A London council’s decision to remove a homeless single mother from its housing waiting list has been upheld in a legal ruling which experts warn could have serious implications for vulnerable households.

The Conservative-run borough of Hammersmith Fulham overhauled its housing rules in 2013 in order to trim a 10,000-strong waiting list, barring homeless people placed in “long-term suitable temporary accommodation” from bidding for a council or housing association home. One of those de-listed was a single mother, named in legal papers as R Jakimaviciute, who had been in temporary accommodation for two years and has now lost an attempt to seek a judicial review against the decision.

“For someone who’s been through the traumatic experience of homelessness, a social home can provide much needed stability and a platform from which to rebuild their lives,” said Leslie Morphy, chief executive of the homelessness charity Crisis. “Reports that some homeless households may be being prevented from accessing a social home, or the guarantee of a longer term tenancy, are therefore a real cause for concern, particularly at a time when homelessness is rising.”

Charities have found serious problems with some private rented houses used by councils. Lawyers argued that Jakimaviciute’s treatment flew in the face of the council’s legal obligation to give priority for social housing to certain groups of people including those who need to move on medical grounds, are in overcrowded accommodation or are homeless.

But, in a hearing to decide whether there should be a judicial review against the council, a high court judge found that the council had wide powers to disqualify such people from the housing list.

The lawyer for Jakimaviciute said that if the council’s application of a clause in the housing act was correct, it gave it carte blanche to remove who it wanted.

In his ruling the judge said: “That submission in fact emphasises the fact that the intention was to give the local authority a wide discretion to decide, in the light of the housing shortages and the demand for properties, how to go about discharging their duty. There is nothing arguably irrational in the public law sense in that concept.”

Giles Peaker, a housing lawyer at Anthony Gold Solicitors, said the ruling meant: “If the council did not give a reasonable preference to people who were on the list, that would be unlawful … It is reasonable preference once you are on the list, but this decision said you have to be on the list first.”

Hammersmith Fulham has been aggressive in its attempts to reduce its housing waiting list, and by excluding a number of groups from bidding for social housing it has cut the list to fewer than 800.

Since the start of the year all councils have been expected to introduce rules around residency, and housing charity Shelter has said these changes reflect the dire need for more homes.

Peaker said the ruling set a worrying precedent. “There’s nothing technically on this interpretation of the law to stop them excluding homeless people completely,” he said. “It is actually putting the homeless person in a worse position that someone who isn’t. Someone else who is in an assured shorthold tenancy, can apply to go on the list, while a homeless person can’t.”

Changes in council housing criteria came about under the Localism Act 2011.

Ben Chataway, the barrister acting in Jakimaviciute’s case against the council, said it had “brought in new powers to disqualify groups of people from the housing list. Local authorities now have much greater freedom to choose how to allocate social housing”.

Chataway said his client had now been allowed back on to the waiting list, but that the case “was an indication of how local authorities are seeking to use their new powers”.

Councilllor Andrew Johnson, Hammesmith Fulham’s cabinet member for housing, said: “We’ve long said that the notion of a council tenancy for life is out-dated and that it’s wrong to automatically expect to receive a subsidised home, irrespective of housing need.”

Johnson said the register prioritised “hard-working local families, foster carers, members of the armed forces and others who have given something back to the community, as well as people living in emergency accommodation and others in severe housing need” and was a fair system, which ensured homes were reserved for those in genuine need.

“Should someone on the register be placed in accommodation that suits their day-to-day needs and offers an ongoing tenancy, they will be removed from it. But, of course, if that tenancy subsequently expires, they will re-join the register and receive support finding a new home,” he said.

“Under no circumstances would a vulnerable homeless person, or household to whom we have a duty to accommodate, find themselves without help securing a roof over their head.”