I have two closely-related questions:
First:
What are the possible pitfalls of a university employee (faculty or staff) and a student at the same university being roommates?
And, in the event that I need to take on a roommate as a faculty or staff member at a university:
Is it best to avoid living with a student and ask, for example, another university employee to share my living space?
Yes, it's basically allowed everywhere I know of, but there are plenty of situations where it might get weird. On the non-weird end of the spectrum, I was a researcher and manager at my university when my live-in fiancee decided to go to grad school there in a different department. We even got married the summer between the two years of her master's program. There were no problems and no rules that prevented this. We didn't even need to tell anyone about it.
Now, if she had worked for me or enrolled in a class that I taught, there would have been some people we would have needed to tell to make sure that there was no favoritism for her and that everything was fair for other students or employees. She probably would have had to have a different manager appointed for work if I would have otherwise been her boss, etc. Our living situation wasn't the determining factor, but rather our romantic involvement.
If the staff member isn't romantically involved with the student who is also their roommate, then there's generally no issue. However, if the nature of the relationship changes from roommates to partners, then depending on local rules and the proximity of the staff member's job to the student, someone probably has to be notified at the very least and a management plan created in some cases to deal with it. If the student and the staff member aren't in the same department, then there's usually no need for notification at my university.
E.g. if a psychology student wants to room with an admin in the Geology department, it's fine. If a student wants to rent a room from his English professor, then maybe some departments want to know that. If a Physics student wants to date/marry a Sociology prof they will never take a class from, it's very likely that the university needs to know, and they may try to forbid it. And if a student wants to become involved with their PhD supervisor, the university will definitely get to have a say.
As best I can tell, the rules tend to be about who is romantically involved with whom, not where students choose to find their accommodations.
It would be very strange for a faculty member to live with student roommates (setting aside relatives or romantic partners, which are separate issues). It would be considered socially unacceptable in the university contexts I'm familiar with, and it would create at least the appearance of conflicts of interest if there was any overlap between the fields. Even if the students were in a totally different field, it could still be awkward if they socialized a lot with students in the professor's field. This doesn't mean it would be impossible, but I'd strongly recommend against trying it. Even in the best case scenario, people would wonder why living with these students was important enough to be worth the negative attention.
As for staff, it depends. I don't think it would be unusual or problematic for, say, a university IT staff member to share an apartment with some similar-aged grad students. Postdocs are a gray area: it would of course be inappropriate to live with students they might teach or supervise, but otherwise it's much easier for a postdoc to get away with living with students than a faculty member.
No. That leads in to favoritism and special exceptions with students plus a whole lot of other liability issues.
They should live with colleagues that they are not the boss of and do not manage or are managed by.
