The Government's new Social Housing Strategy 2020 plan correctly identifies the underfunding of the provision of social housing and rising rents in the private sector as the principal causes underlying the 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 the National Asset Management Agency, which is the largest housing body and property developer in the State. This leaves a fundamental contradiction.
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 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. One newly formed REIT is Irish Residential Properties which includes large property investors from Canada and finance from UK-based Barclays bank. Another REIT, Hibernia, has billionaire investor George Soros’s funds among its shareholders.
Irish Residential Properties bought the “Orange” portfolio from Nama for €211 million – which included 716 residential apartments in Dublin. Nama advertised the portfolio would provide a residential rental income of €10.6 million. Selling to investors with this expected rate of return places huge upward pressure on rents.
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) 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 €1 billion in finance. However, the objective to ensure a maximum commercial return means Nama will sell these units at the highest price, thus inflating prices further.
Nama’s mandate
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 set up to sell or lease Nama residential properties for social housing, but only plans to deliver 2,250 units by 2020.
Nama’s 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 (the majority of those on social housing lists) relief through 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.
Nama is facilitating a massive transfer of wealth 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 legacy of socialising the costs of the banking crisis has been widespread social devastation. Nama is embedding this.
But the Government could expand Nama’s special purpose vehicle by transferring the majority of Nama’s residential development units and land into it. Nama could provide 15,000 social housing and 7,000 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 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 will be the private (mainly international) investors.
When our financial system was in peril there was no obstacle too large for the State to overcome. Now we face an equivalent crisis in housing needs. It is legitimate to ask why the same radical approach is not applied to the housing crisis. It appears the Government is unwilling to stand up to the financial and property investors.
Dr Rory Hearne is a lecturer in the department of geography at NUI Maynooth. He has researched and written extensively on housing, public services and political economy, including his book Public Private Partnerships in Ireland