Cost of living crisis: could taking in a lodger help you pay your bills?

Renting out a room may bring in extra cash and offer someone an affordable home but here’s what you need to know

Are you looking to boost your income because of a higher mortgage or energy bills? Maybe you would welcome an extra pair of hands around the house or are keen to support someone struggling with sky-high rent?

The cost of living crisis means companies that connect people with spare rooms to those looking for a more affordable place to stay are gearing up for a busy season as more people consider taking in a lodger.

There has been a 30% increase in visitors to the site Monday to Friday in the last three months, while Matt Hutchinson at SpareRoom says that while people have been renting out rooms for years to make extra cash, it expects lots more homeowners to take in a lodger in the coming months to help with rising bills.

Unlike a tenant and landlord setup, a lodger shares your space and home, living alongside you in your property for an agreed amount of time but does not have any exclusive entitlement to any part of it. They also have fewer rights than a tenant, a licence rather than a tenancy agreement, and there are no expectations on a “landlord” to give a long notice period to end the arrangement. They also do not need to use a deposit protection scheme.

If you are keen to explore having a lodger, there is plenty to consider.

Why do you want a lodger?

It may be as simple as earning a bit more cash, although bear in mind that having a lodger has its costs, too. For example, those living alone will lose their single occupancy discount on council tax (25% off their bill) unless, for example, the lodger is a full-time student at college or university. You will also need to factor in their energy, water and broadband use, as well as things such as cleaning.

Increasingly, people are looking for lodgers for company and valuable skills.

Jane McNamara, 51, a schoolteacher, has shared her home in London with 27-year-old mature student Vee since February last year. In return for affordable room rent, Vee does some childcare and also helps look after her dog.

“I am a single parent and want to go out sometimes but babysitting is expensive and my teenager doesn’t need interaction,” McNamara says. She believes having a lodger is really worth it. “I’m really happy with the arrangement. It’s also allowed us to have a dog, as Vee is in a lot during the day. We will keep having one in future. She’s really nice and I’ve enjoyed chatting to her a lot. I was worried about sharing a bathroom between three of us but it’s been fine.”

Jane and Vee
Jane has shared her home with Vee, who helps to look after the dog, since February 2021. Photograph: Hapipod

Meanwhile, Gaynor, 65, took in Christy, in her late 30s, when she was recovering at her home in London after surgery and needed help with shopping and chopping food, as well as wanting the extra company.

In both cases they connected through Hapipod, a site launched last summer as a way to reduce midlife loneliness while enabling key workers and students to find less expensive accommodation close to their universities, hospitals and other places of work.

“It is all about offering an affordable way for people to find an ideal home-share that will create mutual benefit and enable both parties to live their best home lives,” says Andrea Frankenthal, Hapipod’s founder.

Christy and Gaynor
Christy and Gaynor connected through Hapipod. Photograph: Hapipod

“There are 3.4 million young adults alone who cannot afford market rents and who would happily offer some of their time to such activities in exchange for affordable rooms.”

How much can you charge?

Hapipod asks people to charge between £250 and £350 a month for a room, and in return lodgers agree to eight hours a week for activities, from gardening to shopping, DIY, babysitting, or company for things such as a game of tennis or a trip to the theatre. The help provided has a value of roughly £400 a month based on the hourly minimum wage.

If you are looking only to let a room, do some research by browsing other adverts, on sites such as Gumtree, for the going rate in your local area.

SpareRoom has a rental data index based on what you can charge for a room: at the moment it is an average of £857 a month including bills in London, and £626 in the rest of the UK.

Judy Niner, a co-founder of Monday to Friday, says that if you are letting out a room during the working week only, she recommends charging four- to five-sevenths of a full-time rental. So, for example, if a room in a property such as yours would normally cost £850 a month full-time, offer it at about £500 to £550.

At the moment in particular, also consider adding the cost of bills into the equation.

“Lodger landlords more commonly include bills in their rent as it makes things easier and everyone knows where they stand,” Hutchinson says.

