John Curran (Dublin Mid West, Fianna Fail)
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I draw the attention of witnesses to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.

The opening statements will be published on the committee website after this morning's meeting. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him or her identifiable.

I welcome from the National Asset Management Agency, NAMA, Mr. Frank Daly, chairman, Mr. Brendan McDonagh, chief executive, and Mr. Martin Whelan, head of public affairs. Their submissions have been received and circulated to members. I invite Mr. Daly to make his opening remarks.

Mr. Frank Daly:

I thank the committee for the invitation to be here this morning. We are pleased to inform the committee about NAMA's activity in the housing market - activity that has been, and will continue to be, positive. Mr. Brendan McDonagh will take the committee through our presentation in detail while I will set out in summary what NAMA has done to date.

The reality is that ever since we began our operations, NAMA's focus has been on getting people into homes, not out of them. Our track record proves this. We inherited approximately 14,000 empty homes and, working with debtors and receivers, we found tenants or buyers to live in the overwhelming majority of them. This was a significant injection of thousands of units of supply into the housing market as we matched up empty homes with people who needed a place to live. In total, we have facilitated more than 11,000 individual buyers - families, couples and individuals - who have bought homes from our debtors or receivers.

In fact, contrary to the perceived wisdom that NAMA has sold most of its residential portfolio to so-called vulture funds, 88% of all the homes that have been acquired from the NAMA portfolio over the past five years have been bought by individual buyers in individual transactions. There are some who mistakenly claim that only big investment groups have been able to buy NAMA houses and apartments. These claims are not true and are contrary to the factual position. Where we have sold houses and apartments in larger groups, it is because there were already people living in them and the alternative of selling the properties individually would have meant removing those people.

In addition, it is easy to forget that in 2012, at a time when many people were afraid to buy homes because prices were falling, NAMA introduced a groundbreaking scheme to protect people buying a home from further price falls – we deferred 20% for five years. This scheme, called the deferred payment initiative, allowed people to buy with the knowledge that they were unlikely to lose money. It was effective. It worked. It brought confidence back. Our influence is often overstated.

Turning to NAMA's wider activities, it is fair to say we are in a quite unusual position in NAMA. Many organisations spend a lot of time reminding people that they are bigger or more influential than it seems at first glance but in NAMA, we often need to do the opposite. One of our challenges is to remind people that our capacity to influence the residential property market is often overstated. We are not – indeed, we never were – the biggest property company in the world. In fact, we do not own the properties; our debtors do. Our loan book, currently valued at approximately €7 billion, is a fraction of the size of the loan books of the main Irish banks and one third of this loan book is outside Ireland. We are a long way from being the biggest property lender in Ireland, let alone the world.

Similarly, many think that NAMA is a dominant player in the housing market in Ireland but they should consider the following: there are 2 million homes in Ireland, only 6,000 or 0.3% of which are currently in the hands of NAMA debtors and nearly all of these 6,000 units are currently occupied by tenants - those which are not are actively on the market for sale by the relevant debtors and receivers. Therefore, there is really no hidden supply of houses that NAMA is keeping from the market. By and large, the houses that secure our loans are occupied and those that are not occupied are for sale to people who want to live in them or people who want to rent them to tenants.

However, I am pleased to say that NAMA is playing a significant role in delivering new houses and apartments, by working with our debtors and receivers on a commercial basis. We have already funded the completion of 2,700 new homes and we have previously announced plans to fund on a commercial basis the delivery up to 20,000 new units over the period 2016 to 2020. This strategy has twin benefits for the Irish taxpayer. The first is that investing in new housing will enhance the return we get from the assets in our portfolio. The second is that we are bringing much needed supply to the housing market, helping to ease the shortage that has emerged and making it easier for people to find a good place to live.

We have also worked hard, with our debtors and receivers, to do what we can to deliver social housing. There are limits to what we can do but we are pleased to have delivered to date more than 2,100 social housing units to local authorities or housing bodies. In fact, demand has been confirmed for 2,531 such units and in his presentation, Mr. McDonagh will take the committee through those figures in more detail. To put this figure in context, it represents approximately one third of all 5,700 Part V social housing units delivered from all sources throughout Ireland between 2002 and 2011. It is worth remembering that more than 550,000 new houses and apartments were built in Ireland during the period 2002 to 2011 and yet the total Part V dividend was only 5,700 social housing units.

In total, we have offered approximately 6,700 units for social housing purposes. This was the biggest number we could offer, as any other houses or apartments that were in our portfolio were either occupied or for sale. We could only have increased this number by moving tenants out of their homes which would have simply displaced one group of people by giving their homes to another group. It would have made no sense.

The difference between the 6,700 we offered and the 2,500 is explained by the fact that the final decision on what properties go into social housing is, quite properly, a matter for the local authorities and housing bodies. We understand why they make such decisions - primarily because the units were not in the locations where social housing was needed or they were too big or too small for their requirements.

As far as NAMA is concerned, we are always keen that any social housing we deliver will be to a high standard. So, for example, in cases where units were incomplete, we have spent more than €100 million to complete them. We also spent another €160 million to deliver social housing through National Asset Residential Properties Services, NARPS, which a special purpose company we set up to expedite the delivery of these units. It buys the properties from debtors and then leases them to voluntary and co-operative housing bodies, which puts less of a cash strain on those bodies. In short, we have made a significant input to social housing delivery to date and will continue to do so where possible.

