The number of rooms for lodgers in properties with live-in landlords dipped by 1.4% in the third quarter compared to the same period last year, but this type of room rental still accounts for 34% of the flatshare market.

Research by SpareRoom found that rooms in homes with live-in landlords are normally cheaper than rooms in other flat shares, saving lodgers an average of £515 a year.

The flatshare site estimates there are around 28 million empty bedrooms across England, Wales and Scotland.

It says that if 5% were made available to renters, this could provide accommodation for 1.4 million people.

In inner London, lodger rooms accounted for 17% of flatshare supply, with availability down 2.9% compared with a year earlier.

SpareRoom is calling on the chancellor to use this month’s Budget to increase the tax-free threshold under the Rent a Room scheme in an effort to encourage more homeowners to take in lodgers.

The threshold allows people to earn up to £7,500 a year tax-free from letting furnished accommodation in their home and has remained unchanged for a decade.

SpareRoom points to Ireland, where the equivalent annual tax-free threshold is due to rise from €14,000 to €16,000 next year.

The firm says UK lodger supply peaked in the years following the last increase in the Rent a Room threshold, which was announced in 2015 and took effect in April 2016, before falling sharply during the pandemic and failing to fully recover.

It is also calling for a minimum 31-day stay to qualify for the scheme to prevent the tax relief being used for holiday lets.

SpareRoom director Matt Hutchinson says: “Not a single brick needs to be laid to boost lodger rental supply.

“Simply increase the threshold, awareness grows, and rooms hit the market. We saw this play out in 2016 and there’s no reason it shouldn’t work again.

“Right now you can only earn £625 per month in lodger rent before you have to declare the income, which isn’t reflective of rents today. 

“As a result, people are pushed into completing a tax return, which we know from having spoken to plenty of would-be lodger landlords is a significant deterrent.”

He adds: “It’s also really important to keep this supply in the rental market, where it’s so desperately needed. 

“That could be achieved by adding 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.”