Kellie Steed, a mortgage expert at money.co.uk, says: “It may take some time and trial and error to charge the right amount, as you get to know how much your lodger will be using the gas, electricity, water and broadband. If it is just you and the lodger in your home, start with a 50/50 split of bills, but if you find them to be out a lot while you are home, consider lowering their costs by 10% to keep things fair.”

You can earn up to £7,500 a year, or £625 a month, tax-free as part of the rent a room scheme. Anything above this and you will need to fill out a self-assessment tax return.

Check with your mortgage lender or landlord first

“With mortgage rates as they are, we’re seeing a lot of customers asking about ways in which they can make their mortgage payments easier to manage,” says Rosie Fish at the mortgage broker Habito. “One way to ease the load is by taking in a lodger.” Most mortgage lenders have no issue with homeowners doing this, she adds.

But there may be conditions: “Some lenders explicitly state that there must be no formal letting agreement. As a rule, you should always inform your existing lender of any changes to your financial circumstances.”

You might find that if you are remortgaging at the moment you could get a slightly bigger loan by taking in a lodger, too. A handful of mortgage lenders will accept lodger income as part of the affordability assessment, where the lender looks at how much income you have to decide how much to let you borrow.

Fish says Santander will use 60% of a lodger’s rent to support a mortgage application, although it will need at least three months of bank statements showing payments from the lodger.

Darlington Building Society takes into account 75% of up to £7,500 of lodger rent each year, while Foundation Home Loans and the Loughborough and Vernon building societies will consider 50% of lodger income, and Norton Home Loans and Vida Homeloans will consider accepting 100% of lodger income.

“In reality, lodger income can only really be taken into account for remortgages, as lenders will expect to see evidence of the homeowner receiving payments,” Fish says. “For new mortgage applications, lenders will usually support a home purchase where the owner intends to take on a lodger. But they won’t take the projected income derived from the lodger into consideration as part of the application.”

If you rent, either privately or as a social tenant, you will need to get the permission of your landlord. If you are a social tenant, you could ask your landlord if they have a scheme to help you find a lodger.

There could be an impact on benefits

Bear in mind that taking in a lodger can affect the benefits you receive. If you are on housing benefit, for example, the first £20 of weekly income from a lodger is ignored, plus 50% of anything over £20 a week, if you provide food for a lodger.

If you are on universal credit, any rent from a lodger is not treated as income, so it won’t affect payments. But you will be subject to the bedroom tax – the room the lodger is in will still be counted as spare, meaning you will get a deduction on your housing element.

Close-up of a fictional website inviting users to enter details in order to get a quote for home insurance.
Have you thought about how taking in a lodger could affect your home insurance? Photograph: M4OS Photos/Alamy

Don’t forget about your home insurance

You will also need to contact your home insurer, as your policy could become invalid if you take in a lodger. Insurers consider them an “extra risk”, says Helen Phipps, a director at Comparethemarket. The theory is you might be unlucky and get someone who is careless, causes damage or even steals from you.

“You may not need to take out a separate home insurance policy but you’ll likely need to change your existing one to take the added risk into account,” she says. “Your lodger may also want to take out contents insurance to cover their own possessions, too.”

You also have obligations to make your home safe. For example, furniture must comply with fire safety regulations, and you need to make sure gas appliances are checked every year and that all electrical appliances that a lodger may use – such as a kettle and toaster – are safe.

You could consider creating an inventory for a lodger’s room and any shared spaces, listing the inclusion and condition of furniture or appliances.

Draw up an agreement and ask the right questions

Whether you are advertising on a site such as Gumtree, Facebook, Monday to Friday or SpareRoom, or have heard through word of mouth that someone is looking for a room, make clear at the outset what you are offering in an advert and then in a written agreement.

Think of the process as like being on a dating site. “The main thing to remember is that it’s not just a financial transaction – you’ll be living with the person you rent the room to, so it’s really important you take your time to find the right lodger,” Hutchinson says.

Tips from SpareRoom include spelling out in the advert what type of person you are and would like to live with, as well as providing information and pictures of your property. Meet in person and show them around before agreeing anything. Consider their working arrangements: will they be working from home or out of the house most of the time? Will they have a partner staying over?

