If money is not a problem for your DS and DIL then I would quietly set about finding them a choice of places to rent for the duration of their time until they move away. If money is a problem for them I suggest that you seriously consider what it is worth to you to subsidise or pay the rent for them. The current situation is not conducive to peace and it could all blow up to something irretrievable which would be devastating with a new grandchild on the way. It is not your place to choose somewhere for them to stay or whether they keep the deranged cat either so I wouldn't be too keen to give my opinion to them. Be very careful and keep the peace as much as you can.
I wonder what is your DH's position on all this and how did you come to an agreement to take them in and also their cat? 
How do I help my sister to stop feeling like a victim?
Reducing contact because my heart just isn't in it.
Would you think it was odd if a younger person wanted to befriend you?

