No one entering my house for the first time would wonder for a second whether we have kids. One good clue is that most of the artwork was created with washable marker and is hung at eye level for a medium-size dog. Upon closer inspection, it's clear that the play spaces occupy roughly half of the home's square footage (2 adults, 2 kids; seems fair). Without suggesting that everyone give their kids the run of the place, like we do, it's safe to say that creating dedicated play spaces is invariably good for both kids and parents, even if it might mean your house will never make it into Metropolitan Home magazine.
Call me old school, but I think concrete is a lot more fun than carpeting. I grew up skateboarding and riding bikes in the basement, which were possible only because my parents never finished it. As a large concrete box, an unfinished basement is the ultimate rumpus room. And it means you always have the option of saying, "Don't do that in here. Do it in the basement." Of course, a finished space makes a great hangout for older kids and a relatively safe play area for toddlers. The important thing is to keep it simple. Don't make the mistake of turning your basement into another living room where you have to worry about stains and climbing on the furniture. Think: durable, washable carpet and secondhand furniture. Also, try to keep the space as wide-open as possible. Open areas facilitate so many types of play, and they're so rare in most regular living spaces.
Art and Craft Space
If your kid is the type who goes nuts with the glue stick and glitter, you know it can be hard to manage the mess and accumulated artwork. A dedicated studio space can help on both counts. Choose a corner somewhere for a kid-size table (one that can be painted and drawn on), a supply cabinet (a cheap, plastic drawer unit on casters works well), and ample wall space for displaying artwork. Let the kid decide which pieces are display-worthy and which can be archived (after a suitable waiting period, the parents secretly decide which stored pieces get pitched). In general, do what they do in preschool: set up the space so kids can create a lot of different things and make a huge mess as needed, but enforce a strict "clean up when you're done" rule.
Lofts come with two things that all kids love: enclosure and elevation. Hanging a blanket over the space under a loft makes an instant fort or hideout. And for some reason, most ordinary activities are a lot more fun if you can do them above the floor (or ground, as with a treehouse). Lofts are especially fun and convenient for sleepovers. A basic loft can be little more than a platform on posts, with a ladder and guard rails, while fancier versions can incorporate sleeping accommodations into an indoor playhouse. It all depends on how much you love your kids (just joking).
If your kid seems destined to be the next Kelly, Midler, or (yikes) David Copperfield, a performance space could be the best gift they ever get. Basements are great for building a low stage with a simple 2 x 4 frame covered in plywood. Hang a long curtain rod (or a taut cable) from the floor joists above and add some black bed sheets for a real stage curtain. Ideally, a stage spans across one section or alcove of the room and is set a few feet in front of a wall for a private backstage area. On a smaller scale, puppet show stages can be lightweight and portable. They can be constructed with PVC (plastic) plumbing pipe and draped with fabric for decoration and a stage curtain. Another option is a three-paneled, foldout stage/scene made with plywood and basic hinges. For an instant sound system, a portable karaoke machine is great for all sorts of live performances and makes a kid feel like a star (even when no one else is in the room; it's hilarious).
Get the Kids Involved
As with games and virtually anything else involving imagination and creative thinking, kids are more likely to use a play space if they get to help design it. Parents are wise to make suggestions (and use whatever coercion they feel is necessary), but it's important to let the kids include personal touches, even if these happen to be neon-pink paint and built-in furniture for stuffed animals.