Housing: Lodger figures up for seventh year in a row

The number of homeowners boosting their earnings by taking in lodgers has risen for the seventh consecutive year, according to data from the UK’s leading flat and house-share website, SpareRoom.co.uk.

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The number of homeowners taking in lodgers rose by more than a quarter (25.4%) between 2011 and 2012, having risen by 18.4% between 2010 and 2011. The biggest increase in homeowners becoming live-in landlords^[1] over the past year was seen in Falkirk, Scotland which has seen a 28% rise in 2012 compared to 2011. Three other Scottish cities feature in the top 10 – Aberdeen (21%), Glasgow (20%) and the North Lanarkshire town of Motherwell (21%), situated to the south east of Glasgow – as the soaring cost of living saw Scottish homeowners turning to renting out rooms to earn some extra cash.

Meanwhile, in England, Wigan and Derby have seen the largest increase in lodger numbers, with new live-in landlords up 23% and 22% respectively. The following table shows the top ten UK towns and cities for new live-in landlords in 2012 compared to 2011^[2]:

With live-in-landlord numbers continuing to grow, it’s a worrying statistic that more than a third (37%) of homeowners who take in lodgers may not be properly insured, according to a survey of live-in-landlords by SpareRoom^[3]. The poll revealed that a third (33%) didn’t realise that having a lodger could invalidate their home insurance. And almost one in three (29%) live-in-landlords said their current home insurers don’t offer add-ons to their existing policies which would cover them for having lodgers.

In spite of rising number of homeowners becoming live in landlords – helped by the Government in the form of the Rent A Room scheme, where homeowners taking in lodgers can benefit from tax-free annual earnings of £4,250 – a whopping 60% say that finding appropriate lodger insurance is difficult.

More than one in four (27%) live-in landlords have been incorrectly offered landlord insurance – designed for buy-to-let landlords who rent out the whole property to tenants – instead. Meanwhile, 40% have struggled to extend their personal liability cover to include accidents to lodgers or to find cover that includes malicious damage to their possessions or property.

Fortunately, it’s not all doom and gloom. Where their existing insurer was able to cover having a lodger, 57% of landlords reported that this was provided as standard. However, for the rest, obtaining lodger insurance proved a costly business, with 30% reporting a small extra charge and 14% a significant extra charge.

Matt Hutchinson, director of SpareRoom.co.uk, comments: “With the economy still in a fragile state, it’s not surprising that earning some extra cash by renting out rooms in our homes is still proving extremely popular, but there are clearly issues where insurance is concerned.

“It seems insurers haven’t caught up with the trend for lodging as opposed to more formal tenancy contracts, with many offering wholly inadequate policies that make no provisions for the needs of the modern live-in landlord. It is rare for an insurer to provide even the most basic cover for legal liability for accidents to lodgers, loss of rental income, or damage to property.

“As well as being a headache to obtain, lodger insurance can often be very restrictive – most insurance companies who offer such policies often prohibit homeowners from taking in those on housing benefit or students. Live-in landlords should also be aware that in the case of theft, their case will only be considered if there is evidence of breaking and entering.

“The most important thing for homeowners to be aware of is that if they take in a lodger they may be in breach of their existing home insurance policy. If you are planning to take in a lodger, never underestimate the importance of doing your homework and finding an insurance policy which gives you the proper cover that you need.”

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Further Information

• Live-in landlords are those who rent out rooms to lodgers, i.e. those who offer a license to occupy a room in their home rather than exclusive occupation tenancies.

• The table below lists the top 35 UK towns and cities that have seen more than a 10% increase in homeowners taking in lodgers. Source: SpareRoom data collected Jan-November 2011 and 2012.

 

 

• A total of 1,119 live-in landlords were surveyed by SpareRoom.