Cash-strapped Brits cash in on lodger boom

Cash-strapped Brits are taking in lodgers in record numbers in order to keep their finances afloat.

Almost a million Brits are letting out a spare room this year, twice the number who did in 2011, according to new research from LV= home insurance. This boom is mainly being driven by the economic climate with over a third (36%) of these live-in-landlords saying they rent out rooms to boost their squeezed incomes. Three in ten (28%) say they need the rent to pay their bills and 15% are using it to pay off their mortgages or other debt. The recent cuts in state benefits are also having a knock-on effect with a small number (4%) saying they use the rent to cover the income shortfall from their reduced benefits. 

The demand for rented accommodation can be attributed to high property prices and a lack of available mortgage finance. More than two thirds (66%) say they rent a room because they can't afford to buy property of their own. And as home ownership is becoming less attainable for many, some lodgers are finding themselves renting much later in life. The average age of a lodger has now increased to 29 and 6% of lodgers now aged between 45 and 54.

While lodgers may be renting for longer, they are also demanding more flexible tenancy agreements. The research shows that the number of lodgers who rent for a period of less than six months, or for just part of the week, has increased by 13% in the past 12 months. These lodgers are most likely to be people the homeowners know socially or through work, as well as young professionals (18%), students (18%) and temporary workers (4%).

Today's live-in-landlords appear to enjoy this flexibility as much as their tenants. The majority (70%) of landlords say they prefer part-time lodgers to their full-time equivalents. A third (33%) of these say this is because they like having their own space and a similar number (29%) say that having a part-time lodger is less of a commitment than having a full-time lodger.

Renting out a room, even on a temporary basis, can be very profitable for homeowners with a spare room available. On average, a person renting a room pays £400 per month which soon adds up. Under the Government's rent-a-room scheme homeowners can receive up to £4,250 a year as a tax free income from the room rent. Yet despite the financial gains, homeowners should exercise caution when they invite new people into their homes. A fifth (20%) of live-in-landlords say that their last lodger damaged their property and one in 10 (9%) said that some of their possessions went missing while the tenant was living there. More than a fifth of people who have had a lodger (22%) report their tenant left appliances or utilities on, such as the lights, TV or gas, costing them money in wasted energy. A significant number also reported that their lodger didn't take precautions to protect the premises against burglary. One in seven surveyed said their previous lodger frequently left the windows open (14%) and more than one in ten (11%) said they often didn't lock the door properly.

Vetting any potential tenant and ensuring there is adequate insurance in place should be high priority for any homeowner thinking of taking in a tenant but many take a blasé attitude to letting. Four in ten (40%) say they don't always check references and two thirds (62%) haven't updated their insurance since taking in a lodger, potentially leaving themselves out of pocket should the worst happen.

John O'Roarke, managing director of LV= home insurance, comments: "As people struggle to keep on top of their bills and mortgage payments, it makes sense to look for other sources of income. For homeowners that have a spare room, taking in a lodger can be a great way of getting in some extra cash. However there are always risks involved when renting a room and all those considering taking in a lodger should vet potential tenants carefully and make sure they have suitable insurance in place."

For further details, log on to lv.com.