There was a fairly lengthy piece in the Saturday Weekend Review of the Irish Times about the philanthropic developer and businessman Niall Mellon. I have a lot of time and admiration for Mellon’s energy, entrepreneurship and housing development works in South Africa. However, his views about the causes of the crash and the role of developers in Ireland’s woes seems way off-beam and, at times, contradictory. On the one hand, developers apparently played little or no role in the collapse and have been the victims of a witchhunt and, on the other, they have a duty of shared responsibility to pay back debts. Here’s a selection of what he had to say:
“What happened” was the collapse of the Irish banks in 2008. One day he was a developer worth more than €150 million; the next he had nothing. “The night the banks collapsed I went to bed a hero and woke up a villain. That’s what the Irish State did.”
Two years after what he passionately describes as a “witch-hunt” against developers, he surrendered his Mount Merrion home on five acres to Nama. “And – what people couldn’t understand – I also handed over another dozen properties I owned, unencumbered, with no bank debt whatsoever, any of which would have paid my mortgage for several years.” …
“Irish people need to remember there was no property crash in Ireland; there was a bank collapse that caused a property crash. Two different things. Fianna Fáil were desperate to blame anyone except themselves and heaped pain on developers. It was an absolutely disgraceful effort by the then government, and it hasn’t been much better under this one. But this year Frank Daly, the current chairman of Nama, came out and said it was the banks, not the developers. So developers need to be fairly judged now. Everyone is forgetting developers only built to satisfy demand.”
The last paragraph is the one that many people will have problems with. The conventional reading would be that the banks collapsed because they had over-extended themselves by lending finance to developers in a bubble and oversupplied market (unlike elsewhere where banks were caught in the maelstrom caused by the complex deriatives of the US subprime market). Given that developers sought this finance, to intimate that they are an entirely innocent part of the banking collapse or that the fault lies simply with banking practice and government policy appears disingenuous.
It was developers who drove property development and borrowed the money for ambitious and risky property schemes; it was developers that contributed donations to political parties and strongly lobbied government about laissez-faire planning and finance; it was developers who drove up land prices and helped egg-on property prices; it was developers that flooded the market with excess housing and commercial property; it was developers who build estates compromised with poor building materials and weak safety standards. Developers did not only build to satisfy demand – they created huge oversupply with respect to residential and commeercial property which still exists and will do for quite some time in many parts of the country. And commercial property has been as much the problem as houses and apartments. The legacy of unfinished estates, zombie hotels, ghostly retail parks and office developments, pyrite-infected homes, and a reading of Breakfast with Anglo or Anglo Republic or Ireland’s House Party or Namawinelake attests to all of this.
Admittedly, not all developers were the same and they ran their businesses in different ways and with varying ethos. Nevertheless, as a collective group developers do share responsibility in the collapse in the country’s fortunes along with banks and government. The idea that developers are simply innocent victims of the crash is delusional and smacks of an attempt to re-write the narrative of history so that they are more favourably judged. It simply doesn’t wash.
Mellon himself does seem to accept this notion of shamed blame and responsibility. He continues:
“I wanted to accept my share of the responsibility. Part of that was moving out of a big house. Part of it was keeping unencumbered assets and giving them to Nama.
“There has to be a shared responsibility and a shared approach to solving this. So if you borrowed money you sell your assets to pay back as much of that loan as you can, and when you’ve done that you should be set free, in recognition of the fact that there was a systemic collapse of the financial governance system with the Irish banks.”
He could have opted for “the easy choice” of bankruptcy in the UK but decided against it. Pride was one factor; another was a sense that he could do a better job disposing of assets than a receiver. He has also managed to pay “95 per cent of debts due to a few hundred small creditors. So that’s nearly finished,” he says.
And fair dues to him. Unlike other developers who have run for the hills or have sought to shift assets or fight Nama, Mellon has seemingly got on with addressing his various obligations. Having read the piece, I’m inclined to try and judge him fairly, but at the same time I’m not prepared to accept many of his assertions with respect to the innocence of developers in creating the conditions for the crash or to rewrite history.