The Charity Commission has advised housing associations to seek legal advice about whether offering the government’s new Affordable Rents social housing product will negate their charitable status.

The government’s new affordable rent regime will see housing association tenants charged up to 80 per cent of market rents on new homes.  Associations are concerned that if they rent out some of these homes to people who don’t claim housing benefit, they may risk their charitable status by not satisfying the public benefit requirement of relieving poverty.

The Commission gave the advice after the Tenant Services Authority and the National Housing Federation asked for its view on the implications for charitable housing associations of the introduction of the new Affordable Rents product.

It said: “All charities, including charitable housing associations, are required to demonstrate a public benefit. 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 sets out a number of key points each housing association should consider when deciding whether to offer the product, and concludes: “In principle, charitable housing associations can provide an Affordable Rents product. However, 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 Affordable Rents product was unveiled by the government’s Homes & Communities Agency in early February as part of its new grant bidding framework which outlines how affordable housing will be funded over the next four years.

Some £2.2bn will be made available to develop new homes, representing a dramatic reduction in available grant. Under the new affordable rent rules, most new homes will have to be let at 80 per cent of market rent and housing associations will be expected to make flexible use of their assets to subsidise new developments. Many reportedly 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.