NAMA has quite specific objectives and the NAMA Act sets out those objectives. Here they are again (section 2 of the Act):
“2.—The purposes of this Act are—
(a) to address the serious threat to the economy and the stability of credit institutions in the State generally and the need for the maintenance and stabilisation of the financial system in the State, and
(b) to address the compelling need—
(i) to facilitate the availability of credit in the economy of the State,
(ii) to resolve the problems created by the financial crisis in an expeditious and efficient manner and achieve a recovery in the economy,
(iii) to protect the State’s interest in respect of the guarantees issued by the State pursuant to the Credit institutions (Financial Support) Act 2008 and to underpin the steps taken by the Government in that regard,
(iv) to protect the interests of taxpayers,
(v) to facilitate restructuring of credit institutions of systemic importance to the economy,
(vi) to remove uncertainty about the valuation and location of certain assets of credit institutions of systemic importance to the economy,
(vii) to restore confidence in the banking sector and to underpin the effect of Government support measures in relation to that sector, and
(viii) to contribute to the social and economic development of the State.”
Some financial flesh has been put on the operation of NAMA by its Draft Business Plan, published in October 2009.
The Irish Independent reports today on what is understood to be a scheme whereby local councils can offload loans taken out to buy development land during the boom, which is presumably now worth a fraction of its initial purchase price. The loans are reported to be bound for the Department for the Environment Housing and Local Government and the Independent reports that there may be €25m of transfers this year. The government scheme is called the Land Aggregation Scheme which appears not to be publicly available at this time. As analysed elsewhere, local councils are likely to have serious problems with resolving their purchases of property during the boom – it was not uncommon for them to pay €250,000 for an “affordable home” which they intended selling, but which might now be worth a fraction of that sum. One council, Dun Laoghaire-Rathdown is reported to be exposed to €35m in respect of commitments to social housing. The Independent today reports that Sligo alone may have €15m of development land loans that may be transferred (that is, paid off) by the DoEHLG. Could the cost reach €100s of million or indeed billions? The rights and wrongs of councils transferring the cost of acquiring uneconomic or unneeded assets will no doubt be debated elsewhwre.
Of more interest here however, is the suggestion that property which is not economic or not required by councils may be transferred to NAMA to manage. Now unless this property was secured on loans which meet the NAMA criteria, this would represent a new responsibility for NAMA – mission creep. It is not set out in the NAMA Act in any recognizable way and is certainly not referred to in the NAMA draft business plan.
Although there has been scant information forthcoming from NAMA, what has emerged has painted a picture of hardwork and a striving to deliver on the NAMA objectives. If NAMA is however going to be used as the receptacle for every uneconomic or unwanted piece of real estate that the government can find, then it may impair NAMA’s ability to deliver on its objectives, particularly because of unforseen demands on management and the profitability. From a competition point of view, it bolsters NAMA’s commanding position as the provider of development land and housing – €25m might not be significant but a few billion would be – and a near-monopoly in a sector where there is substantial private sector involvement is unlikely to be good for competition or economic development. I hope this new scheme is debated and that its effect on NAMA will be widely recognized and understood.
UPDATE: The DoEHLG has made available the circular sent to councils in April 2010 setting out the terms of the scheme. There is to be a new State agency, the Housing and Sustainable Communities Agency which is an amalgamation of theAffordable Homes Partnership, certain elements of the Homeless Agency and the National Building Agency and will be an asset management agency for the land transferred by councils. Although NAMA will be consulted on the use or development of the land, and in some cases will develop joint plans with the new State agency, it is not envisaged the property will come onto NAMA’s books. So no change at NAMA internally but having influence and a certain degree of control over this land will still have an impact on competition. It will be interesting to see the volume and value of land transferred to this new agency. The DoEHLG have not released any information with respect to budgets but have said that there is no proposal to extend the scheme to anything other than land.
NAMA Wine Lake 