My initial reaction was you have to let them stay. But then if you follow that logic I should be sending you money to help offset your burden of letting them stay and if I’m not willing to do that then why should you have to put up additional funds or risk.
So I think you should determine if there is a way to keep your self while and risk free. If you can confirm with insurance about liability being covered and any fire code /occupancy concerns and ensure you are safe that way then I think you determine a reasonable cost for the additional wear and tear and give them the option of staying. You are supporting them without eating all of the risk and cost.
If you can’t ensure the potential fire code issues are mitigated then I don’t think you have an option but to evict
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