'Mini-NAMA' to bail out councils that can't pay land loans
CITY and county councils unable to repay loans on land bought for housing are to be bailed out by the taxpayer.
And it will result in a mini version of NAMA for the country's 114 local authorities.
The Irish Independent has learnt that the Government is to pay off loans taken out by cash-strapped local authorities -- many of which are cutting services as they struggle to meet repayments.
Details of the Land Aggregation Scheme were confirmed last night after borough councillors in Sligo were told that €15m worth of loans would be written off.
Loans involved in the scheme will be repaid by the Department of the Environment, and the land banks transferred to a new body called the Housing and Sustainable Communities Agency.
It will then decide if they should be developed or sold on the open market.
The move comes after local authorities spent millions of euro building up landbanks to be used for social and affordable housing. These are now unlikely to be developed over the next decade because of the collapse in the housing market.
Councils have been told to send details of all land assets they own to the Department of the Environment in the coming weeks. They may then apply for loans to be repaid.
Land on which there is no mortgage can be sold at market price to the new agency -- which will work with NAMA to identify lands suitable for development.
Some €25m has been set aside to meet the demand for 2010, but the amount may rise.
Only loans which are due to be repaid at the end of this year will qualify, but the scheme will then extend into the coming years.
"There will be all various types of land," a department spokesman said. "Some local authorities would have zoned and serviced land which they'll probably hold on to. They may also have unserviced land.
"There may well be stuff that might have been bought at expensive prices, and stuff bought at cheaper prices.
"Some local authorities are struggling with landbanks and the interest payments. If it's surplus to requirements, it's impacting on their finances. It is going to free up money for other purposes," he added.
"There is a saving for local authorities, because they won't have to make repayments and the land will continue to be available for social housing."
A notice sent to each local authority said: "There is no onus on a local authority to partake in the scheme but it will be of benefit to those local authorities who are servicing loans where it is unlikely that the land will be developed in the short to medium term.
"Land holdings transferred to the agency may still be available to the local authority for social housing projects subject to approval. It is possible, in consultation with NAMA, that alternative or additional lands may also become available."
Councils borrow money for housing through a state agency called the Housing Finance Agency. This agency borrows money at cheaper interest rates than those offered by high-street banks.
What usually happens is the local authority buys the land and builds the houses that are sold or leased to tenants. The cost of land, construction and interest is, therefore, usually set off against the money received from selling or renting the houses.
However, because there is no demand for housing, these landbanks are lying idle.
The Land Aggregation Scheme and NAMA will both have a role to play in the changed economic climate.
The information supplied by each local authority will be combined, and NAMA consulted, to maximise the value of lands owned or controlled by the State.
This means council land could be merged with land owned by NAMA to sell on, or to be developed.
NAMA could also provide land to local authorities in towns and cities on which to build homes.