。
She lives right next door to us.
Literal
She [topic-は] our next-door [in-に] is-living.
A polite (~ます) sentence reporting where someone lives. 隣 alone (without 家) is enough to mean 'next door' — Japanese readily drops a redundant noun when context makes it clear. 住んでいます is the polite stative form of 住む ('live, reside'); the verb almost always appears in the ~ている form when describing where someone currently lives, since residence is treated as a continuing state rather than a momentary action. The desu/masu register suits everyday polite speech — talking to acquaintances, neighbors, or someone you don't know well.