The poorest people in England are being denied access to social housing owing to their low income, in a “catch-22” situation that is pushing more people into homelessness, research has found.

A new report from Crisis said that an ever depleting supply of social homes meant that housing associations were using strict criteria to choose new tenants, and people on low incomes and in receipt of benefits were having applications denied due to being deemed too risky.

The situation has been compared to “rearranging the deckchairs on the Titanic” by one housing association, as the homelessness charity urged the government to introduce new rules.

“Ultimately, people are in a catch-22 situation where they’re looking to move into a social rent home, and they’re basically told no because of their financial circumstances. But where else can people live?” said Francesca Albanese, executive director of policy and social change.

A third of surveyed housing associations said tenancy affordability checks – which look at how much money a prospective tenant has – had led to people being denied an offer of a social home.

Nearly a quarter also said that households below a certain income threshold were sometimes excluded from the housing register in their area.

This means that people are being denied a social home due to fears they will not be able to keep up with their living costs, and the report found 71% of housing associations said the benefit restrictions were a key reason for this.

Concerns around the benefit cap, which is a limit on the total amount of money a working-age household can receive in certain benefits, and the freeze on housing benefit were frequently cited as reasons why more affordability checks were being done.

People with more complex needs were also more likely to be denied a home, the research found, due to concerns they wouldn’t be able to sustain a tenancy.

“Housing associations are more wary in terms of taking on risk and clearly welfare reform is part of that,” said Albanese. “They also don’t want to take on applicants with high vulnerability, if they can’t support them, because they are worried about tenancy sustainment.”

Many surveyed housing associations said they felt the scale of housing need in their area was so overwhelming, they were no longer sure that an allocations system could “meaningfully prioritise” applicants.

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The findings are based on a survey of housing associations across Britain, led by Crisis, Heriot-Watt University and the UK Collaborative Centre for Housing Evidence.

Crisis called on the government to adopt a Scottish-style system, where housing associations are legally obliged to rehouse homeless households. No such obligation exists in England.

In England, 27% of new social lettings are allocated to homeless households, compared to 54% in Scotland.

The charity also said welfare benefits need to be brought in line with the real cost of rent and essentials, and the government needs to urgently prioritise social housebuilding.

Matt Downie, the chief executive of Crisis, said:** **“The fundamental aim of social housing is to provide a safe and stable home for people on the lowest incomes. If people cannot afford social housing, where do they go?

“The reckless depletion of our social housing stock, alongside cuts to state support, has put English housing associations into an impossible position where they are forced to refuse access to people in precarious, vulnerable situations.”

A Ministry of Housing, Communities and Local Governmentspokesperson said: “The housing crisis we inherited has left us without the social and affordable homes we desperately need, pushing people into housing insecurity and contributing to record levels of homelessness.

“We’re taking decisive action to fix this by investing £1bn to tackle homelessness, and building the biggest boost to social and affordable housing in a generation – backed by a record £39bn investment. We will set out further action to tackle these issues in our homelessness strategy, which we will publish later this year.”