Tuesday, 26 May 2015

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.

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