How do you deal with people who are taking advantage?

My husband has a friend who has made some bad choices recently and compared to 3–4 years ago, is down on his luck. My husband feels bad for him, and to some extent, so do I, but at the same time, I know about 90% of it is his own doing. My problem is that he is always planting stupid ideas in my husband’s head for ways that we can help ourselves and help him at the same time. That’s how he sells it to my husband, but if you look with a critical eye, you can see the benefits are really his alone. For example, he wants to convert our garage into an apartment so he can live in it. We pay for materials and he gives us his labor for free – in exchange, we let him live there rent free. Because of where our garage is located, what he is proposing doesn’t add any value to our property (a much bigger investment would be required to do that). When I try to discuss this with my husband he is always very emotional and thinks I am being cold. He reminds me of the nice things this guy has done for us, which is true, but those acts in no way would require anything more than a nice dinner out as repayment. My husband and I don’t have extra money to be investing in schemes that don’t give us any return. How do I talk to my husband about this in a way that doesn’t cause him to get so defensive?