Raise the Roof – Are Shelter listening to landlords at long last?

Raise the Roof – Are Shelter listening to landlords at long last?

9:25 AM, 10th February 2014, About 8 years ago 19

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According to SpareRoom.co.uk there are around 15 million spare rooms in the UK.

Letting just 10% of these could go a long way towards solving the UK housing crisis.

Against this backdrop I was delighted to read today that housing charity Shelter are supporting a campaign by SpareRoom.co.uk to increase the “Rent A Room” tax breaks which have not changed since 1997. Currently, tenants and homeowners get the first £4,250 a year from renting a room in their own home tax free. The proposal is to increase this figure to £7,500 which makes a lot of sense given the housing crisis we are in.

The threshold is now almost £1,350 below the average room rent in the UK, which stands at £5,593 per year, and a staggering £3,417 under the average London room rent.

If the tax free allowance had risen in line with inflation it would now be at least £6,500 – still considerably below average London room rents. Since 1997, room rents have more than doubled (103%).

Unsurprisingly, there are now no areas of the capital with average rents of less than £4,250 per year – or £354 per month – while just a third (33%) of rooms across the rest of the UK are below this limit. You’d have to go back to 2009 to find a London postcode district with average rents of under £4,250 per year – and that was only one area, E12, according to SpareRoom’s data.

For at least a decade Shelter have alienated the PRS with their anti-landlord propoganda, their rogue landlords campaign and the creation and enforcement of legislation in Scotland, much of which has proven to be pointless even by their own admission. The support of the “Raise the Roof” campaign is certainly a step in the right direction for the charity but they need to do a lot more in order to win the hearts and minds of the PRS in my opinion.

Matt Hutchinson, director of SpareRoom.co.uk comments: “We’re in the middle of a massive housing crisis in the UK with house prices and rents becoming unaffordable. Everyone agrees we need to build more but we also need to be clever about how we use existing stock.

“Homeowners are sitting on an estimated 15 million spare bedrooms in England alone2. Encouraging them to let those rooms by raising the Rent A Room Scheme threshold will not only help them cope better with the cost of living crisis, but will also go some way to solving the supply issue. Raise the Roof - Shelter

“The current threshold discourages people from letting rooms because they’ll have to spend time filling out tax returns. Increasing the Rent A Room limit to reflect the market will act as an incentive to many cash-strapped homeowners, while reducing the pressure on the hyper competitive rental market within the capital and across the UK.”

For more details about the “Raise the Roof” campaign please complete and submit the form below.

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Comments

by Dennis Stephenson

10:36 AM, 10th February 2014, About 8 years ago

I have looked at the issue of renting out rooms and there are problems with any scheme. For example I suspect that there would be some discomfort in renting out a room to a person whose background is largely unknown and could be potentially dangerous if the owner of the property were an elderly single person for example. Also renting out a room to a complete stranger could be a problem with house insurance should the tenant walk off with half the contents of the house or cause serious damage. This insurance situation also happens when fostering children. Not issues that are well known. Also to think about is what happens if the tenant decides not to pay any rent. The atmosphere in the property would become very acrimonious and intimidation a possibility.

Sounds great in theory but could be difficult in practice irrespective of legislation because this isn't a separate property where difficulties are at arm's length - this is the home where a difficult situation is greatly more personal and immediate. Or have these problems been solved since I last looked at it?

by Mark Alexander

10:49 AM, 10th February 2014, About 8 years ago

Reply to the comment left by "Dennis Stephenson" at "10/02/2014 - 10:36":

Hi Dennis

The risks you have highlighted are always going to exist if a person has a stranger living in their home. There are, of course, ways to minimise these risks.

Websites such as SpareRoom.co.uk, lodgers.com, easyroommate.co.uk etc. would not exist if there was no market for this.

There is some useful information and a guide to due diligence available via this article if you would like to learn more >>> http://www.property118.com/live-in-landlords-survey-results/34460/
.

by Ian Ringrose

11:09 AM, 10th February 2014, About 8 years ago

Should there also be a “benefits” break when someone on benefits rents out a room?

I think along with a higher limit, only 1 room should be allowed to be rented out under the scheme and the room should not be allowed to have its own cooking facilities.

by Sam Cowen

11:57 AM, 10th February 2014, About 8 years ago

Gosh thank goodness not everyone thinks the same way as Dennis or there'd be an even worse housing crisis than there already is! Hundreds of thousands of homeowners already find that renting out a room in their home is beneficial, not just in terms of income (helping them with rising bills, cost of living and potentially also to remain in their home if they're struggling to meet their mortgage payments) but also in other ways - combatting loneliness, having someone around to water the plants, feed their pets, mow the lawn, being handy around the house - the benefits can be immeasurable. Of course it's not for everyone, but we've been helping people rent out spare rooms in their homes for over tens years, and our team is on hand to talk people through the process and understand what they can do to minimise risk. And yes, there are insurance policies available which cover you for the risks of having a lodger, which we can recommend to people thinking of doing so.

