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Falling stock markets have wiped £46.2m from the value of the Joseph Rowntree Foundation's investments and have led to an extensive round of cost-cutting, its latest accounts reveal.

The trust, one of the biggest funders of housing research, is the latest casualty of the declining stock market, which has hit charities hard in the past couple of years.

A report from analyst the Charities Aid Foundation, published on 25 June, said the net assets of the top 500 charities had fallen by £500m since 2000.

The value of Joseph Rowntree's investments, largely in stocks and shares, fell from £226.9m in 2001 to £180.7m in 2002.

Its income fell £267,000 to £7.5m, leaving it with an operating loss of £1.3m. However, it has reduced its losses from £1.7m in 2001.

Reductions in interest rates and the 1997 Budget ruling that charities should pay tax on investments have been the biggest causes of the charity's problems over the last three to four years. The tax change cost the foundation almost £3.2m in the last four years.

The foundation remains viable as a going concern. It has capital of £173.3m – much of it made in the boom.

It cut its spending by reducing support and administration costs by £666,000. It also paid out £584,000 less in grants in 2002 than 2001.

Michael Sturge, finance director and deputy director of the foundation, said it had not set out to save money on grants.

He said: "We respond in part to research proposals we receive and make an assessment on their quality. That saving wasn't a deliberate policy of making a reduction, we just had fewer quality projects we wanted to support."

The foundation has not made firm plans for how to make savings in 2004 if the stock market doldrums continue. Sturge said it would protect its core research areas, including housing.

Housing association the Joseph Rowntree Housing Trust, which has separate accounts, had a successful year, showing a surplus of £2.2m in 2002 – up £1.1m on 2001.