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Archive for December 21st, 2011

Embattled Minister for the Environment, Community and Local Government, Phil Hogan has this evening announced an agreement between his ministry and NAMA whereby NAMA is to make available 2,000 dwellings – apartments and houses – for use through leasing arrangements in 2012. The housing will be made available to local authorities and unspecified “volunteering” housing associations.

Amazingly there is no pretence at the political interference in  NAMA’s operations – the statement has the chutzpah to say “Minister Hogan and former Minister for Housing, Willie Penrose TD have put considerable pressure on NAMA in 2011 to achieve a greater social dividend in the housing area” – so much for the impression that NAMA might have been independent of the political process! I fully expect Northern Ireland’s Minister for Finance and Personnel, the sometimes-bohemian Sammy Wilson, to be on the blower to NAMA tomorrow morning demanding cheap/free social housing for Northern Ireland.

Of course it is a scandal that there are a crudely-estimated 98,000 households (and rising) on housing lists in the State, which at the same time has, in the national sense, some 300,000 vacant dwellings. We have already seen a small number of developments bulldozed by local authorities which gives a perception that we really don’t know what we are doing. In  practice, some housing will not be suitable – because of location for example.

What is surprising about the announcement today is that so much property is now to be made available by NAMA, yet only a short few months ago, it was suggested that NAMA’s property was in the main not appropriate, it was suggested that NAMA had met with housing associations and reviewed the portfolio and found there was little of practical use. What has changed?

Of concern on here is the issue of the terms under which the housing will be provided by NAMA. An ongoing concern is that government departments will “bring pressure” on NAMA to gift benefits to their departments which are otherwise required to deliver savings so that the national deficit can be eliminated. Our political leadership should be concerned at ministries acting individually to take bites out of NAMA’s potential to deliver on its primary objective – to maximise the value of the assets under its control.

If a house is worth €100,000 on the open market, then that is what NAMA should charge for it, and not a cent less. Of course there is nothing to stop the Government seeking a dividend of €25,000 per house from NAMA, a dividend which can then be considered by the Government as a whole and the spending of that dividend can be prioritised across ALL government departments, not just those who “bring pressure” on NAMA. In this way, the integrity of NAMA’s primary objective is maintained – dividends are deducted AFTER calculating net profit – and at the same time, the Government can take advantage of NAMA to deliver benefit in a structured way which recognises the priorities of the government as a whole.

NAMA has not issued any statement, and has not yet replied to a request for comment.

UPDATE: 21st December, 2011.  NAMA has not issued a statement but it is understood that it will offer the housing on an “arms-length and commercial” basis.

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Millionaires? “Property” millionaires? In 2012? At the same time as the Government is levying a new flat tax of €100 per home on 80% of the homes in the country. Surely this is a case of over-indulgence in the mulled wine. You’d think…

Although the Government’s capital programme has been cut back in 2012, there is still a meaty schedule of infrastructure works – road-building and the like. And it remains an unaltered feature of Irish infrastructure spending that land which is compulsorily acquired is paid for through the nose. An acre of land might be worth €6-15,000 in terms of its existing use, but once the State decides it needs it for infrastructure, that price can rocket to well over €100,000 an acre. Not convinced? Why not ask the Limerick land-owner who pocketed €10.4m for a contribution from his land-holding so that a tunnel scheme might have been built; indeed €56.5m was spent on land acquisition in that one Limerick scheme alone.

Of course there are arguments about valuing land which the State compulsorily takes from citizens so as to improve the general infrastructure of the State. But these issues were dealt with, decades ago, when the Kenny Report was produced in 1974. In essence, it recommended that landowners be paid a 25% premium on top of the existing value of their land if there was compulsory acquisition. Successive governments – Labour, Fine Gael, Fianna Fail – all welcomed the recommendations in the Kenny report but somehow, never managed to get around to implementing those recommendations. And by the way one recommendation was a register of  property sale prices which we may eventually get by the middle of 2012 – almost 40 years after Justice Kenny started his deliberations! And I’d be willing to bet that without the IMF breathing down our necks it mightn’t even be happening by 2012.

But what about implementing the rest of the Kenny report? How much would that save in 2012? €160m, the estimated sum to be collected in the flat property tax? Indeed might an urgent reform of compulsory purchase procedures not only yield more than the €160m which the flat property tax is projected to bring in, but also give the State a cheaper and more competitive means of doing business, as well as giving society in general a sense of fairness? The losers would be landowners who might have received a premium of over €100,000 an acre for their land in excess of what it was worth with its existing use; but even they would receive a 25% premium, worth €1,500-4,000 an acre.

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