of them than you might expect. As part of a much-needed solution for more affordable Denver housing rentals, these spare bedrooms are getting used more frequently. But, arguably, not fast enough. Perhaps even more importantly, What’s more, how they’re getting used may be even more important to the overall effect on the local rental market.
Senior and Long-Term Residents
Part of the analysis from John Burns Real Estate Consulting is an estimated 142,000 spare bedrooms are in homes owned by retirees. Many of these retirees are finding greater financial security, while also being able to stay in their homes, by renting out their spare bedroom. Often to someone who’s looking for a cheaper alternative to a one-bedroom apartment. (Spare bedrooms are often about half the price of an apartment.)
While trying to make long-term homeownership more affordable for seniors, the Colorado Homestead Exemption also indirectly incentivizes seniors staying in homes that are larger than necessary. The exemption allows adults over age 65 who have lived in their homes for 10 consecutive years to have their property taxes cut in half. But if they want to downsize and move homes, they lose this exemption. In fact, in some cases, a senior may stay in one of these homes for the tax exemption, even as he or she can no longer access the entire second floor of the home.
In terms of how to best use Denver’s spare bedrooms, this is what we call the low-hanging fruit.
AirBnB and Short-Term Rentals
The other big outlet and upswing for using spare bedrooms in the home is Airbnb. Even with new restrictions and regulations, which themselves seem likely to be tweaked in the future, many people are generating supplemental income by turning their spare bedrooms into Airbnb and other short-term rentals. In fact, if you live in a Denver metro area city where only owner-occupied homes are allowed to market short-term rentals, your spare bedroom might fetch more per night than you suppose. Of course, the more spare rooms that are used for short-term rentals, the fewer options for longer-term renters.
Even with the breakneck pace of new apartment construction, we need more approaches to fully address the lack of affordable housing in Denver. Renting out the supply of spare bedrooms has to at least be part of the conversation. Both in terms of increasing the practice, but also incentivizing rental practices that are likely to have the best impact on housing costs.