Hi --- What they are doing is illegal, by giving a false address they are obtaining services by deception by declaring a false address where the car is kept to their insurer not to mention DVLA etc, probably for the purposes of getting a much lower yearly premium by further stating it is kept in your garage.

This would also implicate you if the authorities consider you have been a part of the deception or that you have knowingly allowed it to continue. Just think of that when you are being dragged out of your bed by the Police.... if the chap had an accident or worse kills someone and leaves the scene of the accident......the registration is recorded as residing in your garage, with him living at your address.

It's up to you whether you give him the choice to end this immediately, or report the matter straight away, but do not let it continue for the sake of your own interests.