Some people would have us believe there are easy answers to all of Ireland’s housing problems. I am sure that this committee, having sat for several sessions, knows that this is not the case. We do not agree either. There are barriers, which we can discuss later, but by working together, many of these can be overcome. I welcome the deliberations of this committee which, I believe, will identify and shape sustainable policy solutions.

NAMA will deliver 20,000 residential units by 2020 and will make a meaningful impact on housing supply, but any analysis that claims we can deliver all the homes that people need is mistaken. We have a mandate to invest commercially, use taxpayers' money wisely, and work professionally with our debtors and receivers to deliver the best financial return that can be achieved from the assets in our portfolio. Our plan to deliver 20,000 new units is ambitious and challenging, but we will do it in a manner consistent with our mandate. However, in terms of the important work of this committee, those 20,000 represent approximately one fifth of the estimated 100,000 units demanded between now and 2020. This means that other players will have to make a contribution. We want to get more people into more homes and we have every confidence that we will do so.

If the Chairman so wishes, I will now hand over to Mr. Brendan McDonagh to outline in more detail just how we will go about doing that.

John Curran (Dublin Mid West, Fianna Fail)
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I thank Mr. Daly and call Mr. McDonagh.

Mr. Brendan McDonagh:

Good morning, Chairman. All members of the committee should have a copy of the presentation. I will quickly run through it just to bring out some of the key points. As the Chairman said, what we acquired from the banks were loans. We do not own the properties. The debtors who took out the loans own the properties and that is something which has to be kept in mind.

In terms of the agency's mandate, section 10 of the NAMA Act is very clear. We must obtain the best achievable financial return for the Sate. We have to deal expeditiously with the assets acquired for it and we have to protect or otherwise enhance the value of those assets. What that boils down to is that the NAMA board is obliged to follow a clear commercial mandate.

In terms of our acquisition process, we acquired some land and development which was security for appropriated loans mainly in 2010 and 2011. We did not acquire residential mortgages, owner-occupied or buy-to-let. There were some incidental residential mortgages which were attached to large debtor loans, but they were not a big part.

There were about 14,000 completed residential units in Ireland, which is less than 1% of the 2 million housing stock and apartments. When we acquired them, they were built but they were not occupied. As regards 15% of these 14,000 units, we worked with the debtors to correct income flow very quickly by effectively getting them tenanted after NAMA acquired the loans because, in effect, there was not a market to be able to sell them into.

We also offered over 6,600 units to local authorities and housing agencies for social housing. Between the time that we offered them and the time they confirmed demand, obviously, in the context of a live portfolio of debtors, some of these were either sold or let in the market. About 2,500 of those were not deemed suitable by local authorities and housing agencies, for various reasons. As regards those 2,500, when we did the presentation, demand had been confirmed for about 2,042. It has now gone up to 2,100 which have effectively been contracted to be delivered. There are about another 500 which are currently under active negotiations.

In terms of that, we have put money into incomplete housing, approximately €100 million to date, to bring it up to current building standards. We have also made use, as the chairman outlined, of a vehicle whereby we buy the units at market value from debtors and receivers and enter into leases with the approved housing bodies. One of the initiatives we engaged in at the start when we got involved in this and there was a different form of lease for each approved housing body was to set up a standardised lease that goes to everybody rather than having different leases and that has worked out very well.

In terms of social housing, there are some key facts to dispel some of the myths out there. Anything that could be offered in a portfolio, we offered up. We have absolutely no control over the take-up of the properties we offered up. That is a decision of the local authorities and the Housing Agency. We will make whatever funding is needed to make the houses habitable available. Sometimes this requires money for remediation plans which have to be agreed with the local authorities. That is fine. We will not offer a product to any tenant which does not meet the requisite standards. There is no point in putting somebody in bad accommodation. Where the demand is not confirmed by the local authority for whatever reason, our experience has been that the private sector market primarily rents those properties from our debtors. That is the 6,000 units that remain in our portfolio. The occupancy rate is up at 99%. The other 1% is frictional as people move in and out. In terms of the figures around that, budgetary constraints have meant local authorities have not had the capital available from central Government to buy units but sometimes approved housing bodies have capital available. To date, approximately 39% has been by direct sale, 6% has been by direct lease and 55% has been us buying and leasing the units directly to the approved housing bodies. That is becoming a bigger feature of that, especially during 2015 where, in effect, 73% of all social housing that we leased was through us buying them from a subsidiary and doing the leases with the approved housing bodies.

The next two pages of the presentation set out by county how the 6,600 units were offered across each local authority, where the demand was confirmed and what has been delivered to date. I do not plan to go through them in detail but members can come back with their questions on them. I will go to page 10 which has pictures of some of the units that have been delivered. The reality is that this accommodation is done to a very high standard and is finished out. On page 11 of the presentation, a key point is that our debtors have sold 12,781 individual homes to people since 2010, which is when we acquired the loans, of which 11,219 have been bought by individual buyers and 1,562 bought by people who are what we call "professional buyers in the market" who do long-term leasing, including REITs and Kennedy Wilson.

