A row about allocation of scarce housing could be heading for the court of appeal after judges rejected a claim that a housing association broke equality laws with its policy of providing homes only to Orthodox Jews.

The Agudas Israel Housing Association, in Stamford Hill, east London, was accused by lawyers acting for a single mother of four of allowing Orthodox Jewish families to “jump the queue”.

The woman, who is not being named and is not Jewish, had seen a property listed on Hackney council’s housing system which stated: “Consideration only to the Orthodox Jewish community.”

The woman was near the top of the council’s housing priority system and had been living with her children, two of whom are autistic, in temporary accommodation for 16 months, because their previous home was ruled unsafe.

Her solicitor, Rebekah Carrier, had claimed that the housing association’s policy “smacked of ‘no blacks, no dogs, no Irish’,” a reference to signs pinned up by some landlords decades ago.

“It was quite shocking to see it being offered not on the basis of need but on the basis of religion,” Carrier said. Hackney has a social housing waiting list of around 13,000 households.

But the mother’s application for judicial review of the policy was dismissed in the high court, which ruled that the charity is within its rights to take positive action in favour of Orthodox Jews because they have different needs – in terms of following a way of life that requires them to live close by each other – and are themselves disadvantaged, in terms of suffering antisemitism generally and in the housing market, and in terms of overcrowding rates in Stamford Hill, which are more than double the rest of the borough.

Lord Justice Lindblom and Sir Kenneth Parker ruled in favour of the charity and cited exemptions to the 2010 Equalities Act, which prevents discrimination based on religion or race, for charities in cases where discrimination allows an organisation to prevent or compensate for a disadvantage linked to a protected characteristic such as religion, but not colour.

Applicants for one of the Orthodox Jewish charity’s 90 homes have to say whether they are strictly orthodox, in terms of observing the sabbath and strict dietary laws, as well as stating under the “ethnic origin” heading whether they are Ashkenazi or Sephardi. The waiting list for the homes includes more than 1,000 Orthodox families, and when it made new homes available last February up to 369 households bid for each property.

The judges said the housing association was enabling Orthodox Jews to avoid disadvantage and meet their needs, including solving overcrowding which is a major problem in the area, which is Europe’s largest Haredi community. Haredi Jews tend to have more children than the average.

They quoted Rabbi Abraham Pinter, a leading figure in Stamford Hill, who told the court: “Being part of a community, both physically and spiritually, is a prerequisite of fulfilling the life of an Orthodox Jew.” They also cited antisemitic threats and violence, quoting one tenant describing their terror when “one night two men came to our door and threw stones at our front door and windows”.

Elliot Lister, solicitor for the housing association, said: “The court has endorsed the critical work of a charity established to fight antisemitism and discrimination in the face of allegation that it itself discriminates. The Jewish community, and even more so the obviously Orthodox Jewish community, faces an ongoing battle against antisemitism, recognised by their Lordships as widespread and increasing and overt.”

Ita Cymerman-Symons, chief executive of the housing association, said: “I firmly believe that our work contributes to alleviating in our small way a national housing crisis, freeing up other social housing for others. We do not take properties from others, but we lessen the queue for other properties.”

Carrier said: “My clients are disappointed in the judgment and it is our intention to appeal to the court of appeal.

“Hackney has a housing allocation scheme that is designed to give scarce resources to those in the greatest need. Orthodox Jews will be among them. But if somebody else, like my client who is struggling with disabled children in unsafe accommodation, is assessed as being in the greatest need according to the council’s carefully crafted rules, then it can’t be right for someone with less need to jump ahead of them in the queue on the basis of their religion. This isn’t about anti-Semitism. This is about a fair system for allocating housing. There are lots of BME and faith-based housing associations and they do not apply these sort of criteria. Its worrying that this judgment may give them carte blanche to start to do so.”

She said the judgment, if it stands, would have wider implications for the provision of services by charities in other sectors as well.

Christopher Baker and Rea Murray, who appeared as counsel for the charity, said: “It will have particular significance for many organisations looking to undertake forms of positive action, and for charities seeking to restrict the benefits they provide, in favour of only certain limited descriptions of people with protected characteristics.”

• This article was amended on 6 February 2019 to more accurately set out the comments of solicitor, Rebekah Carrier.