Nama is to blame for the bubble: new claims

Minister Simon Harris and McKillen say developers ‘demonised’ and ‘criminalised’

THE Government and Nama have been hit by claims that their inaction led directly to the growing housing crisis and fuelled property price increases in Dublin, the likes of which have not been experienced since the height of the boom.

Ireland’s most successful property investor Paddy McKillen — responding to the latest report of the ESRI and its worrying predictions of house price rises of up to 20pc by 2017 in the face of significant shortages of available housing, particularly in the capital — placed the blame squarely on the shoulders of the State.

“It’s a crisis that neither they [Nama] or the Government saw coming. It’s here now. We saw it coming years ago. Where were the Government’s advisors and their economists three years ago, when it was clear that this was going to happen?” Mr McKillen told the Sunday Independent.

The Belfast-born businessman, who bears the singular distinction of having successfully challenged the transfer into Nama of his companies’ loans in the Supreme Court, said a “fast-track plan” to build thousands of new homes was now essential, given the extreme urgency of the situation.

Yesterday, Construction Industry Federation Director General Tom Parlon added his voice to the debate, and said the delivery of those homes and the wider recovery was not going to occur without the involvement of the property developers concerned, as there were no “other developers or people” available with the skill set to carry out the large scale developments now required.

Mr Parlon called on Nama to reach agreement with property developers on “incentives” to help “kick-start the country and the property industry again”.

Mr McKillen expressed his doubt that Nama, an agency which he claimed was “driven by civil servants with zero experience” of banking or development, had the ability to deliver the residential units or commercial space now needed.

He accused Nama and the “wartime powers” it had been

given under the Nama Act of having “frozen the entire property industry”. This, Mr McKillen said, had driven the capital city to a situation where property prices were increasing at a rate not seen since the height of the boom, even in the absence of lending by the banks.

“It’s a double whammy of no bank finance and prices going through the roof,” he said.

In its latest report, the ESRI estimated that 60,000 houses would need to be built in Dublin alone between now and 2021 to meet population demands.

The rate of construction will need to be “increased rapidly”, the ESRI noted, if “significant housing shortages” are to be avoided.

Referring to the difficulties Nama would face in working with the developers on its books to deliver this, Mr McKillen said: “Developers were drafted into Nama because there was a crisis and they had overborrowed. Once they were in, they were treated like criminals.

“The borrowers in Nama are the ones who could solve this crisis, but they’re trapped. The Nama Act says they can’t buy their own properties. They’re prohibited from working in their own profession.

“Nama should be embracing and working with these people because they’re the ones with the knowledge. Nama doesn’t have the professional experience to deal with the crisis we are now facing,” he added.

Elsewhere, Nama is facing claims by the original ‘Rogue Trader’ Nick Leeson that it sold developer Michael O’Flynn “down the river” when it offloaded his companies’ loans to US private equity giant, Blackstone.

Mr O’Flynn is awaiting a decision from the High Court this Wednesday on his challenge to Blackstone’s appointment of examiners to four key companies within the O’Flynn Group.

Contacted yesterday, Nama chairman Frank Daly turned down the opportunity to respond directly to the very serious claims being levelled against his agency and against him personally, choosing instead to refer the Sunday Independent to a Nama spokesman for comment.

In a statement issued to this newspaper subsequently, a spokesman for Nama said: “We won’t respond to these remarks except to say that any serious, objective, assessment of Nama recognises the significant progress being made by the agency and this was borne out again in the recently-published independent review of the agency undertaken by the Department of Finance.”

But while that review’s findings pointed to the significant progress Nama has made since its establishment, Fianna Fail leader Micheal Martin voiced his fear that the Government would now seek to use the agency and its work as part of its “election narrative”.

He said: “I think there’s an increasing politicisation of Nama. Nama should be allowed to act independently of government in accordance with the remit that it was set.

“It is striking that a government that opposed it, condemned it and criticised it now accepts it as an effective intervention and are now participating in announcements in an effort to make the Government look good.”

“Of course, they’re going to try to leverage this [construction] for electoral purposes, but one would have to ask the question: why did we have to get to this stage where people are now homeless?

“We are dealing with an appalling housing crisis and now in the year before the election, you do get a sense that this Government is rewriting the script and the narrative to get ready for the election.

“They’re saying ‘we’ll create 50,000 jobs in construction and that’s handy’,” Mr Martin added.

Junior Finance Minister Simon Harris defended the Government’s response to the housing crisis, saying the Coalition’s first job had been to stabilise the economy.

He said that while the Government was conscious of the housing shortage, it would not be pushed into a “knee jerk” response, or into repeating the mistakes of the past. He said that developers had been demonised and the pendulum had now swung too far against them and their industry.

A spokesman for Finance Minister Michael Noonan said that he was aware of the shortage of family homes, particularly three- and four-bed homes in the Dublin area, and was now working with Nama to address the situation.

Within the ranks of Fine Gael, however, questions in relation to Nama’s possible contribution to the current housing crisis are being asked.

The Sunday Independent has learned that Michelle Mulherin, a constituency colleague of Taoiseach Enda Kenny, wrote to Fine Gael chairman Dan Neville two weeks ago seeking a formal discussion on Nama’s strategy for housing at the party’s annual ‘think in’ next month.

In her request, Deputy Mulherin has called for details of all ‘shovel-ready’ land banks for development which Nama has under its control and for information on the extent to which developers are “being impeded from developing such sites themselves and how this has contributed to the property bubble now arising in Dublin and in other parts of the country”.