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The Housing Corporation will give the go-ahead to paying board members this summer – but the thorny issue of remunerating tenant members will be left unresolved, raising fears of a mass exodus of tenants from boards.

The corporation will set a £20,000 pay limit on board chairs, as outlined in its initial consultation paper last October, and will provide new guidance.

But there will be no detail on how to deal with tenants whose paid membership means they lose welfare benefits, Housing Today understands. This has sparked concern that existing tenants will be forced to leave and others will be put off from joining.

Phil Morgan, chief executive of the Tenant Participation Advisory Service, warned that tenants would become "second-class board members". He said: "Unless the issue of benefits is resolved, we risk paying everyone else on the board apart from tenant board members. Why would you join something where everyone else is being paid but you are not? We could see tenants coming off boards because of the issues around benefits."

Changing benefit regulations to allow board members to be paid without losing their benefits would be complex and might require a new law. This would be the responsibility of the Department for Work and Pensions, which is not involved in the payment plans.

Derek Joseph, executive director of Hacas Chapman Hendy, said: "It's really difficult to see how the corporation could change the law to allow paid work with voluntary organisations without opening a Pandora's box."

Joseph thought associations would choose to pay those on benefit while paying other board members. He added that loss of benefits could deter others from joining.

Alf Chandler, chairman of tenants' body TAROE, called for an adviser similar to the Audit Commission adviser who guides paid tenant inspectors on their welfare situation, to avoid confusion.

Unless the issue is resolved we risk paying everyone but tenant members

Phil Morgan, chief executive, TPAS

He said: "There could be a misconception that they are just getting cash in hand and won't be subjected to tax. This must be made clear to people who are applying to go on boards."

The payment guidance being drawn up by the Housing Corporation includes advice on how to make a sound business case for paying board members and the necessary changes in housing association rules.

A separate piece of guidance is being drawn up by James Tickell, deputy chief executive of the National Housing Federation, and Julian Ashby, managing director of Hacas Chapman Hendy, and will be issued at the same time as the corporation's.

It will suggest average payment levels for different types of associations and board roles and address problems with charity law, group structures and tax.

Tickell said: "Within a group, even if a person serves on more than one committee, they should only be paid for whatever is their highest paying role." He said the NHF would be "watching carefully" to see whether associations that decide not to pay encounter recruitment problems.

A corporation spokeswoman was unable to comment on the potential loss of benefits for tenant board members.

She confirmed that the corporation was producing a "good practice note" following 250 responses to the initial consultation paper.