Sweet charity?

It often surprises me when I find that even quite senior management in some registered social landlords are unsure whether their organisation is charitable or not. So does this mean that whether an organisation is charitable or not makes no difference to what it does?

Most charitable RSLs have objects that say they must house poor people, disabled people, people with illnesses or people who are elderly. This wording replaces the term "people in necessitous circumstances", which is not exactly plain English but it gives a good flavour of what charitable housing associations are about.

What does 'poor' mean in housing?
The view is that a person is poor in housing terms if they cannot house themselves reasonably on the open market. This means someone could be considered "housing poor" in London but not in Liverpool.

From a charitable RSL's perspective, it means that even if it is aware of another charitable RSL with a scheme for housing, say, teachers in London, it does not follow that it can too. It needs to be familiar with its local market before it can consider someone "poor". It is not even possible to generalise about northern and southern England, as there are parts of the North that have high house prices as well as low.

This leads on to the other main difference between charitable and non-charitable RSLs: charities need to justify why they house the people they are housing. In contrast, non-charitable ones may need to justify their activities to the Housing Corporation or to tenants or local authorities, but they do not run the risk of acting outside their powers.

When a charity embarks on a new activity, its board must be clear why it thinks it is acting within its powers. If it is clear from the minutes of board meetings that the issue was examined and appropriate advice taken (both legal and other advice, on the state of the local market, for example) and that the board has considered the matter carefully, the charity is likely to be acting within its powers.

Key worker questions
As far as key workers are concerned, lawyers advising charitable RSLs have plenty of questions – after all, their clients want to be sure they are not overstepping the limits of their powers. What sort of key workers will they be dealing with? What other housing is there for them? Does the RSL control who moves in? Is there a clear policy that staff involved in allocations can apply?

A main difference between charitable and non-charitable RSLs is that charities have to justify why they house the people they are housing

Other issues may arise if another charitable RSL down the road rents at market rates – if it can, why can't you? It may have just gone ahead without advice. Or it may be treating it as a genuine investment – as long as it is within its investment powers and investment advice has been taken.

The RSL in question might be housing a client group that does not need to be considered "poor" to gain from charitable treatment – elderly people, for example. Or perhaps in the market, according to its research, there are few private rented properties and the people the RSL is housing can afford market rents but cannot buy. In that context, those people might be considered "housing poor" in that area – but do such areas really exist?

The RSL may have charitable objects that include regeneration and the provision of private rented accommodation as part of a plan to regenerate an area by mixing tenures.

It may be under the illusion that as long as any profits it makes go towards its charitable objects, that's all right. But ask yourself whether it would be acceptable for a charitable RSL to set up a clothes factory for a major retailer and plough the profits back in. The answer is clearly no. And it's no better if the non-charitable activity is housing.

So does it matter? If an RSL's activity is outside the objects of the charity and it loses money, the board may be personally liable. That is when those strategy board minutes are so important.