NAMA seems in many ways like the proverbial Irish solution to an Irish problem. In reality, it’s largely based on a US ‘bad bank’ established in 1989: The Resolution Trust Corporation. The RTC was set up following a financial and real estate crash not unlike our own and is serves as a kind of blueprint for Nama.
One aspect of the RTC is, however, notably absent. One of its three core objectives was ‘to maintain and expand affordable housing’. Over the course of its lifetime, it delivered in the region of 100,000 affordable using units, working with community organisations and housing associations.
Nama, in contrast, has maintained a strictly ‘commercial remit’. And Nama’s is a particularly narrow view of the term ‘commercial’. It has focused on selling as many assets as possible as quickly as possible. In practice, this means selling heavily discounted packages of assets to global private equity firms and hedge funds, the oft bemoaned ‘vulture funds’. The vulture’s feeding frenzy is not an unfortunate consequence of Nama’s ‘asset management strategies’, it’s an explicit objective. Nama’s annual statement for 2013 talks about the importance of ‘attracting international capital’ while only last week its CEO Brendan McDonagh took the opportunity of his appearance before the Public Accounts Committee to champion Nama’s contribution to ‘strong inflows of foreign capital’.
On the other hand, the last year has seen Nama introduce a new aspect to its work. Focusing on the Dublin Docklands redevelopment, it has morphed into an urban development agency of sorts. This means that Nama is taking a lead in driving the latest phase of Docklands regeneration. The agency holds 75% of 22 hectares of undeveloped land in the Docklands, representing what Michael Noonan described as a ‘rare opportunity’. So what is Nama doing with this opportunity?
Despite the ongoing housing crisis, the focus is on building commercial office space. The agency is linked to the building of almost 4 million sq ft of new office space in the Docklands, but only 2,000 apartments. The residential properties it is involved with appear to be luxury apartments unlikely to do much for the severe affordability problems of housing in Dublin. For example, one of the global firms Nama has teamed up with, Oxley Holdings, describes itself as a ‘lifestyle property developer that caters to the upwardly mobile homebuyer and entrepreneur’.
If we don’t like what Nama is doing, what should it be doing? Last weekend I had the opportunity to discuss this issue at the Housing Emergency and Rights conference in Liberty Hall.
Nama has three things that are crucial to overcoming the housing crisis: houses, land and money. It is thought to have around 14,000 residential properties. Land, however, makes up the largest asset class in Nama’s portfolio (more than 30%). Both land and housing units should be sold to housing associations, local authorities and anyone else who is willing to provide affordable housing at a discount. If potential buyers don’t have the funds to buy these assets Nama can lend them the money to do so under its ‘vendor finance’ initiative.
Finally, Nama can provide development capital at very good interest rates.
If this sounds like a lot to ask for, remember that Nama is already doing all of this for global financial firms whose only interest is profit. Nama sells at huge discounts (up to 70%), lends to buyers of its assets and provides development capital. Why not do the same for the public?
But wait, I can already hear a chorus of voices lining up to tell us this is not possible. Nama, they’ll say, has a ‘purely commercial remit’. Perhaps those who think we can do nothing except stare blankly at Nama while it flogs more than €72 billion worth of assets (47% of Irish GDP) should take a cursory glance at the Nama Act (2009) — the piece of legislation which established Nama and which governs how the agency works.
The opening section of the legislation states that one of Nama’s chief purposes is ‘to contribute to the social and economic development of the State’. In Section 12 of the act we find that Nama ‘shall have regard to proper planning and sustainable development’. And to top it all off we also read that the Minister for Finance ‘may give a direction to Nama’ and that ‘Nama shall comply with a direction given by the minister’. In other words, Nama’s current ‘hyper-commercial’ focus is just one interpretation of the legislation. And while this interpretation is favoured by both the Finance Minister and the Nama board, it neglects the potential of our bad bank to be part of the solution to the housing crisis.
Let’s be clear, Nama cannot not solve the housing crisis; it is not some kind of panacea. It does not have responsibility for housing policy nor should it. But it can be part of the solution. When we have an agency with billions of euro worth of real estate assets, a total cash intake thus far of €26.7bn, substantial cash reserves and an expected profit of €1.75bn we really have to ask, can we afford not to use Nama to respond to the housing crisis?
Dr Michael Byrne is an Irish Research Council post-doctoral fellow at the National Institute for Regional and Spatial Analysis, Maynooth University.