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Gene Kerrigan: With the 'reit' stuff you can rake in the money

Tackling the housing crisis is difficult enough without daft plans to “incentivise” the private sector, writes Gene Kerrigan


Seven of the top lads in Hibernia Reit were due to be rewarded with a financial boost. About €21m, give or take.

Separate from this, the salary of one top lad is due to be doubled, with another getting a huge increase. Advisors to company shareholders were unhappy about that, but I suspect it’ll all work out fine in the end.


Stock picture: PA

Stock picture: PA

Stock picture: PA

This is an uplifting tale of life in the property business. Leo Varadkar turns up later, bless him.

This world can be depressing. Cruelty, homelessness, unfairness, conflict. For light relief, I read the business pages.

There, it’s all uplift. “Remuneration packages” and “second quarter growth” sound so positive.

In the photos, business people smile confidently as they tell us their philosophy of life.

If things such as homelessness bring you down, read the business pages. You’ll see that even an accommodation crisis has its bright side.

It was there that I came across Hibernia Reit.

Now, the business pages are written in a lingo that suits corporate strivers, not envious, lurking no-hopers like you and me.

So, I’ll do my best, but bear in mind that in my world “cash flow” is what happens when I get lucky with a slot machine.

First, I saw a nice Irish Times photo of a man named Bill Nowlan. Bill, the paper said, “is widely credited with a successful campaign to encourage the Irish Government to introduce legislation that has facilitated the introduction of real estate investment trusts (REITs) in Ireland”.

“Reits” provide a “tax efficient” way for investors to get into property. They were part of the Fine Gael/Labour Government’s 2013 solution to the collapse of the financial business.

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Today, the housing market is unsustainable. Prices go through the roof, the market is unbalanced. So much so that the head of the National Treasury Management Agency told a Dail committee that the market has failed. Even those earning up to €50,000, he said, have been unable to afford homes.

Some expect rents in Dublin to hit €2,000 a month by the end of the year.

Traditionally, the State provides local authority housing at affordable prices and rents. This stabilises the market and ensures the workforce has a roof over its head.

Since the 1980s, however, right-wing politicians have had a fetish about eliminating local authority housing. In Ireland, no party is more a slave to this fetish than Fine Gael.

Figures from Dr Rory Hearne, of Maynooth University, suggest that local authority housing in the UK (where Tory politicians hate it) is at 17pc, as opposed to 33pc in the Netherlands. In Ireland it’s 9pc.

Now, at the front of the newspapers — and, in my case, on the back page — we’re kind of obsessive about homelessness. The State can’t even properly count the numbers of houses built - though we know it’s far fewer than are needed.

In the joyful business pages, they’re exuberantly positive. It seems the desperation for a roof over people’s heads produces opportunities for those with the money to get creative.

Bill Nowlan was one of the founders of Hibernia Reit, along with Frank Kenny.

With the financial clout of numerous investors eager to get a steady income from housing needs, the “reits” have had a cash tsunami.

Politicians are adamant that the private sector is the answer to everything, so an unceasing deluge of State cash flows into private hands — subsidising landlords and builders and speculators.

Nama has brought in the vultures, to buy and sell vast accumulated packages of housing.

The “reits”, too, are happy. David Ehrlich, former CEO of Ireland’s largest landlord, Ires Reit, explained: “We’ve never seen rental increases like this in any jurisdiction that we’re aware of.” He added, “I truly feel badly for the Irish people.”

David got a bonus top-up of €376,500 added to his €753,000 salary that year. And, when he subsequently moved on he sold his stock options for €4m.

And, as the State sought to avoid building affordable housing itself, it ensured the private sector wallowed in a comforting bath of money. The Irish Examiner predicted, “a scramble amongst professional firms to be part of the first phase of the Government’s €300m social house building Public Private Partnership (PPP) programme”.

They even set up a “speed-dating” system, at an event in the Round Room of the Mansion House, last March. There, firms were given five-minute slots to pitch for a tender for services, moving from table to table as they tried to woo buyers.

Remember that PhD that Bill Nowlan got? It was for research into “funding models for social and affordable housing”. The Hibernia founders set up another company, Dad Property Fund, aiming to invest up to €200m a year in rental properties for the “affordable” market.

Remember that €21m financial top-up the seven lads were looking forward to at Hibernia Reit? Long story short: by the time the dust settled the €21m was €39.9m.

That’s the kind of “remuneration package” you might expect if you invented a cure for a deadly disease. It seems to me a little on the generous side for people whose achievement is to sell property in an accommodation crisis.

What about those unhappy shareholders? Hibernia bumped up dividends, the kind of move guaranteed to warm shareholder hearts.

Meanwhile, the Government was dicking around with whatever scatty plans its advisers thought up, in an effort to look busy. The obvious thing to do was to follow the lead of the politicians of the 1930s and 1940s. Declare a housing emergency, take the reins and build solid, habitable houses at a steady rate.

But that’s against their ideological beliefs. Instead, they had to find ways to “incentivise” the private sector. And the private sector, as it always must, did what it needed to do to maximise profit. It’s not in the housing business, it’s in the money-making business.

Guessing what will “incentivise” people to do what we need is not only slow and inefficient - it’s bloody expensive.

Alan Kelly gave way to Simon Coveney, who gave way to Eoghan Murphy, all of them announcing imaginative ways to do nothing much.

All’s well, then?

Slight glitch, I’m afraid.

The number of homeless continues to rise. Businesses worry about locating here if their workers have nowhere to live.

Dad Property got an €8m State investment, but it was in a terrible hurry.

It found an “exemption” that allowed it raise rents by 6pc in a “rent pressure zone” where the limit was 4pc (those zones were one of Simon Coveney’s gimmicks for doing nothing much).

Then Dad Property announced a rent review but didn’t notice that the law said they had to wait a year.

Oops, they said, sorry about that.

Sounds to me like they were pawing the ground with eagerness to ramp up rents.

But, that’s the nature of the beast.

Asked if the legislation should be reviewed, Leo Varadkar said no. He said, the “exemption” Dad took advantage of helps build houses and apartments. Therefore it’s a good thing.

Mr Varadkar will put up with anything as long as it might eventually, in some roundabout way, do the job his ideology forbids him allowing the State to do in an orderly way — build, build, build.

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