In terms of the sale of loans, there are some key principles around this. We do not ask our debtors' receivers to seek vacant possession of residential property if a loan book is going up for sale. We go through the portfolio to see if there are more properties which can be taken out to be used for social housing. We also go through and look at the land bank with each of those portfolios to see if there is any land-banking there which would make commercial sense for us to fund. The reality is that in terms of our biggest loan book sale, which was Project Arrow last year, we took out 425 properties before that went to the market which were used for social housing purposes, based on demand as set by the Housing Agency approved housing body.

I refer to page 16. Within the NAMA portfolio, the land bank held by our debtors is approximately 2,800 ha which is broken down there by county. As members can see, the biggest elements are in Dublin, Kildare, Meath, Wicklow and Limerick. In effect, our portfolio is very urban-centric.

In terms of NAMA funding 20,000 units by the end of 2020, approximately 1,500 ha of the 2,800 ha will be required. There are some significant barriers to the delivery of new housing on residual lands in the portfolio, namely, achieving planning permission and commercial viability. The biggest issue, however, is the infrastructure deficit such as lack of roads, water and sewerage facilities.

From 2009 to date, construction costs have been relatively stable. As the country went into recession, obviously, house prices dropped significantly. From 2011 to mid-2014, it was not commercially viable to put money into building new houses anywhere. We could not do this under the NAMA legislation. At present, it has effectively flat-lined. While prices rose to an extent, they have effectively plateaued, much of this linked to the Central Bank mortgage measures which are a welcome influence.

From 2014, it became profitable to build a house, based on the sales price which could be achieved. The typical profit we are seeing across our schemes in Dublin, the Dublin commuter belt, Cork and Galway is €20,000 per unit. The Construction Industry Federation, CIF, has a different view and it is correct that, outside of these areas, house units do not make a profit.

On the sensitivity of profit-to-sales price variances, if sales prices went up by 5%, the profit would increase to €30,000. If they went up 10%, the profit would increase to €40,000. That is the dynamic of the market.

We have seen many figures quoted for building a typical three-bed, semi-detached house. Some of the best figures, when compared to our benchmarks from our portfolio, were those published in January 2016 by Anthony Foley in a report for the Society of Chartered Surveyors Ireland. It set out the constituent parts of the building costs for a house. The total construction cost comes to €150,000. When one adds in other costs such as local authority levies, Part V, finance, etc., it comes to an extra €46,000. With a profit margin of 15%, which is what the market typically targets, it adds €30,000. VAT comes to €30,000. Before the land is added, to build a typical 1,200 sq. ft. house will cost close to €260,000. The average land site for this type of house, depending on location, is somewhere between €35,000 and €40,000. In Cork and Galway, it is somewhere between €25,000 and €30,000. Accordingly, one has to get a sales price of €300,000 before one can make any profit on a typical three-bedroom house.

The Dublin housing supply and co-ordination task force looked at the estimated costs for fixing the infrastructural deficits in each of the four local authorities in Dublin. In Fingal County Council, approximately 24,000 units are constrained by infrastructure deficits. The cost of rectifying this would come to €66 million. In Dublin City Council, up to 5,400 units are constrained while rectifying the infrastructure deficit to deal with this would come to €48 million. In South Dublin County Council, it is 2,000 constrained units, while rectifying the infrastructure deficit would come to €4.7 million, not a significant amount of money.

In Dún Laoghaire-Rathdown, it would deliver about 17,000 units and cost about €45 million. Therefore, this means that there is land across the four local authorities in Dublin with infrastructure deficits where effectively €165 million could make that land viable for achieving planning permission and building houses. This is a very important statistic. Page 22 contains publicly available information that breaks down where the number of units could be delivered across each local authority by each area, which is quite interesting. In respect of NAMA's funding of the 20,000 units on a commercial basis, we believe 78% of them will be in Dublin, 15% in the commuter belt and 7% outside the greater Dublin area, mainly Cork and Galway. All our focus is on the starter home market.

On page 24, it states that since 2014, about 2,800 units have been delivered throughout the country. About 3,100 units are under construction by our debtors. Planning permission has been granted for about 5,200 units and applications for planning permission have been lodged for more than 5,000 units. We are actively working with our debtors to get planning into local authorities for about another 6,600 units. There is a landbank that could deliver another 25,000 units but it has infrastructure deficits and much of that land is tied up in the four local authorities in Dublin where this is required.

Another message that is being put out is that we are hoarding land and that if we only released more land into the market, the private sector would avail of the opportunity and build. The reality is that since the start of 2014, in 24 months, we have sold land that could deliver 20,000 units into the private sector. We monitor that land to see what is happening with it. Only about 5% of that land is being built on at present. Members ask why the people who bought it did not build on it. Sometimes people might be looking for revised planning or waiting for a new county, area or development plan. Sometimes there might be an issue in respect of densities, a revised planning application and seeking more semi-detached houses rather than apartments, which requires a new planning application. Infrastructure constraints are certainly there. One of the largest issues - from looking at transcripts, we know the committee has discussed it - is people buying land and effectively looking for a higher rate of return. This has to be a big feature.

In respect of where NAMA is at present, 81% of our senior debt is repaid. We want to pay off 100% by 2018. That gets rid of the contingent liability of the State, which stands at €5.5 billion. We want to pay the rest of our debt by March 2020. This is sub-debt. We are projecting that at the end of NAMA's life, there will be a surplus that will be available to the Minister and which is already provided for in the NAMA legislation of 2009. If members look at section 60 of the National Asset Management Agency Act, they will see that the surplus goes back to the Minister. We estimate that this will be at least €2 billion.

