Paul Melia: 'Bad bank's remit should have been changed to help ease homes crisis'
To be clear: Nama is doing nothing wrong by selling properties to investors and for building homes which cost in excess of what many people can afford.
It is not its function to solve the housing crisis. It's to make the best return for the State on the appalling mess of a loan book it inherited after the housing market collapsed. By this metric, it's doing very well, and is on course to deliver a €3.5bn surplus when it winds down in 2020. Some believe the surplus could be higher, in part due to rising house prices.
The problem is that Nama is an arm of the State, and it is the State's job to fix the housing crisis. The agency's remit should have been changed when it became apparent that the sector was in trouble, probably in about 2014 when the last Government published its Construction 2020 strategy, aimed at easing the severe shortage of housing stock and dampening prices. But it was left as is. That meant when it was considering funding housing development, it was driven by the need to maximise returns.
So instead of building three-bed starter homes for €300,000, which would serve a substantial portion of the market, it instead went for projects like College Square in Dublin 6W, where homes started at €550,000 and where - presumably - the returns were better. It had to do so. Because its job was to maximise the return on the loan book.
Lessons must be learned.
The Land Development Agency is tasked with utilising State-owned land to develop a mix of social, affordable and private homes.
It will wield enormous power, not only controlling enormous landbanks, but also having the financial muscle to start delivering homes. The idea is that land will be made available in a controlled manner, backed by good planning policies, so that homes are delivered on a steady basis, at accessible prices, and which will avoid the boom and bust cycles of the past. It will be crucial to ensure that any homes built on public land are sold to the 'right' people.
What cannot happen is that the agency funds development, only for it to be sold to cash-rich investment firms.
And nor should rental properties be developed on public lands which cost a small fortune. Let the market look after this cohort of wealthy tenants. Politicians should also be willing to change the underlying legislation if it appears that changes are needed.
Regardless of how well Nama performs, the State will still experience appalling losses from the financial crisis. Ex-Central Bank governor Patrick Honohan reckons around €37bn. On that basis, giving up a Nama surplus of €3.5bn to allow it build cheaper homes is a difference of less than 10pc.
Nama has delivered almost 2,500 homes it inherited during the crash for social housing. Its record on new builds is less impressive. Had it been allowed to develop more affordable homes since 2014 it may not have solved this housing crisis, but it would certainly have helped ease it.