The Tenant Services Authority recently asked for the Charity Commission’s view on the implications for charitable housing associations of the introduction of the new Affordable Rents product. This is our response:

Thank you for the issues you raised with us regarding the new Affordable Rents product. We are sorry that we could not meet, and we’re happy still to do so.  In the meantime I hope the following will help answer your questions.

All charities, including charitable housing associations, are required to demonstrate a public benefit. Our guidance Charities and Public Benefit and The Prevention or Relief of Poverty for the Public Benefit explain this requirement in more detail. 

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.

However, there are some key points that an association should consider and these include:

• Does the 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 s2 of the Charities Act 2006.  In applying the Affordable Rent product, the association should satisfy itself that the product will enable it to further its aims.  Because of the nature of affordable rent products - i.e. they represent significant physical and financial assets - it is 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.
• 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.  Section C1 in Charities and Public Benefit explains what is meant by enabling people in poverty to benefit.  A key point is that the ability to access the benefit is more important than the level of rent charged.  For example a person in poverty may be able to access the benefit because they are in receipt of housing benefit.  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, e.g. key workers and older people requiring specific types of property, but this would require an appropriately worded objects clause and associations need to consider where the Affordable Housing Product sits in relation to their various purposes.

In summary, 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.

We are happy for you to publish this response, and we are also sending a copy to the NHF who have separately written to us on this issue.

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