NEW YORK, Sept 13 (Reuters) - In a blow to advocates for New York City's homeless population, a Manhattan judge on Tuesday held that the city could terminate a program that offered rent subsidies to thousands of formerly homeless residents.

In a 21-page ruling, Supreme Court Justice Judith Gische ruled that the city and the Department of Homeless Services did not enter into binding contracts with recipients of the Advantage Program, which provides up to two years of rent subsidies to help New Yorkers transition from temporary emergency shelters.

"[N]o matter how laudable its goals, [the Advantage Program ] is nothing more than a social benefit program, which defendants had the right to terminate, based upon the lack of funding available for its continuation," Gische wrote.

Earlier this year, the city announced that budget reductions would make it impossible to continue Advantage, which began in 2007.

On March 28, the Legal Aid Society sued on behalf of existing Advantage recipients to block the city from cutting the program, as it planned to do April 1.

In June, the Appellate Division, First Department, issued an order requiring the city to continue the payments to existing recipients.

Meanwhile, in a five-day trial before Justice Gische, the city argued that it had no legal obligation to make the payments.

NO INTENT TO BE CONTRACTUALLY BOUND

Justice Gische agreed.

"The defendants did not manifest an intent to be contractually bound to provide the benefits associated with the Advantage program," she wrote.

But the First Department order means that the subsidies will continue unless the city moves to vacate that order.

Steve Banks, attorney-in-chief for Legal Aid, said in an interview that an appeal would be forthcoming from Legal Aid and Weil, Gotshal & Manges, which represented the recipients pro bono.

"This certainly seems like a case in which the city loses when it wins, since it will have to pay far more to shelter these families and individuals than by continuing to make the rental payments," Banks said.

"We believe that the judge made the correct decision based upon the facts and the law," said Corporation Counsel Michael Cardozo in a statement. "The Advantage Program is a social program and not a series of contracts entered into by the City."

The case is Jasmine Zheng et al v. The City of New York et al, New York Supreme Court, No. 400806-2011.

For Jasmine Zheng et al: Steven Banks of The Legal Aid Society and Konrad Cailteux, Isabella Lacayo and Debra Dandeneau of Weil, Gotshal & Manges.

For New York City et al: Eric Rundbaken, David Cooperstein and Abigail Goldenberg of the New York City Law Department and Michele Ovesey of the Department of Homeless Services.

(Reporting by Noeleen Walder; Additional Reporting by Jennifer Golson).

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