We have a housing crisis just now, not everywhere but particularly in London and in some of the other larger cities.
The main problem is lack of available housing. However, this is not always a shortage of actual accommodation that could be used to house people. For example, many people have a spare room which could be rented out to a lodger.
It looks as if the Government is on to this as a possible way to help ease the housing crisis.
Government measures to encourage lodgers
In March a short surprise paragraph in the budget indicated that a ‘sharing economy’ was to be encouraged (discussed here on this site)
In the most recent budget was the announcement of a long overdue increase in the ‘rent a room’ tax allowance, from a pitiful £4,250 to a more encouraging £7,500.
Meaning that from April 2016 homeowners and tenants with permission to take lodgers, will be able to earn an extra tax-free £625 per month. As opposed to £354 as of now.
Why landlords should consider allowing lodgers
Landlords are generally hostile to their tenants taking in lodgers, but you can take in up to two lodgers without creating an HMO and it can help cash-strapped tenants pay their rent.
I think it is something landlords should seriously consider allowing, particularly with known good tenants in financial difficulties. After all, you want to hang on to your good tenants.
Permission to keep a lodger can be coupled with an obligation to do credit checks, give them a lodger agreement and even maybe get the landlord’s approval of the lodger first. It can, with the right people, work very well.
After all the recently widowed Mrs Smith who always keeps her rented house spotless but who is in financial difficulties after the death of her husband, is not (after getting permission to sublet to two lodgers) going to suddenly go mad, subdivide the sitting room and take in fifteen druggies and/or illegal immigrants.
Before I married I took in student lodgers for several years. Some of these were ‘normal’ students studying at UEA (my local University), others were overseas students on a short ‘learning English’ course. These last paid quite well, particularly if you give them meals. Apart from one (there’s always one), all of my student lodgers were lovely.
Then some landlords who do not want to manage their shared properties themselves, delegate this function to a trusted tenant, who deals with renting out the other rooms in the house on a lodger basis. This can work very well – assuming the tenant in charge is up to the job.
Good tenants who have lost their jobs may be able to carry on paying their rent until they get a new job with the help of a lodger. It can also be a financial lifesaver for remaining tenants where one of their number wants to move out. If the lodger fits in, they can then be added to the tenancy agreement as a tenant at renewal.
It all depends on making sure that you have good tenants and lodgers.
Obviously you need to be careful and keep a close watch on who your tenants take in as lodgers. However, that said, it can work very well. If not, there is always the option of getting the property back under section 21.
So landlords, if your tenants ask for permission to take in a lodger – don’t dismiss it out of hand. It could be financially worth your while to say ‘yes’.
Note – if you are considering renting a room to a lodger, you will find a lot of free guidance here.