SoulNHealing,I am sorry that you are having problems with your living situation. If I understand it - you live with another person in their house yet you are babysitting your niece in this other person's home. The owner of the home has had some input into how she feels the niece should behave while she is under her roof and you feel this person has no right to speak up as you are the one getting paid for caring for the child.
This is a communication problem and I am wondering what kind of agreement you made with the person that owns the house before you took on the babysitting job.
It feels to me like the owner of the home has the right to speak up about what is happening in her home if she has concerns. Any chance you could go to your niece's house and babysit there?
You need to do what is best for you and this whole babysitting job is causing you much stress as well as it is stressing the relationship of the homeowner.