Friday, 31 October 2014

Associations face losing charity status

Charity Commission tells providers to seek legal advice on implications of charging 80 per cent rent.

Housing associations risk losing their charitable status if they implement the government’s new affordable rent regime.

This is the stark warning issued to the 1,236 charitable housing associations in England and Wales by regulator the Charity Commission.

It said each association should seek legal advice about whether introducing the regime will affect its charitable status.

The affordable model will see new tenants charged up to 80 per cent of market rent on their homes. The commission has advised associations to look at the extent to which homes rented at affordable rates will relieve poverty.

‘Charitable associations operating in areas of high market rents will need to look at this aspect in detail to see whether the affordable rents can provide a means of relieving poverty,’ the commission stated in a 1 March response to a Tenant Services Authority consultation on the issue.

A number of associations want to rent some homes to tenants who can afford to pay rents at up to 80 per cent of market value without using housing benefit.

Charitable associations receive benefits such as tax breaks and relief on business rates.

Simon Dow, chief executive of 60,000-home The Guinness Partnership, said: ‘We’ve been debating internally the issue of whether [charging] affordable rent would be a charitable act. It requires us to be more conscious of who we’re letting to than we were in the past.’

Bruce Moore, chief executive of 19,000-home Hanover Housing Group, said that without charitable status his organisation would pay 28 per cent on its annual surplus of around £5 million.

Lawyers also warned some associations would have to reassess whether tenants are charitable beneficiaries before renewing the new flexible tenancies ministers are promoting. The new programme allows associations to offer flexible tenancies lasting at least two years.

‘Associations will need to reassess tenants and decide whether they are a proper charitable beneficiary. If not, they have to go,’ said Adrian Carter, a partner at Trowers and Hamlins.

Andrew Cowan, a partner at Devonshires, said it was likely the Charity Commission would be uncomfortable if a tenancy was renewed and the tenants’ circumstances had improved.

A Charity Commission spokesperson said: ‘Charitable housing associations must use assets in furtherance of their charitable objectives for the public benefit.’ Lawyers think landlords are most likely to be taxed solely on income from affordable rents.

Readers' comments (26)

  • Rick Campbell

    I am sure that Shapps, Pickles and their supporters on IH will see this as fair when it's just another way to screw tenants and social housing providers.

    We'll see as the day progresses what comes out of the woodwork?

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  • Margaret Thatcher worked very hard to destroy the social housing sector. Now that they are back in power the cons obviously wish to carry on her work.

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  • Janine Jarvis

    It seems pretty obvious to me that letting properties on 80% of market rent isn't a charitable activity by most standards, at least in a lot of the country. Specially if a whole load of existing social rented property also needs to be converted to 80% rents to finance the activity. That really would be selling the (charitable) family silver to subsidise non-charitable activity. Well done the Charity Commission for being brave enough to state the bleedin' obvious. Let's see if they get abolished now for their pains.

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  • Sidney Webb

    No doubt Pickles will turn his tanks onto the Charity Commission next.

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  • Does that means that Housing Association only get Charitable Status under Rent only. They do not have to do anything else that is Charitable

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  • The only surprise here is how long the point has taken reach the surface. Housing Associations never were or are charities in the true sense, in fact several of the larger so-called charities more akin to big business. However, opposition to HA's in the early days was ignored in the main. Recent events and proposals are the sinister result. In any event it is about time the offensive terms of 'social housing' and 'affordable rents' are dropped in favour of a return to proper and seriously administered 'regulated housing'.

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  • Jon

    Shapps 'what more can we do to privatise HA's?..... Ah, i know'

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  • Alpha One

    I have to say I don't see the Charity Commission's logic.

    To be charitable you have to provide housing for those in need, i.e. those who can't afford to buy or rent on the open market.

    Therefore if you are charging anything less than market rent you are indeed performing an act of charity.

    With regard to profits, provides all of the money received from affordable rents is reinvested back into the provision of more housing, then again this serves the charitable aim.

    I can see the point that if you grant a two year tenancy to someone on the basis that if their situation improves in two years you can't realistically grant them a new tenancy if they could afford to move out. But then surely that's the point, if they can afford to rent on the open market then they probably should be, and HA's should be setting up corporate arms to enable them to grant open market tenancies to these people if they don't want to move them on.

    I suppose the problem will come for people who's situation has improved slightly, so that they could afford to rent at 90% of market value. But even then I would argue that they are still a charity case as they can't afford to rent or buy on the open market and are in housing need.

    I think the issue here is priority of need, does a person who is in an affordable rent property, who can afford, say, a 90% rent get to keep that property by virtue of the fact that they are living there, or should they be removed and the property given to someone in greater housing need? Arguably by making that person homeless you increase there housing need, and there is also the issue of the Human Rights Act, could you really kick someone out of their home because there is someone else more in need?

    For the most part, I think the charity commission are over-reacting, most affordable rent people will still be charitable cases, it's only going to be a few (the ones who are still in housing need but can afford rents at higher rates than 80%) that will pose interesting legal questions and, I suppose, we'll only know the outcome of that when we have a few cases.

    I have to say that I doubt this ever entered the government's mind when they were considering Affordable Rents!

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  • This is perhaps a logical outcome of the trajectory along which housing associations have traveled since the 1988 Housing Act. I am not sure how organisations such as Places for People, Circle Anglia and Home Group can be called part of the voluntary sector when they are clearly businesses managed and operated by people receiving salaries. Having a few voluntary board members does not equate to kind of voluntary activity that most of us would associate with the word, such as running brownie or scout troop or helping out at charity store.

    Their charitable status is perhaps a less clearly defined issue. Clearly, by offering homes at well below market rents or prices to people in need of housing could be seen as being a charitable enterprise. That some of them have grown rather bloated is perhaps an unfortunate consequence of wider social trend towards the acceptability of glitter and greed. A clever lawyer, I would venture to suggest, would argue that affordable rent at 80% of market rent is still below the tariff set by the markets and could therefore - just - be considered charitable. If however the Charity Commission's suggestion prevails, then I would expect the Coalition to accept that as being perfectly acceptable. Combined with the rapid phasing out of capital subsidy for new build and the de facto deregulation of the sector, there is little or nothing to stop housing associations abandoning what for all too many has been the pretence of being charitable, social organisations and go all out to become private sector landlords, floating on the stock market for example. That raises the question, as yet unresolved, as to who actually owns a housing association and the other issue of what we used to call 'grant in the ground'. The latter could be resolved by Treasury taking a cut of any flotation proceeds as settlement for grants aid. The former will require nifty work by some clever legal beagles but is not unresolvable.

    Everything is going swimmingly for the Coalition. Housing policy is moving to where they want it - a massive increase in private rented housing, a run down of owner occupation for all but the most well off and an end to the notion that society has a moral responsibility to house its members. The rate of return from the existing stock will increase, allowing assets (and tenants) to be sweated harder than ever before.

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  • Joe Halewood

    Is it still the case that the largest recipients of 'charitable income' in the UK is the public schools?

    If so anyone care to discuss whether Eton or your local housing association provides more of a charitable service of benefit to the public?

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