Can Nama help solve the housing crisis?

The recent death of Jonathan Corrie on the streets of Dublin brought into sharp focus the plight of homeless people in Ireland. It also followed shortly after the Government had published its social housing strategy out to 2020.

The two issues aren’t exactly one and the same but they are clearly linked.

On paper, the social housing plan is an ambitious programme, certainly when set against the record of delivery of such units since the economy crashed in 2008.

Minister for the Environment Alan Kelly has committed €1.5 billion in “guaranteed, up-front exchequer investment” from 2015 to 2017.

The Government also intends to develop a new €300 million Housing Public Private Partnership and to make available up to €400 million of public investment in a “new housing finance entity” to leverage further substantial private investment.

The aim is to provide more than 35,000 new homes to meet social housing needs by 2020, and to deliver up to 75,000 units of long-term, quality accommodation through local authority housing support schemes for tenants.

For some, there is one simple solution to the social housing problem – the National Asset Management Agency.

It controls vast landbanks around the country associated with the 850 debtors – about 100 have since exited Nama through one means or another – who had their property loans transferred to the agency from the Irish banks at a cost to the State of €32 billion.

Why doesn’t Nama simply hand over the land to local authorities or approved housing bodies (AHBs) for the development of social housing or allow the existing houses and apartments under its control to be used for such purposes?

Nama can certainly play a role in providing much-needed social housing around the country, but it can it never be the whole solution.

For a start, it has a commercial remit that is designed to keep it off-balance-sheet in terms of the State’s coffers. Eurostat, the independent statistical agency of the European Commission, keeps a watchful eye on Nama’s activities and the agency has to be careful not to fall foul of EU state aid rules.

A commercial case has to be made for each action that Nama undertakes and it can’t simply grant free land or housing units to local authorities at the whim of the Government.

When Nama began its work in 2010, it inherited a stock of about 15,000 housing units. By the end of June 2014, it had made 5,482 houses and apartments available through the Housing Agency to local authorities and approved housing bodies for social housing.

Some 2,854 of these were deemed unsuitable or there was no demand in the areas were they are located. All of these units have since been sold or let by Nama in the private sector.

The reasons for rejection are many and varied. Each local authority has its own planning strategy and that often involves not wanting to concentrate too many social housing units within one area.

In many cases, Nama’s units have involved large groups of houses or apartments being concentrated in parts of Dublin or towns around the country.

Demand was confirmed by local authorities for 2,121 units, while another 507 were still under consideration at the mid-year point.

By the end of June, 926 units under Nama’s control had been delivered for social housing. About 1,100 will be delivered by the end of this year.

Nama has spent about €20 million on these units, either in site costs or on work to finish them out and make them habitable. The rest will come on stream in 2015.

On Saturday, my colleague Olivia Kelly reported that four office blocks and one hotel could be made available by Nama to provide emergency accommodation for homeless people sleeping on Dublin’s streets.

The agency was one of more than 50 groups to attend meetings with Alan Kelly last week to explore measures to alleviate homelessness in the capital.

Nama is believed to have identified office buildings ranging in size from 3,000sq ft to 20,000sq ft in the north inner city, at Talbot Street, Blackhall Place, Ormond Quay and Smithfield.

The third leg to the stool is new construction. Recent revisions to Part V of the Planning and Development Acts require that 10 per cent of any development must be for social housing.

It has been designed so that developers can no longer wriggle out of this commitment by offering cash to a local authority or an alternative site in a different area.

Following a recent review of Nama, the Government has given it a residential mandate.

This will involve the construction of about 4,500 units in the greater Dublin area by 2016 and possibly an additional 20,000 around the country over the next five years or so.

Apply the 10 per cent rule to these numbers and that’s another 2,450 social housing units. It makes Nama an important player in delivering on the Government’s plan to have 35,000 units in place by 2020.

Nama’s involvement in building these properties means that cash-strapped local authorities do not have to bear the upfront capital cost of construction. That burden will rest with Nama.

The agency will then enter into long leases for the units with approved housing bodies, who will receive their funding from Government.

The approved housing bodies will have an option to purchase the property two-thirds of the way through the lease.

To help finance this work, Nama intends to package up the leases and sell them on to a pension fund, offering a net yield of around 5 per cent.

It has set up a special purpose vehicle to do this and estimates that 2,000 units, with long-term leases, and a balance sheet of €250 million will prove popular with pension funds looking for steady returns for their members over the long term.

None of this will affect the tenants involved. The proof will be in the pudding but this could prove to be a cost-effective and timely way of providing much needed social housing.