Living in San Francisco is expensive. Very expensive. Median rent is nearly twice the national average and 81% of homes cost more than $1 million. It is no wonder that many Bay Area natives find their children leaving to live in places like Seattle, Denver, and Austin, where they can afford a house and where salaries, while lower, provide a higher overall standard of living.
This exodus is common for adult children who pursue careers in education, social services, or other valuable but less lucrative professions. More recently, dual-career couples earning six-figure salaries also have difficulty justifying the high rents and inability to purchase even a modest house, especially when they hear from friends who have moved away to find a very comfortable lifestyle elsewhere.
Empty-nester parents who would like their children (and future grandchildren!) to stay in the Bay Area have a few options to help them financially, either directly or indirectly:
• Assist with the down payment: providing a loan for a down payment and gifting the IRS-required interest is a way to help if you have the resources. You can be repaid when the house is sold.
• Let them live with you while they save for a down payment. This trend is happening nationwide, not just the Bay area, with over 30% of 25 – 34 year-olds living with their parents.
• Expand your living space. A growing trend is for parents to add a small outbuilding or other “granny flat” for their grown children to stay in for a while to save money. The space adds to your home value and could be rented out later to provide retirement income.
Co-signing for your son or daughter’s mortgage is not an option we generally recommend. The loan will be on your credit report and can affect your own ability to borrow later. Even when he or she makes the payments on time, the amount borrowed is shown as your debt.
Often this issue arises at a time when you are close to retirement, and you may not feel you have the resources to give large sums to your children. There are other ways to help. One of the biggest things that you can do is to help with childcare and other support to lower their cost of living. According to the Children’s Council of San Francisco, a family with an infant will pay more than $30,000 a year for full-time child care. Helping to lessen those costs can help them devote more to saving for a down payment or other housing costs.
In addition, there are some start-ups trying to solve the down-payment problem. Firms like ZeroDown, a newly launched venture-backed firm provide lease-to-purchase options for houses in the $550,000 to $1,500,000 space in the Bay Area for a $10,000 fee. They’re targeting young professionals (making $200,000-plus) who struggle to save for a down payment while paying exorbitant rent and student loan debt.
In the end, your children may need to move to thrive financially. The plan that many empty-nesters gravitate toward is to build into their retirement plan a strategy to live for part of the year near their children and grandchildren who have left the Bay Area. After all, while housing is often the biggest cost in the Bay Area, the overall cost of living, fuel, food and healthcare are also very high. Many cities, while not offering the spectacular views, landscape and sense of place as San Francisco and its surroundings, may provide a greater quality of life for your money. Especially when you can see your (grand)kids!