Nama chief links housing shortfall to land hoarding
Brendan McDonagh indicates only small fraction of sites sold have been developed
Brendan McDonagh, chief executive of Nama: ‘There is little disincentive to hoarding as long as the owner expects house prices to rise”. Photograph: Alan Betson / The Irish Times
The chief executive of the National Asset Management Agency (Nama) has linked the low level of residential development on sites sold by the agency to land hoarding.
Brendan McDonagh told the Oireachtas finance committee that since its inception Nama had disposed – either through loan sales or asset sales – land sites with the capacity to deliver 50,000 housing units.
However, to date only 3,700 units had been built or were under construction.
“There is no doubt that land hoarding is an issue,” Mr McDonagh said. “For any given site there is little disincentive to hoarding as long as the owner expects house prices to rise,” he said.
Despite the current shortfall of new housing, there are significant tracts of land particularly in Dublin that could be used for housing that still lie idle.
The Government has signalled the possible introduction of a vacant site tax as early as the next budget in a bid to ramp up supply.
Mr McDonagh rejected suggestions that Nama should have imposed stipulations as part of its loan sales requiring purchasers to develop sites within certain pre-determined time periods.
He said this would have led to a discount on the sales price achieved and would have been difficult to enforce.
“I’m not convinced you can force a developer to develop a site if he or she considers it unprofitable to do so,” Mr McDonagh said.
He said the principal reason for the current housing crisis was the 50 per cent drop in residential house prices in the immediate aftermath of the crash.
“Only in recent years has it become commercially viable to build houses again. No funder – be it Nama, banks or otherwise – could have funded the building of houses unless it was profitable to do so,” he said.
Amid criticism that Nama should have restricted its loan sales to domestic developers, Mr McDonagh said restricting the field of buyers would have limited the return for taxpayers.
Separately, he said the agency was likely to let go 40-50 staff next as it begins the next phase of its wind down and would soon establish a voluntary redundancy programme.
Earlier Nama chairman Frank Daly said he expected the agency to deliver a surplus of €3 billion to the exchequer when the agency completes it work in 2020.
He noted the agency had redeemed €5.5 billion of senior debt in 2016 and another €2.1 billion in the first half of this year, leaving just €500 million, less than 2 per cent of the €30.2 billion originally issued.
Mr Daly said Nama had also exceeded its target of facilitating and funding the delivery of 4,500 homes by the end of 2016.
He said estimates of housing supply requirements now suggest Ireland will need 30,000 –35,000 new units annually in the coming years.
Between 2017 and 2020, he said Nama debtors and receivers, even operating at full capacity, would, however, only deliver about one-seventh of the 120,000 – 140,000 units required.
“It is clear that the market is responding to this need – new residential funding and delivery platforms are being established on a regular basis – but no one expects supply and demand to be in balance for quite some time,” he said.