"A long-term relationship recently ended and to make ends meet I rented out one of the extra rooms. Ground rules were set ahead of time - clothing optional unless there are guests, keep the place clean, etc, etc. Day One this guy comes out of his bedroom wearing nothing but morning wood. Hung like a pony doesn't do him justice. I made a joke, we laughed, then talked about how tough it is for him to get into a relationship because women run when they see his dick. Anyway, last night I came home from work and he's sprawled out on the couch stroking that humongous cock. When he finished spewing the biggest load of jizz I'd ever seen I thought "Holy shit..." You know when someone asks, "Did I say that out loud?" Yeah, it was one of those moments. He scrambles for his pants then starts yelling at me that I should've let him know I was home before I walked into the living room. I apologized. But, really, did I owe him an apology? He was the one laying there butt naked and jerking off in a common area."
First, sorry for the loss of your relationship. It's tough no matter how or why it ended. You set ground rules and he agreed to them. But what ground rules? You're two single guys living in the same house, and it seems as if you're both trying to live in denial. Boners should be expected. So should masturbation. My personal opinion? The more relaxed about it you are, the better.
When I lived in the dorms I told every one of my room mates that no one needed to hide. Have at it, it's not going to bother me at all. If I'm having a session, stay, leave, join in for all I care.
You and your new tenant need to set ground rules that work for you both. If it embarrasses him to be "found out,"
then he needs to restrict his stroking to where he'll have more privacy.
But, bottom line: It's your house, you shouldn't be made to feel as if you need to announce your presence every time you enter a room.