Regulator warns associations to check charitable status if offering Affordable Rent

The Charity Commission has warned housing associations to seek legal advice on their charitable status if they plan to offer Affordable Rent products.

The Commission had been asked by the Tenant Services Authority to give its view on the implications of Affordable Rent, one of the government's key housing reforms.

In its advice to the TSA, the regulator said charitable housing associations in principle could provide such products. However, it pointed out that all charities, including charitable housing associations, are required to demonstrate a public benefit.

The Commission added: “The extent to which the product will be used to relieve poverty may determine whether it is able to satisfy the public benefit requirement and one aspect of this will be the extent to which housing benefit will cover the rental.

“Charitable associations operating in areas of high market rents will therefore need to look at this aspect in detail to see whether the affordable rents can provide a means of relieving poverty.”

The regulator added: “Given the different types of charitable housing association, the breadth of their activities, and the areas in which they operate, we cannot be definitive about whether the introduction of an Affordable Rents product by any particular charitable housing association will affect its charitable status and associations will need to seek their own legal advice on this as necessary.”

The Commission identified a number of key points that housing associations needed to consider, including:

• Does the Affordable Rent product fit with the association’s aim or aims? “Many housing associations are established for the relief of need by the provision of housing, although of course there are others which have aims which further other purposes described in s. 2 of the Charities Act 2006,” the Commission said. “In applying the Affordable Rent product, the association should satisfy itself that the product will enable it to further its aims.” It added that because of the nature of affordable rent products – i.e. they represent significant physical and financial assets – it was unlikely that that they would be an incidental part of an association’s activities, although that may be the case for some associations.
• It is also up to the association to define what its area of need is, based upon its aims, the regulator said
• An association could meet a need by directly providing housing or by holding investment property which generates an income to support the association’s charitable purposes (i.e. cross-subsidy) provided that such an activity is clearly primarily to generate an investment income, rather than as an ancillary purpose. “Such property is therefore likely, by its nature, to be let at a market rent (i.e. above the levels within the Affordable Rents product)”
• Generally, where an association has a charitable purpose to relieve those in need by providing housing, then those who benefit must be poor and in housing need. The Commission said a key point “is that the ability to access the benefit is more important than the level of rent charged….Associations will be aware of whether, in practice, some affordable rent products have rents at a level that people in poverty cannot access, and where housing benefits are capped at a level below the rent”
• There will be circumstances where people who are not in poverty can properly benefit from a charity, such as key workers and older people requiring specific types of property, but this would require an appropriately worded objects clause. “Associations need to consider where the Affordable Housing Product sits in relation to their various purposes,” the Commission said.

The Commission advised housing associations to look at its publications, Charities and Public Benefit and The Prevention or Relief of Poverty for the Public Benefit, which explain the public benefit requirement in more detail.

Philip Hoult