The National Assets Management Agency (NAMA) sold the Dock Mill building in Dublin 4 for €1.3 million in 2013. In 2014, Google bought it from the new owner for €13 million – a ten-fold price rise in less than a year.
Such odd deals can always happen of course, but this is not an isolated example, as recent revelations in the Sunday Business Post make clear.
According to a report by economist Jim Power, commissioned by developer David Daly, NAMA’s fire-sale strategy (selling assets when the market was at close to bottom) allowed vulture funds in particular to make a killing by “flipping” the properties they had purchased i.e., selling them dear after buying them cheap.
Power estimates that NAMA could have earned at least an extra €18 billion for the state if it had retained and managed its assets for longer periods. This echoes the report of the Comptroller and Auditor General, which found that NAMA’s controversial sale of Project Eagle properties in Northern Ireland to US vulture fund Cerberus resulted in a loss to the state – relative to what it could otherwise have received – of £190 million (sterling).
Meanwhile, the number of homeless children in the Republic rose to 2,546 in February, 2,129 of them in Dublin – impacting over 1,000 families. Meanwhile, Dublin house-price inflation may be running in excess of 20 percent this year, with rental costs ratcheting up in lockstep.
Homelessness for some, unaffordable homes for many others, and super-profits for a few are, in reality, all part of the same model, one the government seems determined to persist with.
Five local authorities – including Dublin City and South Dublin – have recently been asked to initiate new Public-Private Partnerships (PPPs) with private builders to deliver 500 homes.
The private companies will finance, build and maintain the new properties – at a cost to the public authorities that is as yet unknown.
Eoin Ó Broin of Sinn Féin points to past experience as indicating there is no guarantee affordable housing will actually be delivered, that the properties will be of appropriate quality, or that acceptable employment and environmental standards will be maintained.
The record of PPPs is, as Tom Healy and Paul Goldrick-Kelly of the Nevin Economic Research Institute (NERI) say, one of “wasteful use of public resources with very poor results”.
Why then rely on the private, profit-driven sector to deliver the homes we need?
As I have reported here before, Michael Byrne and Michelle Norris have documented how between the 1930s and the 1950s, half to two-thirds of new Irish housing was supplied by local authorities and by not-for-profit housing associations. They borrowed the money to build these homes and then used the rents (a surefire income stream) to repay the loans.
In their hugely important and timely new report, Healy and Goldrick-Kelly have shown how such historical precedents, supplemented by successful examples from other countries, could be built upon to solve today’s homelessness and housing crises.
The core idea they set out is simple: a newly formed Housing Corporation of Ireland (HCI) would get seed capital of €3 billion and then borrow the rest of the money necessary to finance a building programme that, over its first 12 months, could see the construction of 5,000 new homes at a typical cost of €180,000 each.
This is in line with recent estimates cited by architect Mel Reynolds that the average cost of a three-bed semi-detached house should be €180,000, which could be rented out for less than €800 per month and still cover its costs over a reasonable time period.
Over five years, a conservative estimate is that the HCI’s output could rise to 70,000 properties at a total cost of €12 billion. Over the same period, the HCI could also acquire and make available 20,000 currently vacant properties.
This would not be money down the drain, it would be an investment. Rents, even based just on costs rather than current market rates, would ensure a steady income stream of the sort local authorities enjoyed in Ireland in earlier eras. And that rent would cover not only construction costs (to the highest standards of energy efficiency) but also maintenance.
For tenants, the benefits would be enormous, as Michael Byrne highlights: “Many of us are familiar with landlords who treat fixing a washing machine like a major logistical operation. Imagine renting from a company which managed thousands of units and hired dedicated property managers and maintenance professionals. [And] this system can deliver something tenants can currently only dream of: full security of tenure. You pay your rent, you don’t get kicked out.”
So where would that initial €3 billion of seed capital come from? There are plenty of feasible options outlined in the NERI report, but one springs immediately to mind: a mere sixth of the public money squandered by NAMA through premature disposal of its assets could have financed the set-up of a HCI.
As paradigm shifts go, this one is very viable and easily affordable.