I just made 3 sims, two young adults and one teen. The teen and one of the YA are supposed to be siblings, but the only options are "housemates" or "child". Why is this? Any way around it?

Because the parent/child relationship is the only one that you're offered, the only way I've found to do it is this: create one of your Sims' parents, set the parent/child relationships, and then the sibling relationships will happen properly. (But then you need to decide what to do with your otherwise-unsought parent Sim. I don't feel good about detonating them.)

* Reveal Secret
Your question points to the real reason that my two canonical Sims aren't biological sisters. It led to a whole elaborate back-story about my adoption and mysterious unknown origins -- because that makes for a better story than "novice player only knew how to set it up that way."

I was sure that that was already a feature... jumped into my game and found out that I can make teens and YAs siblings. Do I have a mod that makes this possible or..? No idea that wasn't possible in the vanilla game.

Well! now I'll try it again and see. Maybe it came in with a patch? Or maybe I was just Doing It Wrong somehow... I will check...
EDIT: Same for me as it is for OP. I'm offered two choices: the Teen can either be a child of the YA, or a housemate.

Some mod makes it possible! ...I just have no idea which.

I think you can work it with Nraas Master Controller. I often use it to create nephews, nieces, cousins, uncles, aunts or whatever. But it does frequently call for the annihilation of some superfluous relative.

I've usually did r_deNoube's method of making sims just to create the relationship, and then delete them using NRAAS's no fuss, no grief method of killing sims. Like make grandparent, make parents, make children - start game, wack the older generations, and voila! Cousins.

Some relationships can be made in NRAAS too, but not all, and like as been said... your non-mod choices are limited. For example, IRL, I'm an elder with a child. Can't do that in The Sims.

AwesomeMod allows you to do this. I ran a test just to be sure.
All you really need to know are the Elder options. You can work everything else out from them:

Elders can be Parents/Siblings/Housemates to any age, including Toddlers.
Elders can be Parents/Siblings/Housemates/Spouse/Boyfriend or Girlfriend to Adults, Young Adults and other Elders.

But because I drove myself crazy typing it:

Adults can be Housemates/Parents/Siblings to Teens, Children and Toddlers.
Adults can be Housemates/Parents/Siblings/Spouse/Boyfriend or Girlfriend to both Young Adults and other Adults.*
Young Adults can be Housemates/Parents/Siblings to Teens, Children and Toddlers.
Young Adults can be Housemates/Siblings/Spouse/Boyfriend or Girlfriend to Elders, Adults and other Young Adults.**

*Adults can be Children of Elders. They can also be the Spouse of an Elder.
**Young Adults can be Children of Elders. They can also be the Spouse of an Elder.
Please also note that the aging span of any YA that is a Parent to other YAs will be pushed very far towards the end of the bar when such a relationship is set in CAS and when the selected household is placed in-game. I'm not going to go into specifics for the other ages again, but you get the general idea.


One last thing, in case anyone was thinking that I lost my mind or that their eyes deceived them:
Adults can be Parents of other Adults.
Young Adults can be Parents of other Young Adults.
I leave the logic up to you. ***

***Though I suppose that this is very logical indeed for custom age lengths.

Because Maxis/EA apparently didn't think about that and jut assumed we'd all want to make to make standard families. I always found it ridiculous but CAS has always bene restrictive in creating families outside of a standard model

The way around it sort of is without a mod is to make one young adult and two teens in CAS. Set the teens up as siblings. Move the family into a house, have the teen have birthday and age them up to a young adult. In the end you end up with two young adults and one teen with one young adult as a sibling to the teen.

You can also do this with NRAAS master controller using the age up command.