The pros and cons of granny flat living

Thinking about granny flat living? Whether you’re considering inviting an elderly parent into a granny flat living arrangement within your own property, or you’re starting conversation with your adult children about the possibility of accommodating you, understanding the pros and cons of granny flat living is essential.

Pros of granny flat living

  • multigenerational living can be rewarding for everyone involved
  • older people can be cared for by family members
  • increased safety and family connections
  • financial burdens can be shared
  • property value can be increased.

Cons of granny flat living

  • family relationships can be damaged if things go wrong
  • unless clear boundaries are established, lack of privacy can be an issue
  • unless financial interests, rights and responsibilities are clearly understood and documented, it can lead to legal issues
  • the approval process can be complex, depending on where you live.

To understand the potential pros and cons of granny flat living, there are some key things to consider.

Different local councils have different rules and regulations.

As a general rule, a granny flat needs to:

  • be built on a property that is zoned for residential use
  • be built on a property that is at least 450 square metres in size
  • be the only granny flat on the property
  • be owned by the same person who owns the property’s primary dwelling
  • have a maximum living space of around 60 square metres (this figure varies across Australian states and territories and typically excludes carports, patios and verandahs)
  • have separate, unobstructed pedestrian access.

Depending on where you live, different planning law rules and regulations apply:

Once the planning regulations are taken care of, a written granny flat agreement helps protect the interests of everyone involved.

What is a granny flat agreement?

A written granny flat agreement gives you enforceable rights against the other party. This might include:

  • the right to reside in the property if the child dies
  • the right to recover some or all of your original lump sum if the arrangement falls through
  • the right to transfer your interest to a new property if the home is sold.

According to Owen Hodge Lawyers, granny flat agreements are where “one or both parents are provided with accommodation in the home of an adult child”. 

“The accommodation is usually provided by the child in exchange for some payment, and sometimes the parent will sell their home to pay for a granny flat to be built at the child’s home. In most cases, care is required for the parent or older person, and is in fact the impetus for considering a granny flat agreement in the first place.

Whatever the family arrangements are for security in old age, a granny flat agreement needs to establish a ‘granny flat interest’. There needs to be a transfer of assets/money to the owner of the property in which the parent will live in exchange for a tenancy or ‘life interest’ in their property.”

How will it impact estate planning?

Paying to build a granny flat on one of your children’s properties, means you are adding value to that property. Think of it as an early inheritance payment to that child. Certainly, if you have other children, they may see it that way.

Of course, living with one of your children for several years, and receiving aged care support from that child, may see that transaction even out, but that needs to be reflected and made clear in your estate planning, to prevent your will being contested after your death.

Talk to a lawyer to manage your will to avoid future disputes between your adult children.

Things to think about before moving in with adult children:

Before you agree to a granny flat living arrangement, think about how this change in living arrangements will affect you and your lifestyle.

  • Community connections: If your family lives in the area you live in, community connections will be easier to keep. But if they don’t? If you’re still independent and active, be realistic about what extra travel time and potential isolation from your existing activities and friendships will mean for you. Maintaining strong social connections is important for your emotional and mental wellbeing and leaving them behind can have a negative impact.
  • Pets: If you have a pet, you’ll want to take it with you. Be realistic about what that looks like in the future living arrangements. Concerns about your pet getting along with other pets, any allergy issues with members of the other household, as well as property fencing and security for your pet will need to be addressed. 

The reality of a multigenerational household

Data from the City Futures Research Centre at the University of New South Wales found that one in five Australians are living in a multigenerational household.

For many families, it’s a lifestyle choice that supports better housing affordability, reduced financial pressures, and mutually beneficial family support needs.

It’s vital that, as an older person moving in with younger family members, you don’t feel pressured to be the go-to babysitter and household help, if you don’t want to be. And for older people with existing health conditions that will require ongoing and evolving care needs, it’s just as important that arrangements are understood and accommodated.

Living with extended family can have many positives but the downsides can include dealing with noise, lack of privacy, and lack of boundaries.

  • Finances: Buying a bigger house for your children with the intention of living with them, building a self-contained unit on land owned by your adult children, or giving your children a lump sum payment to live in one of their spare bedrooms is known as a ‘granny flat interest’. A granny flat interest is created when assets, money (or both) are exchanged for an ongoing living arrangement in a property owned by someone else.

If you are thinking about granny flat living in your retirement, make sure you get professional advice to ensure your financial interests are protected. Unfortunately, even within families, financial elder abuse does happen. It’s also important that you understand how living in a granny flat could affect the Age Pension.

How much does it cost to build a granny flat?

The cost of building a granny flat on an existing property varies across Australia, and depends on the size and fit-out of the dwelling too.

Generally speaking, if you’re planning on getting a new granny flat constructed, expect to pay somewhere between $100,000–$150,000.

Before you commit to your granny flat construction, have a clear budget and check whether these fees are included in the cost of your granny flat build:

  • surveying and engineer reports
  • building plan/design
  • planning/construction permits and certifications
  • building materials
  • labour and tradespeople
  • fixtures and fittings.

Don’t forget to check what your home insurance covers. Granny flats are, typically, considered ‘home improvements’ to a property and should be included in your regular building and contents insurance. A quick call to your insurance provider can clarify.

Get help if you need it

Despite everyone’s best intentions, moving in with your family might not work out.

If things are getting complicated and stressful, it’s vital to seek support as soon as possible, before the problems get worse.

Family mediation services aimed at supporting older people achieve better communication and working through difficult conversations can make a positive difference.

If living with family members is damaging your relationships with the people you love, the problem needs to be solved. Unpicking the financial responsibilities might be complex but with meditation and legal support, trying to resolve the issue in a way that’s fair and reasonable is a better option than risking losing connections to people you care about.

It’s another reason why a granny flat arrangement is so important before living and financial arrangements are put in place. By making sure everyone’s interests and expectations are clearly understood (and protected), from the start, granny flat living has the potential to be a wonderful arrangement for everyone involved.

Are you thinking about moving in with your adult children? What are you looking forward to about the move? Share your thoughts and experiences in the comments below.

Read more: Don’t let a granny flat arrangement wreck your retirement

Written by Claire Halliday

Claire is an accomplished journalist who has written for leading magazines and newspapers, such as The Sunday Age and Sydney Morning Herald, Australian Women's Weekly, Marie Claire, Rolling Stone, Australian House & Garden, GQ, The Australian, Herald Sun, The Weekly Review, Kidspot.com.au and The Independent on Sunday (UK).

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