I agree with helping with the rent for now. The situation is complicated and you may not solve anything and actually create new problems.

Don't forget about the possibility of having a special assessment in addition to normal condo fees.

Hopefully this whole thing is temporary. I would rather help out with rent with a time limit than buy a place.

No. Do not buy. There are tax complications if you do below market rent. But many other reasons.
Just give his parents money to help them cover her rent.

No. NO. NO. NOOOO.

Watch Judge Judy.

You mention no numbers. Show us the math where buying is better than renting.
You are better off renting a studio for her and having parents, you/DH, and sister pay rent.
DH's sister may be better off never going to school but working a part time job, and concentrating on her mental health.
Physical job that doesn't need to be take home, does wonders for mental health.
Real estate is no always an asset.
Your in-laws have been bad with money, Sil has no money, and now DH is about to make a bad money decision.

I wouldn’t rent to a family member. If I can afford to have them stay for free to help them, I would do it. If I cannot afford, I wouldn’t do it, but I wouldn’t do a business transaction with them.

Seems like a bad idea and I wouldn’t want to get in the middle. Sooner or later everyone will quit paying and you will be stuck having to kick your SIL out.

My husband’s 23yo sister has been struggling to get back on the right path after a prolonged depression / eating disorder. She moved back in with her parents, which was worse for her mental health, and now they’re paying for a studio for her with the hope she’ll go back to school in September. This is financially draining for them.

My husband suggested to me that we, who have greater financial resources, could buy a studio apartment, which we would then rent to his parents.

His parents have a limited budget so they wouldn’t be able to pay the full cost of the monthly payments.

Has anyone rented to family before? Does one charge market price or accept a monthly loss in the name of a long term real estate investment?

I’m ok with a bit of a subsidy but I’m not sure how much, and I don’t want to turn this into a petty money discussion when I know how much it means to his parents, who are very helpful grandparents to our children.

TIA