Two questions, and I know one of them has been brought up before.
1. Would you have allowed it to happen if it was a heterosexual relationship and not a homosexual relationship?
2. Why do they need to live with anyone? What's the reasoning for not being able to have their own place? If it's just temporary until they get on their feet, that's one thing... if it's a permanent thing, that's a whole other story.
As for keeping your 7 year old from it, that's your call... my son was exposed to a gay man at the very moment of his birth, in fact the same gay man was the one who held him first and brought him to my chest, gave him his first bath, and spent the 5 days/4 nights with me in the hospital (seriously ladies, how many husbands spend all 5 days/4 nights in the hospital with you?!?) Do I fear he'll be gay or somehow be tainted by this contact? Not at all. My friends, gay or straight, are my friends for a reason and as such they are allowed to be around my child as they are, not putting on some dog and pony show simply because they're outside the social norm.