In summary, we are involved in some high-profile activities in both the residential sector and the Dublin docklands. We believe we have an important role to play, but we recognise there is a huge issue around the need for housing. We are doing our very best and will continue to do what we can.

John Curran (Dublin Mid West, Fianna Fail)
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I thank Mr. Daly and Mr. McDonagh for the presentations, particularly the factual content and numbers included. The committee will find them very useful. A number of colleagues have indicated that they have questions.

Fergus O'Dowd (Louth, Fine Gael)
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I welcome the representatives from NAMA. I am very interested in the statistics and figures they have provided. It is a very clear indication of the work they have done as opposed to what people think they might be doing or not doing. I have two major questions. NAMA has identified €164 million worth of infrastructure development. The Minister for Finance said that €100 million would be provided for infrastructural deficits.

Mr. McDonagh said the entire €164.2 million was not required on stream immediately. Given the seriousness of the crisis, should there be a one-stop shop for dealing with the infrastructure deficit rather than a situation in which different people are handling it in various local authorities? Perhaps it could be done by an organisation such as NAMA. In past years, the National Building Agency dealt with housing and construction issues.

My other question relates to the failure of local authorities to take up housing units. I am surprised that NAMA has 2,457 units of accommodation available for local authorities to take up. According to the list of local authorities that NAMA gave us, the ones that have declined the most units are those that have the greatest demand - namely, Dublin City Council, Fingal County Council and areas of County Dublin, as well as Cork city and, surprisingly, Wexford. What is the issue? If NAMA has homes that it will make ready for occupation, it makes no sense that councils would refuse homes that are in the areas where they are needed. They are what we need.

The witnesses spoke about NAMA's commercial remit, which I accept and acknowledge. They also acknowledged NAMA's social remit. If one can borrow as cheaply as possible, this is the key to NAMA's work in terms of building and controlling the price of houses. NAMA will fulfil its commercial remit if its income is greater than its loan charges. If NAMA can borrow at 1% or 2% to build houses, it would make a huge difference to the cost of the homes. Do the witnesses have a comment on it?

John Curran (Dublin Mid West, Fianna Fail)
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Could Mr. McDonagh specifically address Deputy O'Dowd's point about units that were not taken up by local authorities? The committee feels that the provision of 800 or 1,000 units immediately in Dublin would do much for people who are in hostels and bed and breakfasts as a crisis or emergency measure. Are any of those units available, or have they all been dealt with and disposed of in other ways?

Mr. Brendan McDonagh:

We have 6,000 completed residential units left in our portfolio and they have an occupancy rate of approximately 99%. They are rented by the private sector. There are sometimes frictional vacancies when people move out. We constantly comb the portfolio to see if units are available. We do not have 800 or 1,000 units. Over a period of time, when people leave these rented units and they become free, we might be able to make a few hundred available out of the 6,000. If people are renting units from us, we cannot displace them, as it would add to the housing problem.

Deputy O'Dowd asked whether there should be a central agency. That is a policy question for the Government and I am precluded from talking about it, but I will say something in general terms. When centralised agencies with a specific purpose, such as the National Roads Authority, NRA, are assigned to such tasks, they build up a particular focus on it and make things happen. They learn from their experience as they go along and they get better at it. While I think it may have merit, it is a Government policy decision.

We have heard it said that the units NAMA offered to local authorities were sometimes rubbish. They were not. They might be half-completed housing developments or unfinished housing estates. In 2010, we started with 335 unfinished housing estates in our portfolio. We have put money in and reduced the number to 29. We finished housing estates and put in infrastructure such as landscaping. Some of the pictures there are of housing estates that were unfinished in 2010.

We will agree a site resolution plan with the local authority, put the money in and ensure the accommodation is up to current building standards. We, therefore, do not accept that at all.

One of the biggest issues that we hear about is that sometimes in some of the counties listed for local authority housing, there is not huge demand. We fully accept that but in the larger urban areas, where there is a huge crisis, one of the biggest issues we are hearing about is that there is a high concentration of social housing in those particular areas. Local authorities have an overall policy of approximately 20% social housing and they generally do not want to go above this. That is a policy decision for local authorities or for Government to say "You have to do something different". We offer the units up and if people do not take them-----

Fergus O'Dowd (Louth, Fine Gael)
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So NAMA offers the houses to the local authorities and they are saying they have too many.

Mr. Brendan McDonagh:

It is one of the primary reasons they turn them down.

Fergus O'Dowd (Louth, Fine Gael)
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That is not acceptable. I appreciate Mr. McDonagh cannot comment on that matter. Could they not be used as affordable homes or starter homes? How in the name of God can local authorities turn down houses for families? That is what they are doing.

Mr. Brendan McDonagh:

I agree with the Deputy. We hold the units back with our debtors by saying to them, "Hold that back until the local authority comes back. Keep it vacant in case it wants it". As soon as the local authority turns them down and our debtor puts them up for rental in the private sector, however, they are snapped up in 24 hours. That is the major issue.

