Homeowners Are Using This Hack to Cut Their Mortgage Payments in Half — and Help Solve the Housing Shortage

In 2025, skyrocketing home prices and rising interest rates have left millions of homeowners stretched thin. But a growing number of savvy property owners are discovering a powerful solution: building or converting rental space on their property to generate income and cut their mortgage payments in half — or more.

Known as “house hacking,” this creative housing strategy is not only helping homeowners stay afloat financially but is also quietly becoming a grassroots solution to America’s housing shortage.

🏡 What Is House Hacking — and Why It Works in 2025

House hacking refers to the practice of renting out part of your primary residence — whether it’s a basement, garage, spare bedroom, or a newly built Accessory Dwelling Unit (ADU) — to generate rental income that offsets your monthly mortgage.

As housing demand outpaces supply in cities across the U.S., renters are increasingly looking for affordable, flexible living options. This makes small units, in-law suites, and backyard cottages especially attractive — and profitable — for homeowners.

✅ Why House Hacking Is Booming in 2025:

• High mortgage rates mean larger monthly payments

• Rental demand is at an all-time high

• States like California and Oregon offer ADU grants and tax breaks

• Zoning laws have been relaxed, making it easier to build or convert space

• Platforms like Airbnb and Furnished Finder allow flexible, short or medium-term rentals

💸 How Homeowners Are Cutting Mortgage Payments

Homeowners across the country are using this hack in different ways, depending on their property and local regulations:

1. Building a Backyard ADU

Thanks to new ADU laws, it’s easier than ever to build a tiny home or converted garage apartment. States like California offer up to $40,000 in grants to offset construction costs.

2. Renting a Bedroom or Basement

Even without construction, homeowners are transforming spare rooms or basements into separate units with a private entrance and bath.

3. Converting a Garage or Shed

Detached garages and garden sheds are being turned into micro studios, especially in cities where square footage is at a premium.

🌎 Solving More Than Just Mortgage Problems

While house hacking offers huge financial relief for homeowners, it also contributes to the solution of the national housing crisis.

Here’s how:

• Increases rental supply in high-demand areas without new land development

• Creates affordable housing options in single-family neighborhoods

• Reduces urban sprawl, traffic, and commute times

• Encourages multi-generational living, aging in place, and community support

Cities and states are increasingly supporting house hacking as a scalable, cost-effective housing policy tool.

🧭 How to Get Started With House Hacking

Step 1: Check Local Zoning Laws

Cities like Portland, Berkeley, and Austin have ADU-friendly regulations. Check your local planning office for rules on conversions, setbacks, and permits.

Step 2: Apply for ADU Grants or Incentives

States such as California, Vermont, and Oregon offer financial support to build or renovate rental space.

Step 3: Plan the Layout

Design a unit with privacy and function in mind — separate entrances, bathrooms, and basic kitchenettes make rentals more desirable and compliant.

Step 4: List Your Unit

You can choose long-term tenants or explore medium-term rentals on platforms like Airbnb, Vrbo, or PadSplit.

Learn more about Homeowners are using this hack to cut their mortgage payments in half — and chip away at the housing shortage