Lodger supply declines as scheme could free up millions of empty rooms

Lodger landlords continue to drop as organisation calls for Autumn Budget to raise Rent a Room Scheme threshold to £11,000.

Data from SpareRoom reveals that UK lodger room supply has fallen by 1.7% in the year to Q2 and has remained flat for two years.

Under the Rent a Room Scheme, homeowners and landlords can currently earn up to £7,500 a year tax-free from letting out furnished accommodation in their main home. The flatshare website says the threshold should be raised to £11,000.

Supply is down

According to the data, flatshare supply is now in decline, having fallen by 3.2% in the year to Q2.

SpareRoom says lodgers offer a cheaper alternative, with the average UK room rent currently standing at £761 per month.

However, the average UK room rent based on lodger ads alone is £729 per month, providing an annual saving of £385. SpareRoom says this could be particularly beneficial given that there are an estimated 28 million empty bedrooms across England, Wales and Scotland.

Freeing up just 5% of these rooms would provide desperately needed rented accommodation for 1.4 million people.

Matt Hutchinson, director of flatshare site SpareRoom, said: “Supply is down, which has already forced room rents to record highs in most regions. The trouble is, rents were already well above the ceiling of affordability for far too many people.

“Flatsharing is the cheapest way to rent, so when room rents are out of reach, people are running out of options”.

Ease pressure on housing crisis

Mr Hutchinson adds raising the threshold for the Rent a Room Scheme will ease pressure on the housing crisis.

He said: “Incentivising the use of under-occupied housing stock is a no-brainer and may be the fastest way to reduce intense pressure in the rental market, while boosting household finances, too.

“There are two ways to do that: increase the tax-free income threshold to reflect rents today, not in 2016, and add a 31-day minimum stay requirement to the scheme’s terms, closing the loophole that allows people offering holiday lets to benefit from this tax relief. We have a housing crisis, not a hotel room crisis.

“Raising the threshold alone won’t solve the housing crisis, but it will definitely help, and the effect is immediate, unlike house building which takes years to make a difference.”

The data also reveals that in Greater London, lodger room supply fell by 2.6% and 15% of UK renters and 13% of London renters spend less than 30% of their pay on rent, excluding bills.