The Deputy's third question relates to our commercial remit. NAMA has not borrowed money since its inception. We paid the banks with Government guaranteed bonds. It started out at €30 billion. We have paid off €25 billion and we are down to €5 billion. The plan is to pay that off by 2018. The borrowing vehicle for the Government is the NTMA and it is up to the Minister for Finance if more money is to be borrowed. We all know the rates on the market at present. Ten-year money can be borrowed at 0.8%. It is unprecedented how cheap that money is when the long-term average is 5.5%. That is again a policy matter for Government in terms of whether it wants to borrow money in this cheaper interest rate environment and use it for that purpose. I can see from where the Deputy is coming.

Seán Canney (Galway East, Independent)
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I thank Mr. McDonagh for his presentation, which was factual. We can see the numbers and, therefore, we can decipher them for ourselves. NAMA plans to build 20,000 new houses between 2016 and 2020. Has Mr. McDonagh a number for each year in order to outline how that will be progressed?

Mr. Brendan McDonagh:

Yes.

Seán Canney (Galway East, Independent)
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He said 48,000 units could be built on land available in the greater Dublin area, with an investment of €165 million to get the sites shovel-ready. Is there is an issue with planning permission running out on sites, even allowing for extensions that are currently in place? If planning permission was extended by another three or five years, would more land be available to build on?

I am concerned that NAMA has sold significant land banks and that the purchasers are adopting a holding position and waiting for prices to increase before housing development can commence. I read about one house building company which owns 20% of the land available in the greater Dublin area. It built 15 houses in 2015 and has built 35 so far this year. Does NAMA fear a holding game? Can we flush these people out to get building quicker?

NAMA has a target of a €2 billion surplus by the end of this process.

If there is cash in the bank, could some of it be invested? Who makes that decision? In terms of the €165 million needed to develop this land to make it available, I am looking at ways of trying to get land available so there are no barriers. I do not know if I understood Mr. McDonagh correctly. Is he saying that developers in the private sector might have a profit margin on housing of €20,000 per unit? That is disputed by the CIF. Is that based on the average size house of 1,200 sq. ft or 1,300 sq. ft.?

Mr. Brendan McDonagh:

In terms of the number of units for 2016 to 2020, it is a massive operation to try to fund the delivery of 20,000 units by 2020. Of those 20,000 units, approximately 14,000 are commercially viable at today's prices. We think in the region of 6,000 will become viable between now and 2020. By the end of 2016, we will have about 2,500 delivered and in 2017 we hope to get up to 3,500, which would make 6,000. The other 14,000 must be delivered over the remaining years, on average, because we will be ramping up our operations. Our debtors have to build up their platforms again because they ran them down during the recession. They have to recruit more carpenters, plumbers, bricklayers and whatever they need, or get subcontractors. That is what we are doing.

The planning permission extension was provided for in the NAMA Act 2009 and the subsequent Local Government Reform Act said that planning permissions could be applied for to extend it. The Deputy is correct to say that some of that planning permission might be coming to maturity and to ask if it makes sense to look at extending it again. This is a policy matter but it is something that may help. Much of the planning permissions that were got up to 2008 and 2009 were for the wrong type of product. It was for a different time and was primarily for apartments that were sometimes in locations where it just does not work and people do not want apartments. More family type housing would be more appropriate. There are certainly some planning permissions that would benefit from that. Everything that can be done to help is worth doing rather than submitting a new planning application because then one is back into the whole planning process again, with people appealing and going to An Bord Pleanála. The timeline from having a raw site to having somebody on site is two years if there are appeals all the way through the process. That is a very long time when there is a crisis in the market. The Deputy made a good point.

Mr. Frank Daly:

On the planning point, there is one other thing that could be said. We have had a very good experience in Dublin in our work in the docklands because of the area's strategic development zone. That approach is possible in other areas, particularly in Dublin. It streamlines the whole process and avoids much of the appeal-reappeal process that Mr. McDonagh has talked about. There is one site in Dublin - the glass bottle site - which has the potential to deliver maybe 2,000 or 3,000 housing units but there has been no progress on getting to the stage where there is a plan for that area. We are strongly of the view that designating that as a strategic development zone would move things along much more quickly than is likely to happen under the current system.

Mr. Brendan McDonagh:

Deputy Canney asked a question about new owners hoarding land and what can be done to make them build. There are lots of reasons why people hoard land. There is an element of people sitting back and saying that prices will go up so they will make more profit. This does not necessarily mean that those people will build the houses; it just means that if the prices of the houses go up, the price of the land will be a multiple of that.

They might decide to sell on the land again in the future but they will wait for house prices to go up first. There are already mechanisms in place in this regard. Effectively, the legislation already makes provision for a vacant site levy, and there is talk of introducing that towards the end of this decade. Again, I am very reluctant to propose disincentives to build. Nonetheless, calibration is a great thing in that it outlines what will happen if people do not do something with the land. I believe that is very useful.

All of our cash is at present earmarked for building or for paying back our debt. We cannot use our cash to fund this infrastructure deficit. If it was a NAMA debtor's land, the way we would use our cash is to lend the debtor more money, which he would use to pay the local authority to contribute towards that infrastructure. However, we do that on the basis that we can get our money back, and it would have to be a commercial arrangement.

