Nama plans ‘illegal State aid’, say builders

The builders challenging plans of the National Asset Management Agency (Nama) to construct 20,000 homes have broadened their complaint to include the body's involvement in commercial development.

Five builders have complained to the European Union competition directorate that the Government’s proposal that Nama fund the building of 20,000 homes as part of a plan to tackle the housing crisis is illegal State aid.

It is understood the companies have also raised concerns with Brussels officials about the State agency’s involvement in office developments. Nama has an interest in 75 per cent of the 22 hectares of development land in the Dublin docklands strategic development zone.

Boland’s Quay

It is backing the €170 million Boland’s Quay project close to Google’s European headquarters on Barrow Street. Nama is also involved in a project on the city’s North Wall Quay with

Ballymore Properties

and Singapore-based Oxley Holdings.

The five builders – New Generation Homes, MKN Properties, David Daly, Paddy McKillen and Michael O'Flynn – lodged their complaint with the European Commission directorate general for competition late last year after Minister for Finance Michael Noonan announced in his budget speech that Nama would fund 20,000 new homes.

They argue that when the State got EU approval in 2009 to establish Nama it was intended to repair the banks’ balance sheets and that the Government has gone beyond what was agreed with Brussels.

The complaint also states that as a State agency Nama enjoys a number of competitive advantages. Its finance costs are nine percentage points lower than those of private sector operators and, unlike them, it does not have to price in the cost of replacing sites and housing stock, as the agency will ultimately be wound up.

Disadvantage

That means it can sell houses considerably more cheaply than the private sector can. While this will benefit the people who buy homes developed by Nama, it will leave the other 100,000 estimated to be seeking houses at a disadvantage.

Economists hired by the developers say the Government could cut the cost of new houses by cutting VAT and capital gains tax and by making the planning system more efficient.

The developers say the proposal would slow the rate at which new homes are constructed as it limits the number of sites on which private-sector players can build. This because Nama’s price advantages mean its competitors’ financial backers do not want to fund construction close to where the State agency is building.

It is estimated 120,000 new homes are needed in the Republic and the shortage is one of a number of issues that will feature in the general election.

Under EU law, state aid is illegal where it tends to distort normal competition in markets for goods or services.