Who said you have to be nice about it? Being nice doesn't get you anywhere. I don't mean you have to be mean, but... Worry about being nice when you don't have anything else to accomplish.
"Dude. I offered you a temporary place to stay, and I was very glad to be able to do that. But now you've stayed longer than what I'd call 'temporary'. What are we going to do about that?"
Let him know that he can leave, or he can become a paying, load-carrying roommate. And let him know you'll still be his friend whichever he chooses.
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