Deputy Canney's final question concerned the profit of €20,000 per unit. That is an average. The reality is that people will always be able to produce schemes where they say they will only make €10,000 per unit on a certain type of a house in a certain development. There are typically three, four and five bedroom houses within a scheme, and a person could make an average of €12,000 to €14,000 on a smaller house, €22,000 to €25,000 on a four bedroom house and up to €40,000 on a five bedroom house, of which there would be very few. It is the average profit that is close to €20,000.

What it comes down to, at the end of the day, is the cost of the land. If somebody has overpaid for the land in the first place, there will be a bigger site cost and that will reduce the profit. The Central Bank measure, by reducing the size of mortgages that people can take out, has certainly had a stabilising effect on the price of land because it is completely linked to the price of houses and, if people cannot get mortgages, they cannot buy the houses. Again, I have my own views about the calibration of that, but, as a measure, it is a useful tool. I hope that answers the Deputy's questions.

Seán Canney (Galway East, Independent)
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Mr. McDonagh referred to gearing up contractors. If there is a huge building programme for the next five years, in his view, do we have the people required, particularly the tradesmen, or does he see this as a difficulty?

Mr. Brendan McDonagh:

It is a difficulty in that many people have emigrated. We have talked to our major debtors, who say they have the names and e-mail addresses of all the people who used to work for them who went abroad to the UK, Australia and the Middle East, or wherever the work was when there were no jobs here. They said that a lot of these people would definitely come back to Ireland and would prefer to work in Ireland and raise their children here. The issue is that they are not going to come back if they only see a 12- to 18-month pipeline of work. If they could see there was a way to build product for five years, it would give them a bit of certainty, and I believe many of these people would come back.

There is certainly a scarcity of people, particularly as there have not been many people working in the trades during the recession, but all of our big clients have said that if they knew they had five years' work, they would get the people. It would take them a while to ramp up in terms of delivery, but they have said they will get the people if they have that certainty.

Mr. Frank Daly:

That is why NAMA is bringing certainty to this view that we will fund 20,000 houses between now and 2020. That is very important to the debtors we are working with in terms of certainty about a pipeline of funding which they can transfer back to the people with the skills that are needed.

I think they are spread across - I do not have not the figure and I might not be totally accurate-----

Mr. Brendan McDonagh:

Some 45 sites.

Mr. Frank Daly:

-----45 or 46 sites and they are functioning. The skills are there. I am not saying it is not a challenge for the debtors to service every site but it can be done. The more certainty there is about funding in the future, the more we can say quite clearly that we have the funding and will deploy it between now and 2020 if it is commercially viable. That is very important to our debtors and to the certainty of bringing people back. There is a social issue there as well about bringing people with those skills who have emigrated back into the country.

Mr. Martin Whelan:

I wish to make one point about capacity and experience in the sector. The most intractable cohort of long-term unemployed people on the live register is males within the age group that would have fallen out of the construction sector. Having seen the industry ramp up and ramp down, I think there is every expectation that if there were a pipeline of certainty in house building, one would see some of them coming back into employment, which obviously has the benefit of savings on social welfare and tax on the other side. There is, therefore, a latent capacity there that could be tapped into if the sector were able to ramp back up.

Mr. Frank Daly:

We share the Deputy's view, by the way. Maybe I am misinterpreting him - I hope not - but I believe he is expressing surprise at the fact that there are house builders and people with land on a very sizeable scale in this country who are building a very small number of houses. We share his surprise at that. While we do not have the solution, it is something that needs to be accelerated because, as I said in my opening statement, we will deliver what we can but we cannot by any means bridge the gap between the 20,000 units we will provide and the 100,000 that are needed between now and 2020.

Barry Cowen (Offaly, Fianna Fail)
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I thank the witnesses for their presentations and the clarity contained within them. However, it would be necessary in future, if at all possible, for us to have more detail about the fact that local authorities are refusing units and the reasons for this. Picking up on the points made by Deputy O'Dowd, I sought further information recently from Dublin City Council about offers that NAMA had made to them. I think NAMA had offered the council in the region of 828 units. NAMA subsequently sold 190 of them. Within that, however, the main reason was the tenure mix. That was the reason given by the local authority. Some 638 were offered while 400 were taken. Some 32 units were in poor condition and had structural issues. In the case of eight of them, the council claimed, there was a low demand. Some 146 units were accepted in one development where 198 had been offered. The council only took 48 of them, again because of the tenure mix, and 46 were turned down in Ballymun as well for the same reason. In Ballymun, they are building modular homes at a cost of €250,000 per unit. They were to be built in 12 weeks but they are still not in place. How long do they take to build? How much did they cost? How much were the offers made by NAMA? What were its costs? The point was made that there is no provision for affordable homes. The local development plan may be outdated in comparison to the situation on the ground. That is why it is incumbent on NAMA and the local authorities, if at all possible, to make available to this committee at a later date more detailed analysis of what was offered, what was taken and why units were not taken for us to make a judgment on that in order to correct that issue so that the new Minister can direct local authorities to have a bit more resolve in the way in which they flippantly refuse units that are being made available while there is an emergency and a crisis out there.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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That is not the case, in fairness.

Barry Cowen (Offaly, Fianna Fail)
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That is the point I am making and the point I want addressed.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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The Deputy is saying it is.

