NEWS: Stressed borrowers taking in lodgers

DESPERATE home owners overwhelmed by interest rates and the high cost of living are renting out bedrooms in order to survive financially.

The combined effect of the housing and rental crises is believed to be causing more home owners to seek “lodgers” to provide more income to the household.

Housing Industry Association (HIA) chief economist Harley Dale told NEWS.com.au that there has been anecdotal evidence that renters were increasingly being used to help owners with mortgage repayments.

“Certainly, there’s very, very strong anecdotal evidence that we’re starting to fill up empty bedrooms in the current tight housing market that we face,” Mr Dale said.

Several home owners in Perth, Sydney and Melbourne that have sought lodgers have said their motivation to bring in a renter was because of mortgage and living costs.

Irini, a university student living in her family-owned home in Brisbane, said living costs forced her to bring in a renter.

“I would have preferred to live by myself, but I didn’t really have that option,” Irini said.

"It’s been pretty helpful.”

She said she would continue to rent out a bedroom for at least two more years.

Mr Dale said he expected an increasing number of home owners to “fill” any spare bedrooms with renters in the next 12 months.

“It looks as though we’re at the start of a point of time where that free space is going to be scrutinised more closely than it would have been a year or two ago… easing the financial burden on the household,” he said

“I think, provided an element of common sense is used, it’s a smart way of relieving the current financial pressure.”

Beware the tax man

Stressed homeowners who are thinking about taking in lodgers need to be aware of the tax implications. Check with a financial expert about how taking in a lodger will affect your tax status. There can be a fine line between who the Australian Tax Office deems a boarder or lodger, and who they see as a tenant.

For a lodger, you have to be able to convince the tax office that any money you receive is going towards household expenses – otherwise it will be classified as rental income. This means you could lose a portion of your capital tax gains exemption as you’ll be seen to be running a business from your home. Get professional advice.

Stress levels rising

Mortgage stress recently hit its highest level in more than a decade, according to credit ratings agency Standard & Poor's. Around 1.45 per cent of borrowers with standard mortgages were at least one month behind on their loan repayments in the three months to end of March, compared to 1.09 per cent in the December quarter.

Property research firm RP Data is predicting that up to 400,000 Australian households will be severely stressed by September, and 500,000 will be at least mildly stressed.

SOURCE: News.com.au