Research by Total Landlord Insurance reveals that lodgers contribute £57.5 billion a year to England’s rental market, providing a reliable avenue of additional income for homeowners in the face of a cost of living crisis.
Despite this, the latest data shows that the number of households with a lodger has actually declined in recent years. The number of those with two or more lodgers is down 33 per cent while homes with just one lodger are also down 20 per cent.
At a time when money is tight, taking in a lodger enables homeowners to supplement their monthly earnings, dipping a toe into the rental sector but without having to adhere to the stricter rules and regulations that come with a buy to let investment – not to mention the budget required for a second property.
The figures suggest it can be a worthwhile endeavour from a financial standpoint, as the average lodger pays £438 per month for a room, equating to an annual rental income of £5,256.
As it stands, this means lodgers generate £57.5 million a year in rental income and that’s just across England’s rental market alone.
It’s also worth knowing that the Government’s ‘Rent-a-Room Scheme’ allows live-in landlords to earn £7,500 tax-free by letting a spare room in their property if providing furnished accommodation either in their main or only home. You can find out more about the ‘Rent-a-Room Scheme’ at the Government website here.
Things to consider
While taking in a lodger is a relatively simple process, there are a few things homeowners need to be aware of before taking the plunge.
First, your mortgage provider, local authority and insurance provider need to be informed that a lodger will be moving into the home. What’s more, if rental income generated is going to exceed £7,500 a year, HMRC also needs to be informed.
In terms of insurance, there are no hard and fast rules as to how much lodger insurance will cost, but some providers will cover up to three lodgers for no additional fee whatsoever. However, it’s important to get cover that includes liability insurance. This means you’re covered should your lodger try to sue you for an injury sustained within the home, via a faulty electrical outlet, for example.
Total Landlord Insurance’s specialist lodger home insurance policies are able to accommodate up to six lodgers – up to three at no extra cost. Call 0800 63 43 880 for a quote today.
A landlord is not responsible for their lodger’s personal belongings, so if the lodger wants to insure their valuables, they need to arrange it for themselves.
Another serious consideration should be personal privacy. While the lodger will have their own room, they will be sharing the communal spaces in the home, including the kitchen, bathroom, and living room.
The homeowner needs to be sure that they are comfortable with this and then needs to thoroughly vet any lodger applicants to ensure that there is a reasonable personality match and that living together isn’t going to cause aggravation for either party.
Eddie Hooker, CEO of the Hamilton Fraser Group, who operate industry schemes such as mydeposits, the Property Redress Scheme and Client Money Protect, as well as Total Landlord Insurance, says: “With the cost of living crisis continuing to weigh heavy on the nation, a lodger can be a win-win situation. Not only do they bring an additional boost to the household’s monthly income, but lodging can also provide a more affordable path for the lodger, compared to the cost of renting a one bedroom property.
“Despite this mutual benefit and relative simplicity, it’s really important to keep everything fully above board.
“This means ensuring everyone who needs to know about the situation is told in good time, including your mortgage provider and your insurance provider, who should be able to adapt your policy to cover the presence of a lodger.”