In the UK, it’s estimated that there are around 19.5 million empty bedrooms, and an innovative scheme has just been launched, aimed at helping cash-strapped London homeowners monetise their unused space.
Fintech company Moovable has created a ‘Life Boost’ product, which gives homeowners an up-front cash lump sum of between £3,000 and £15,000 in exchange for renting out one (or a maximum of two) of their spare rooms for between six to 24 months.
Their lodger, or housemate as they are referred to, pays rent directly to Moovable, which then ‘repays’ this lump sum, although it’s not classified as a loan and will have no impact on credit ratings. In essence, Moovable is buying access to a future revenue stream, in advance, at a discounted rate.
In addition to the lump sum, the homeowner will also receive a five per cent share of the rent received, paid 12 months in arrears. At the successful completion of the contract, they will also be paid a 7.5 per cent Completion Bonus. For the duration of their stay, housemates will also make a monthly contribution towards household bills, which will be set out in the initial contract, handled, along with all of the admin, by Moovable.
“We’re offering homeowners a way to unlock the value of their home without taking on debt or giving up equity,” says Moovable Founder & CEO Justin Smith. “It’s a completely new route to cashflow — without the credit checks or repayment stress.”
Homeowners have the option of either choosing their own housemate — and Moovable say 52 per cent do this — or the company can source someone on their behalf. If homeowners decide on the latter, they can specify who they would like to live with, in terms of sex, interests and age, and answer a few questions that will allow Moovable to find them suitable housemates. “We will not put anyone in the property; the control of the decision sits entirely with the homeowner, as the lump sum money is not released until a lodger has been agreed and contracts are in place,” says Smith. “We also offer a very flexible process post-move-in should circumstances change.”
Alongside interviewing housemates for suitability, Moovable also organises all the necessary checks, including working with credit reference agencies to deliver verification, full ID and address history, confirmation of right to rent, extensive fraud checks, credit and affordability, previous landlord references, and DBS and criminal record checks. “I should stress that both the homeowner and the lodger are our customers, and we are equally concerned to ensure we are introducing lodgers to an appropriate and safe household. For that reason, we carry out full ID and fraud, plus, proof of address checks on the homeowner, plus a Land Registry search to confirm title to the property and a DBS check,” adds Smith.
Moovable estimates the value of the lump sum, based on what it thinks the rent will be. It uses a tech-based model that can predict the demand, price, void period and defaults of a property with a good degree of accuracy but, should they fail to rent out a room due to insufficient demand, the homeowner doesn’t pay back a penny of the cash lump sum, although they don’t receive five per cent from the rental or the Completion Bonus.
The flip side, however, is that, if the room over-performs, the homeowner doesn’t benefit from the uplift. “As we are taking the risk that the room doesn't perform, it is important to take the upside when rooms outperform to counter any losses. However, once we build up our performance data, we certainly plan to offer a profit share of any outperformance with the homeowner at the end of the agreement,” says Smith.
Should the homeowner’s circumstances changes, perhaps they’ve lost their job or got themselves into financial difficulties and are struggling to pay the mortgage or their bills, there is some scope to increase the rental share they receive, or amend the contract length, to get them over these hurdles. This is something that Moovable plans to work on moving forwards as they refine their offering.
The scheme is designed to help renters too, and not only by boosting the supply of good-quality rental accommodation. “Rather than anonymous flat shares and absentee landlords, Moovable housemates, who are fully verified, live with owners, creating more stable, community-led home environments,” says Smith. “The platform can also report rent to credit agencies, helping renters build up their credit scores and helping to turn them into future homeowners.” The idea is that these affordable rents give lodgers the chance to save for a house deposit of their own so they can become homeowners too.
In order to reduce any potential friction between the homeowner and housemate, Moovable also sets clear expectations with house rules and lodger agreements and takes care of any other admin.
Life Boost is currently only available in London, but the plan is to roll it out quickly across the rest of the UK. To be eligible for the scheme, the property must be the homeowner’s primary residence, and they must complete all the eligibility checks. If they already have a housemate, they are also welcome to apply. Applications are made via Moovable’s website and, once the first allocation has been filled, applications will close but applicants can register for the next release of Life Boost funds.
