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Homeowners turn to lodgers to beat the credit crunch
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Renting out your spare room may seem like a good plan to help beat the financial burden of the credit crunch, but if you don’t do your research before you let you could find yourself out of pocket
The number of homeowners taking in a lodger has increased significantly over the past three years, according to Halifax Home Insurance. The insurer’s anonymous poll of homeowners, completed as part of its Peace of Mind campaign, revealed that lodger numbers have reached 970,000. These figures are in stark contrast to official statistics from the Government’s Survey of English Housing that suggests lodger numbers are as low as 156,000.
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The research from Halifax suggests that financial concerns are fuelling the “lodger boom”. Approximately 200,000 homeowners have taken on a lodger since 2006, with 55% of those surveyed claiming they did so for financial reasons; 17% said they would be unable to pay their mortgage without added income from renting out a room.
Tax-free?
Unfortunately, many of these new landlords are keeping tenants “under the radar” due to concerns about tax implications from additional income earned from a lodger. In fact, under the Government’s “Rent a room” scheme, homeowners can actually earn £4,250 a year gross income, tax-free, from renting furnished accommodation in their main home.
Alarmingly, 74% of new landlords are putting their home and finances under threat by making “unofficial” arrangements with lodgers – and Halifax Home Insurance is urging them to think again.
Rogue lodgers caused £136m worth of damage last year as a result of criminal behaviour or severe neglect of the property, affecting 27% of landlords, while 14% of landlords revealed they’d been left out of pocket by tenants absconding without settling rental arrears.
“Getting a lodger is a great way to earn some extra money to help with the household budget,” said Halifax Home Insurance senior claims manager, Martyn Foulds. “But it’s important to seek advice from your home insurer beforehand, as this can often impact on terms of your cover, and failure to let your insurer know of your changed circumstances could potentially invalidate a future claim.”
Foulds also advises would-be landlords that lodgers will need to get their own home contents cover because their belongings won’t normally be covered by your own.
Published 28 October 2009
