With NAMA recently entering into its fifth year, Maynooth Geography’s Rory Hearne considers what it has achived. Published in today’s Irish Times
The government’s new Social Housing Strategy correctly identifies the underfunding of the provision of social housing and rising rents in the private sector as the principal causes underlying the current housing crisis. Unfortunately it continues this underfunding as the 2015 social housing budget will be just half of what it was in 2008. Furthermore, the Strategy failed to radically reform NAMA, which is the largest housing agency and property developer in the state. This leaves a fundamental contradiction in housing policy.
While the government expresses a strong concern to address the 90,000 households on the waiting lists it is, at the same time, actively encouraging NAMA to sell off its residential and land assets in the form of ‘packaged portfolios of property’, at the highest possible price, to international and Irish capital investors. The Strategy did not alter NAMA’s primary objective to achieve a maximum commercial return to the state. The uncomfortable truth is that those who will benefit most from current government housing policy, and NAMA in particular, are international wealthy investors and banks, developers and landlords and not the ordinary Irish people who have paid dearly for the write downs on development loans transferred to NAMA.
The reality is that NAMA is playing a significant role in worsening the housing crisis through its sale of assets to Real Estate Investment Trusts (REITs). The government encouraged the setting up of Irish based REITs in 2012 through generous tax breaks. Irish REITs are being set up to take advantage of high yield returns from investment in the ‘recovering’ Irish property market. One newly formed REIT is the Irish Residential Properties which includes large property investors from Canada and finance from the UK based Barclays bank. Another REIT, Hibernia, has billionaire investor George Soros’ funds amongst their shareholders. Irish Residential Properties bought the ‘Orange’ portfolio from NAMA for €211m which included 716 residential apartments in Dublin. NAMA advertised that the portfolio would provide a residential rental income of €10.6m and ‘significant rental growth potential over the near and longer term’. Selling to such investors with this expected rate of return will clearly provide a huge upward pressure on residential rents in the coming years.
NAMA is also likely to have a major influence on the residential property market through its intention to provide over 22,000 units in Dublin (half of expected demand in Dublin) and surrounding counties by 2019 through the use of existing units and 1,500 hectares of development land. It is doing this through partnerships with developers including the provision of at least €1bn in finance. However, the objective to ensure a maximum commercial return means that NAMA will make certain these units are sold at the highest possible price thus inflating prices further.
Although we don’t hear much about it, NAMA has a mandate to ‘contribute to the social and economic development of the State’. It achieves this through its provision of social housing yet only 736 units have been delivered. The new Housing Strategy includes an expansion of NAMA’s Special Purpose Vehicle (SPV) set up to sell or lease NAMA residential properties for social housing but only plans to deliver 2,250 units by 2020.
NAMA’s current trajectory is wrong if we want to develop a sustainable economy and society. Its need for rental growth is likely to be one of the reasons the government is refusing to give private tenants (who are the majority of those on social housing waiting lists) relief through the introduction of rent controls. By pushing for maximum commercial returns NAMA is working against the interests of those looking for an affordable and secure home. It is continuing the speculative asset approach to housing that fuelled the crisis. This promotes residential property as a commodity rather than a social good that is developed primarily to meet people’s housing needs.
NAMA is facilitating a massive transfer of wealth (income) created by the Irish people to foreign and domestic capitalist investors. It exemplifies all that is wrong with the current model of financial neoliberal capitalism. Rather than investing in the ‘real’ economy and social requirements it is promoting speculative finance. The result is rising inequality and a more unstable system. The legacy of socializing the costs of the banking crisis in Ireland has been widespread social devastation. NAMA is embedding this for decades to come.
But the government can still reorientate NAMA to play a key role in addressing the housing crisis. It could genuinely expand NAMA’s SPV by transferring the majority of NAMA’s residential development units and land into it. NAMA could then provide 15,000 social housing and 7000 low-cost rented units managed by housing associations by 2020. These could be excellently planned, environmentally sustainable and model community developments in areas such as the 25 acre Glass Bottle Site in Ringsend. Such a social stimulus could help repair some of the societal damage caused during the crisis. If this means NAMA doesn’t make a profit it is important to highlight that those most affected by that will be the private (mainly international) investors who own fifty one percent of NAMA’s shares. Furthermore, NAMA was also set up so that if it makes a loss a surcharge can be introduced on the profits of the financial institutions.
When our financial system was in peril there was no obstacle too large for our political establishment and the state to overcome. Now we face an equivalent crisis in terms of the fundamental housing needs and rights of hundreds of thousands of our citizens. It is legitimate to ask why the same radical approach that determinedly did ‘whatever was needed to be done’ is not applied to the housing crisis. It appears it is because the government is unwilling to stand up to the financial and property investors and transform the residential property market into a system to meet housing needs.