Barry Cowen (Offaly, Fianna Fail)
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NAMA has entered into many long-term leasing arrangements with local authorities and housing associations. How does that sit with its lifespan? How does that sit with the dividend that is to be returned to the State? When is it expected there will be an interim dividend? When is NAMA's lifespan due to end and what dividend can the State expect? While I respect and acknowledge that the legislation governing NAMA's set-up was of course one of a commercial mandate, there was also mention of a social mandate.

Perhaps NAMA will be deemed profitable at the end of the day and the social mandate will accrue to the State at that stage, and the funding associated with any profitability will be used for the purpose of addressing the crisis and emergency that we have at present. It is incumbent on the State, and those with authority within the State, to ensure the funding is accessible and used for the right purposes from our perspective.

My next question is on the lending rates that NAMA may be charging developers. What are they on average? How do they compare with the open market? How do they compare with what is charged by the mezzanine funds in which the State is involved in some instances? This may address the answer Mr. Daly just gave, when he spoke about the State having a role to play in the freeing up of 100,000 units. The State has a role to play in charging appropriate rates if it is involved in making available strategic investment funding. Such rates should be competitive and real and should yield a dividend for those partaking in the development. At present, funding cannot be obtained, and what funding can be obtained is at exorbitant rates. In some instances, only 60% of funding is being provided, at exorbitant rates, and more exorbitant rates are charged by mezzanine funds to make up the difference that exists.

With regard to Project Arrow, Mr. Daly mentioned that 425 units were taken out due to the potential for a social dividend. What percentage of the entire residential portfolio did this entail? With regard to the 20,000 units NAMA hopes to build by 2020, what obligation has the State placed on NAMA in legislation to provide social units? Is it 10% or 20%? The previous Government reduced the obligation under Part V of the Planning and Development Act 2000 from 20% to 10%. I did not expressly agree with this, but I know where it was coming from; it could have freed up ways and means for development to take place while allowing the 20% obligation to remain in place. I refer again to the 100,000 units that are not being provided and the reasons they are not being provided. Will Mr. Daly enlighten us on the obligations placed upon NAMA, if any, in this regard?

Mr. Frank Daly:

I will take the first question on the long-term future of NAMA, what will happen to the surplus and whether there is provision for an interim dividend, which there is not in the legislation. There is little doubt at present that we will have surplus in excess of €2 billion and this will go back to the Exchequer. Quite obviously, it will be a matter for the Government at the time to decide what it does with it. With the money we have and the money we have generated we are repaying the debt, which is our top priority all the time. The debt has been, and will remain, a contingent liability on the Irish State, and if we do not repay it, that will have implications for access to money markets and confidence in Ireland. There is a bigger issue. I have said before the biggest social dividend we can deliver indirectly is to pay this back as quickly as we can. We will have paid back the senior debt by 2018, and we have a small amount of subordinated debt which is due to be repaid on 1 March 2020, and we will pay it on the due date. There is no advantage to anybody, not least to the State, in repaying it earlier. There will be other things to be done then.

With regard to senior debt, NAMA will have its work done by 2018, but we will continue in housing and with the Dublin docklands. Where we lease houses to housing bodies, there is a provision in the leases whereby they can buy them out at a certain stage during the lease if they want to do so. All of this is being done through a special purpose vehicle in NAMA, so the holding of all of these leases is an asset in itself and at some stage NAMA will be able to realise this asset and its value will go indirectly from NAMA to the Exchequer.

There is no doubt at all that there will be a surplus and that it will go to the Exchequer, but what it will do with it will be a matter for the Government. There are no constraints in that regard.

Perhaps Mr. McDonagh might wish to discuss lending rates.

Mr. Brendan McDonagh:

I will revert to a couple of questions asked by Deputy Barry Cowen. He referred to local authorities and their reasons for refusing. He will appreciate that they only tell us their reasons for turning down properties. We will put the information together and send it to the committee. There is no issue in that regard. Tenure mix and concentration are given as two of the main reasons. The Deputy mentioned that 32 units were in poor structural condition. We have always told local authorities that if there is anything that is not of the standard they want, we will raise it to that standard. There is no question of our not providing funding. I just want to correct what was said.

We charge market lending rates. Typically, our margin is 8% to 9% over the six-month EURIBOR rate, which is comparable with the rates available in the market. Everyone refers to the high rates being charged, but they apply to one element only. I might explain this to the committee. On senior debt, banks typically lend 5% coupons on approximately 60% of the total. Five per cent of 60% is 3%. On approximately 10%, one can borrow equity on 20% coupons, which equates to a figure of 2%. The mezzanine piece of the bill used to be approximately 12%, but mezzanine financiers have reduced their rates which are negative among central banks. To make money, they have reduced their rates to 10% and 10% of 30% is 3%. Adding 3%, 2% and 3% gives 8%. Typically, one can borrow at 8% or 9% from the private sector. We are changing the same rate. As Deputies will appreciate, given state aid considerations, we must do so.

Regarding Part V obligations, NAMA debtors are like any other builder in the market and want to be treated the same. If builders not in NAMA only have an obligation to provide Part V housing to a figure of 10%, NAMA debtors will have the same obligation. It is a policy matter. Regardless of whether the level should have stayed at 20% instead of 10%, the law will be complied with and our debtors will have the same obligations as others in the market.

On the question about Project Arrow, I do not have the detail with me, but Mr. Whelan will revert to the committee with the information, if that is okay.