If the lodger (not a tenant - they don't have an AST or a right to exclusive use of the room) fails to pay their rent they can be simply asked to leave, and the homeowner can change the locks and call the police if they're worried that they may cause trouble. There's more information on how to take steps to protect yourself on our website, as well as how to prepare for taking in a lodger and what your responsibilities are as a landlord. http://www.spareroom.co.uk/content/info-landlords/advice-landlord/

by Industry Observer

12:12 PM, 10th February 2014, About 8 years ago

Mark

Perhaps at the same time you could persuade George Osborne to raise the benegfits in kind tax level for employees which was at £8500 when I left NBS in 1994 and had been at that level for the 10 years at least before that.

It won't happen - and neither will an increase in the rent a room tax allowance, it is just left to wither on the vine.

by Mark Alexander

12:22 PM, 10th February 2014, About 8 years ago

Reply to the comment left by "Industry Observer " at "10/02/2014 - 12:12":

"Raise the Roof" is not my campaign, but I am more optimistic than you, even though I'm unlikely to ever use the "Rent A Room" scheme and despite that fact that at least in theory it could impact the markets I do operate in.
.

by Mandy Thomson

12:29 PM, 10th February 2014, About 8 years ago

As has been suggested in the previous posts, the biggest barrier to letting out spare rooms is stranger danger - however, the way around this is the same as for any landlord - due diligence, careful interviewing and running a thorough tenant verification check with a reliable company. Agreeing reasonable house rules, while accepting that the lodger needs to treat the place as home is also crucial too. However, when I was doing my research for my lodger website I soon came to realise that lodger landlords often don't do any of this - least of all the check. A lot of them simply let to friends, without properly considering the pros and cons, and many friendships have ended this way.
On the subject of insurance, some home insurers will allow lodgers (if they're of good character) but if they don't, I know of at least two insurers with specialised products - google "insurance with lodger".
Someone mentioned letting a room and benefits - the government were proposing to allow public housing tenants to take in lodgers and keep their benefits, but this was only going to be with the roll out of universal credit. As it currently stands, the first £20 per week is disregarded, more if they provide meals, laundry etc.
While the Raise the Roof campaign is a good idea and I have signed the petition, there is a common misconception among lodger landlords about how this works - as it's called a "scheme" they think they have to apply to HMRC to join, To clarify this for resident landlords, there is a rent a room ready reckoner tool on my site.

by Industry Observer

12:30 PM, 10th February 2014, About 8 years ago

Just realistic Mark the money has to come from the Budget somewhere and it just ain't there.

In response to Dennis I missed his later points.

Lodgers are outside the normal tenant and licencee provisions, 1977 PFE Act etc and so after a written request to leave you can basically just put their belongings outside and change locks.

You might need to give them a week not certain think you do but after that they can come back to find their personal efects outside the front door.

by Mandy Thomson

13:52 PM, 10th February 2014, About 8 years ago

Reply to the comment left by "Industry Observer " at "10/02/2014 - 12:30":

While lodgers are excluded occupiers under the Protection from Eviction Act 1977, a lodger is still entitled to what the law calls "reasonable notice" to quit. In an absolute extreme situation where for example, the lodger is violent, the agreement can be terminated immediately, otherwise notice should be given - for obvious reasons, this should be written but it isn't a legal requirement. The notice period depends on the agreement - if it's for a fixed term, as with an AST, you could only serve notice for a breach - such as rent arrears, damage or breaking a house rule. Outside a fixed term, again as with an AST, notice is as per how often rent is paid. A lodger should never be excluded until the notice period is up and the agreement terminated.
However, in practice, a large number of lodger agreements are very informal, even beneath the radar affairs, and the line between someone simply staying as a guest and a lodger is blurred (a bare licensee as opposed to a licensee). Even where the lodger is a licensee, the agreement is often verbal (this is perfectly legal but bad practice). This naturally makes things very messy if the lodger needs to be evicted.

by Jeremy Smith

14:27 PM, 10th February 2014, About 8 years ago

I have a comment, then a question:

Since the tax allowance is £4,250 and this does not have to be declared anywhere on any tax return,
I would think alot of landlords with more than this amount coming in, or having two lodgers, would just take the extra money in cash and not declare it at all.
- I know not of having to declare the number of lodgers one has.

I was told, by my accountant, that if one is a landlord of let properties, one cannot then participate in the 'rent-a-room' scheme.
- Is this correct ?

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