Rental supply from lodger landlords has fallen for the first time since the pandemic, prompting calls for the government to raise the Rent a Room tax-free threshold.
Data from flatshare platform SpareRoom shows lodger room advertisements dropped 2.5 percent year-on-year in January 2026 – the first decline since lockdowns halted the rental market in 2020. Lodger landlords, who rent out rooms in their own homes, account for just over a quarter of all supply on the platform.
Rent a Room threshold unchanged since 2016
The Rent a Room scheme allows homeowners to earn up to £7,500 per year tax-free from letting a furnished room in their main residence. The threshold was last increased in 2016, when average monthly room rents stood at £573 – well within the £625-per-month equivalent.
Since then, average room rents have risen 29 percent to £749 per month, according to SpareRoom’s Q4 2025 figures. For landlords in high-demand areas, annual rental income now regularly exceeds the tax-free limit, creating a disincentive to participate in the scheme.
Around 43 percent of lodger landlords are retirees, with half citing day-to-day costs such as food shopping, bills, and car running costs as the primary motivation for renting out a room.
28 million empty bedrooms
There are currently 2.41 renters searching for every room available in the UK. Meanwhile, an estimated 28 million bedrooms sit empty across England, Wales and Scotland. SpareRoom argues that freeing up just 5 percent of those rooms would provide affordable accommodation for 1.4 million people.
Matt Hutchinson, director at SpareRoom, said: “In the middle of a housing crisis we should be doing everything possible to protect supply in the rental market, whether it comes from landlords or homeowners. The last time the Rent a Room scheme was altered, supply rose and remained at healthy levels until the pandemic. A booster shot in the arm is what’s needed now.”
Hutchinson also called for holiday lets to be excluded from the scheme, arguing that the tax incentive should support long-term rental supply rather than short-term tourist accommodation.
The decline in lodger room supply adds to broader pressures on rental availability as more private landlords exit the sector amid tax changes and regulatory uncertainty.
Editor’s view
The Rent a Room scheme is one of the few policy levers that could quickly boost rental supply without subsidy. A threshold increase to £10,000 or £12,000 would bring it back in line with modern rents – a low-cost change that could ease pressure on a strained market.
Author: Editorial Team – UK landlord & buy-to-let news, policy, and finance
Published: 11 February 2026
Sources: SpareRoom
Related reading: Rental inflation drops below wages as market cools