Be upfront about expectations around house rules – particularly when it comes to cleaning. “Cleaning is often the biggest issue,” Hutchinson says. “So when you meet, be open about how you like to keep the house to check if this is compatible.”

A man looks at the SpareRoom website on his iPad tablet device, shot against a wooden table top background
The website SpareRoom says spell out in the advert what type of person you are and who you would like to live with. Photograph: M4OS Photos/Alamy

If possible, talk to someone who has experience with lodgers about the best questions to ask. SpareRoom surveyed thousands of lodger landlords and the top questions included: “Why are they looking to lodge as opposed to a flatshare?”, “What bugs you about living with other people?”, “Describe some things that have happened and how you dealt with it”, and “What time do you need the bathroom in the morning?”

Another said: “I ask them to leave shoes out by the door. Depending how they leave their shoes, I know 99% of the time whether that person is suitable as a lodger.”

McNamara thinks having compatible personality traits is crucial. “I am (relatively!) easy-going and positive, and so is Vee. I also wanted someone with a DBS [Disclosure and Barring Service] check as they would be left with my child. Vee is doing a master’s in child psychology so was perfect for me. She and I have a similar outlook.”

She says it is important to be clear about expectations and who will do what housework. “I wasn’t looking for someone to clean my home or cook. It’s a very flexible arrangement for us. Also, the Hapipod agreement document is very clear, so I felt protected by it, although I did get a lawyer friend to check it over.”

‘Dogs are a very good vetting agency’

Rik Ludlow, 67, and his wife, Marianne, 62, both retired from teaching, have been taking in lodgers for more than 15 years.

The couple, who have a six-bedroom house in Nottinghamshire, decided to upsize their property in 2004 in order to open a B&B but soon decided to switch solely to having lodgers because they enjoyed getting to know housemates over a longer period of time.

They have three lodgers at any one time and have made lifelong friends as a result of letting out rooms. From the university student who arrived when she was 18 and was ready to drop out because she was unhappy but ended up staying until graduation and has become “like another daughter” to the couple from China who worked at the university and had a baby while living with them. They have stayed in touch and view the youngster as another grandchild.

Rik and Marianne Ludlow
Rik and Marianne Ludlow live in their property with two dogs and have taken in lodgers for more than 15 years. Photograph: Rik Ludlow

Rik says the most important thing before you agree to take in a lodger is to have them over, sit in your living room with a cup of coffee, and decide if you gel.

“We talk through, warts and all, the ins and outs of living in a shared house, especially with two dogs. By then, the dogs will have given us a signal if they like the lodger or they don’t – dogs are a very good vetting agency.

“Make sure they feel totally comfortable with you, and you feel comfortable with them. Also, give them a get-out clause: say you are very happy to let them go after a week or so if the arrangement is not right for them, or if it’s not right for you.”

“I also don’t ask for a deposit for the first fortnight. We say that if we feel we can trust you to live with us, it seems ridiculous to ask for a deposit, and if we don’t trust you enough that we need to have a deposit, then we’d rather not have you. This has helped several people who have struggled to find a deposit, and it also sets the tone: this is a family home, not a hostel.”

The couple have installed en suite bathrooms, which, Rik says, are worth extra cash – between about £10 and £30 more a week. He adds that lots of lodgers don’t want to share a bathroom.

They have a communal kitchen. The lodgers have their own fridge and cupboard space, and can share condiments: “Four bottles of cooking oil by the cooker is a fire hazard.” There are two living areas: one that lodgers can use freely, and another that Rik and Marianne have as private space. They have cooked and eaten with lodgers, learning and sharing different cuisines, but others prepare food in their rooms or subsist on takeaways.

The agreements are open-ended. Some lodgers have stayed for years but Rik and Marianne explain at the outset that while bills are included, there are no surprises: the contract will be reviewed in line with published inflation figures every six months.

Taking in lodgers has become a financial necessity, they say, but they also value keeping their rents relatively affordable.

“We don’t want to be grasping landlords and lose good relationships. We also feel we should do this morally. We have a big house and see a lot of people struggling, and emotionally we get so much support, enjoyment and satisfaction from being landlords and looking after people. It’s a triple-win situation.”

Laura Whateley

The GuardianTramp

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