Part 2: When will an Entity which Provides Housing not be seen as Charitable?
In this first Part of this series here we dealt with when housing can be considered charitable. Now in this Part 2 we are going to consider the opposite scenario and when it applies.
The key hurdle for an entity to overcome in obtaining charitable status is to ensure that its purposes in providing housing meet the definition of a charitable purpose outlined in the Act. The relatively recent case of Queenstown Lakes Community Housing Trust provides guidance for us to consider.
Although each situation will be decided on a case-by-case basis, some situations where an entity may not be seen as having a purpose which is charitable when it comes to providing housing include:
(a) Those who are eligible to partake or receive the entity’s assistance do not fall within the scope of the term “poverty”. For example, an entity may have various schemes or programmes which seek to assist particular people into home ownership. However, these people may not necessarily be considered to be in poverty or necessarily in need of assistance, such as those that make a low to moderate income;
(b) An entity’s services may confer a private benefit on selected individuals, such as assisting them to meet housing costs and eventually into home ownership. Although this appears to be an inevitable outcome of providing assistance to individuals, the courts have emphasised that housing is a basic human need and right, not home ownership.8 If your entity’s purposes are more swayed towards assisting individuals into home ownership, it may prevent your entity from obtaining charitable status;
(c) There may be reasonably available and realistic alternatives for those an entity is assisting into housing. This may, for example, include cheaper accommodation in the surrounding regions of the area an entity is providing housing in – so the facts around where this is to be done is important. We have even seen Charities Services become interested in stats around the poverty in a particular area; or
(d) The benefit to the community in providing housing may be too indirect, remote, or nebulous. It may be that in providing housing, an entity’s purpose is to promote urban and rural regeneration, a purpose which has been accepted by the courts as capable of meeting the charitable purpose definition.9 However, if an entity’s purpose is to provide housing for individuals which may then lead on to some sort of public benefit (for example, improving the welfare of the community), then such entity may not be granted charitable status. The public benefit an entity seeks to achieve through providing housing must outweigh the private benefit that it naturally confers.
If you believe your entity will not meet the requirements to be a registered charity due to the considerations we have discussed there is still hope. An alternative option is to apply for an exemption through Inland Revenue. See Part 3 for further details on this option.
We have helped many groups in this area and have created a free guide for Community Housing providers which is available here.
This article is intended for general informational purposes only and does not constitute legal advice. For advice specific to your situation, please contact a qualified legal professional. Reproduction is permitted with prior approval and credit to the source.
8Re Queenstown Lakes Community Housing Trust [2011] 3 NZLR 502 (HC), at [41].
9At [70].
