How do I get level # tenants to be selectable? I keep building the level 2 houses but their pictures are still dark and cant select them even though at hq I have more than 5 tenants. Is there a way to select them?

nvm... got a response. You need to give Computers to your tenants in order for them to make the next level tenants or build a School.

My suggestions:
Build the Gadget Factory, send workers inside it, and have them build a small number of computers. I suggest two or three. Next, go to a level One home, and click on the icon on the right that will order the tenants to collect the computer. Once they have retrieved the computer from the gadget factory, switch them over to building new tenants; you will see that the computer has enabled the "Level Two" tenant option. (Note that they may become more fertile if you upgrade the bedroom). Only AFTER you have built a level Two tenant will it be the right time to build level two homes.
If you build homes and wait too long to put in tenants, they can be destroyed by termites, catch on fire, or be filled with squatter hippies. One option might be to build a level Two home early, place Level One tenants inside, then evict them once you've built some level two replacements. However, it's probably not worth it.
As mentioned above, you can also build a school, which will upgrade tenant level without having to install computers in the homes.