Mario Carrozzo is a respected property entrepreneur and the director of the Caridon Group. This article will look at the UK government’s rent-a-room scheme and how it is driving a rapid increase in households renting out a spare room.
According to a recent article published on The Telegraph, the cost of living crisis has led many people living in the UK to drastically adapt their spending habits. Enabling owners and occupiers to earn up to £7,500 tax-free by taking in a lodger, the government’s rent-a-room scheme is attracting tens of thousands of households to take in live-in lodgers, with 9,523 room-to-let adverts placed in May 2023 alone according to spareroom.co.uk.
During the pandemic, the number of people taking in lodgers declined sharply. However, a recent Mortgage Lender survey revealed that some 7% of respondents had taken in a lodger, with a further 16% considering it.
With interest rates tipped to hit a hefty 6.25% and 1.4 million fixed rate mortgages due to end this year, against a backdrop of soaring food and energy bills and spiralling inflation, people are feeling the pinch. The government’s rent-a-room scheme enables not only homeowners but also tenants to rent out a furnished room, earning up to £7,500 annually without being liable for income tax.
Cohabitas.com is an over-40s room-sharing website. According to research from the website, the recent rise in rooms for rent is largely driven by the rising cost of living rather than interest rate rises. As co-founder Nick Henley explains, older homeowners are likely to have no or low mortgages. Landlords renting out rooms in their homes are typically over the age of 50, and although they own their homes outright, they are struggling to afford their bills. Letting out a room enables them to stay in their home and still keep pace with the skyrocketing cost of living. Conversely, some homeowners who intend to sell may be holding back until property prices increase, and taking in a lodger buys them time.
Living arrangements have drastically changed in the UK. 2021 census data indicates that there were 2.2 million UK households where a resident aged between 40 and 64 had never married, or was widowed or divorced, representing a 50% rise compared with census data from 2001. Today, some 4.8 million people in the UK live without a partner, and for them, room-renting presents an enticing opportunity to ease their financial constraints. With some 21% of London households seeing double-digit rent increases in the last year and average national room rents currently standing at £683 a month, taking in a lodger can be an effective means of boosting household income. In addition, for the elderly, benefits can extend beyond financial incentives, not only generating revenue but also providing company, as well as lightening the load in terms of household responsibilities, with lodgers who sign up to Cohabitas able to achieve a reduction in rent by completing domestic tasks such as dog-walking, gardening or shopping.
Of course, it is vital for anyone considering letting out a room in their home to conduct due diligence, meeting potential lodgers in advance and asking them questions about their expectations and lifestyle to ensure that their living arrangements are compatible. In The Telegraph article, Mario Carrozzo pointed out that there are legal obligations that come with becoming a resident landlord to ensure the lodger’s wellbeing and safety. For example, gas appliances must be checked annually by a Gas Safe registered engineer, furniture must comply with fire regulations, and all electrical systems and appliances supplied must be safe. Landlords are also required to conduct right-to-rent checks in order to verify the lodger’s immigration status.
Although lodgers have few legal rights, experts recommend that landlords draw up formal contracts. In addition, it is important for prospective landlords to carry out careful research to ensure that they understand their local market.
