Around 1975 my teacher read the class a story about a family that moved into a huge house. Their children discovered a family of shadow people living in the backyard. The living children can see the shadow people because of their size – the shadow people can only be seen by living people whose size is smaller than their own. I couldn’t get the concept of the book and my teacher, whom I adored, was a large woman so she used herself as an example of why the living adults in the big house could not see the shadow people. I have fond memories of the feeling the book imposed but that is all I can remember of the book.
What you remember doesn’t quite align with the title I’m thinking of — to see the shadows as people rather than shadows you have to wash your eyes in the water from a particular fountain also in the backyard — but the feeling is right and how many books about living shadows can there be? So you might see if Betty Brock’s The Shades is the book you remember.
This is probably The Shades, by Betty Brock. Do you remember a dolphin fountain, where the magic came from?
Thank you for your comments! I will buy the book and see if it is it!