Homeowners rent rooms to stave off foreclosure

February 15, 2010 at 12:00a.m.

San Jose Mercury News

SAN JOSE, Calif. — Reeling from the recession’s one-two-three-punch of job woes, climbing mortgage payments and evaporating equity, desperate homeowners are dipping into a nearby income stream to avoid foreclosure: that bedroom just down the hall.

Though renting out a room has been around for years, sharing a home in order to save it has become an increasingly popular way to hang on to the front-door keys to the American dream.

“I’m up against a wall and I had no other place to turn for income,” said Rafael Porras, a 50-year-old waiter who began renting out a room in his downtown San Jose condo this month after he was squeezed by pay cuts at work and a mortgage payment about to rise. “But I had to do it because I don’t want to walk away from this place.”

Whether they’ve rented out rooms in the past to make ends meet or a job loss has prompted them to tap into their inner landlord for the first time, many people say their rental income is the only thing keeping them from losing their homes. And for many homeowners — even those whose property is worth less than their loan amount — losing their home is not an acceptable option.

“I can’t imagine life anywhere else,” said 71-year-old Margaret Licon, who bought her San Jose house 40 years ago and raised six kids in it before losing her husband 25 years ago. With no job, dwindling savings and rising loan payments, Licon now relies on a houseful of renters to stay afloat — a couple with three kids, an ex-Marine with health problems, and two grandsons shoe-horned into the garage.

“Without my tenants, I couldn’t make it,” said Licon, who’s hoping her lender will modify her $400,000 loan. “But I’ve been here so long, this house is a part of me. I’d even move into my garage and rent out my own bedroom if it meant keeping my home.”

Though it’s hard to know precisely how many struggling homeowners have turned to renting out rooms, housing advocates have seen a surge in the past year in the number of people desperate enough to give it a try. Especially among the recently unemployed, rental income — along with family loans — has become a godsend.

“Renting out bedrooms is a growing trend,” says Sunnyvale, Calif., housing counselor Maritza Wong, who works for the nonprofit Project Sentinel. “And it’s not just lower- income people doing it, but even people who were making good money before losing their jobs.”