John Curran (Dublin Mid West, Fianna Fail)
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I thank Mr. McDonagh. Before I call Deputy Bernard J. Durkan, I wish to follow up on one of the points made by Deputy Barry Cowen. Regarding the special companies NAMA has set up, it has invested approximately €160 million and the properties have been leased to voluntary bodies and so forth. Is the funding mechanism used off the State's balance sheet?

Mr. Frank Daly:

Yes.

John Curran (Dublin Mid West, Fianna Fail)
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Is there further scope to develop that special vehicle? Would Mr. Daly like to comment on this?

Mr. Frank Daly:

It is off the State's balance sheet. That has always been the unique advantage of NAMA and we want to keep it that way. It is possible to develop the concept within NAMA or elsewhere for other purposes.

John Curran (Dublin Mid West, Fianna Fail)
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Without meaning to push Mr. Daly on it, he is referring to-----

Mr. Frank Daly:

The Chairman is bringing me into the area of policy.

John Curran (Dublin Mid West, Fianna Fail)
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NAMA has embarked on this project. I am expanding on where it could go.

Mr. Frank Daly:

Yes.

John Curran (Dublin Mid West, Fianna Fail)
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My specific point relates to the indication that NAMA will return to the State a surplus in the near future. What are the constraints on NAMA in advancing this special vehicle in order that it might become more active in and engage more in the housing market, given the extent of the crisis?

Mr. Frank Daly:

Do not forget that there are constraints on us.

Mr. Brendan McDonagh:

When we buy units, we buy them from NAMA debtors. In granting approval to NAMA the European Union told us to deal only with NAMA debtors and whatever they produced, not with other matters. We will continue buying units with this special purpose vehicle - NAMA Asset Residential Property Services Limited, NARPS - and to agree leases with approved housing bodies as soon as they confirm to us that is what they want to do.

We are making use of our resources wherever possible. We developed this concept and it has proved itself. It is open to other people to copy the concept. For example, Mr. Whelan has had meetings with the credit union movement and it appears to be very interested in the concept and how it works. Effectively, it involves the creation of a vehicle which purchases the assets on-balance sheet and then leases them out, resulting in an income into the company. Over time, it becomes like a Government bond on the basis that money is accruing per annum. It is a product that we believe an insurance company, perhaps, would be interested in buying in the future because, effectively, doing so is akin to buying an income stream similar to that of a Government bond. All that is required is a bit of management and two people to run the entity into which thousands of units can be put. We developed this entity from scratch and we have streamlined it with the leases. In terms of the legal contracts involved, this is a technical concept but one that is eminently doable. All that is needed is the necessary finance and interested parties such as insurance companies, the credit union movement or other funds. It can be done. It is not a huge overhead.

Bernard Durkan (Kildare North, Fine Gael)
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I have a number of questions for the witnesses. In regard to the Dún Laoghaire project, I presume that is off Government balance sheet?

Mr. Brendan McDonagh:

It is a private sector transaction, so it is done at market value.

Bernard Durkan (Kildare North, Fine Gael)
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NAMA purchases the properties and leases them through the local authority.

Mr. Brendan McDonagh:

Yes, or an approved housing body.

Bernard Durkan (Kildare North, Fine Gael)
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Is it the local authority or an approved housing body involved?

Mr. Brendan McDonagh:

In some cases, the local authority does the leases and in others, the approved housing body does them.

Bernard Durkan (Kildare North, Fine Gael)
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Is there an obligation on NAMA to inquire as to the likely future use of a property following on disposal? In other words, would it not be wise and in the interests of NAMA and the taxpayer for NAMA to inquire as to what is likely to happen to a property, be that houses already built or potential development land, including, for example, whether a buyer intends to hold onto the property until such time as it appreciates in value, given current low interest rates and the possibility of a much lower dividend from the financial sector?

In regard to the local authorities' reluctance to take up offers from NAMA, were the properties concerned suitable for families or were they deemed by the local authorities to be unsuitable and to what extent, where a particular reason in that regard has been identified, has NAMA examined how best to make available properties to the local authorities into the future?

On the per square foot cost of building a house, in respect of which we have heard various projections in the past few days, has NAMA undertaken analysis in that regard, including in regard to the per square foot cost, the land value and the tax impact? Do the witnesses appreciate that it is virtually impossible for an average family with an average income to purchase a house on the market, bearing in mind the Central Bank requirements in regard to deposits and the necessity to ensure house property inflation remains low? In 1978, owing to rapidly increasing inflation in the housing sector, housing was removed from the consumer price index, CPI.

It appears there was huge inflation in house and property prices that was not visible before that.

I should mentioned that I am not in favour of selling to private or approved bodies. They have abysmally failed in delivering the housing requirement and nothing will change that unless and until local authorities take direct responsibility and are recognised as the most likely body to provide alternative housing from the private sector. With respect to local authorities, it appears from my investigations that the majority of options are for the private housing or approved housing bodies and not local authorities. It seems it was not possible for the local authorities to access it, given the balance sheet issue, so the witness may comment on that.

There is the hoarding issue and an inquiry into a purchaser who intends to hoard and for what purpose is required. Is NAMA aware that some of the lands and properties acquired over the past number of years in the downturn were the subject of multiple turnovers in ownership over a period, with each occasion inflating the price of the property hugely? In some cases, properties were turned over up to ten times, each time with a profit for the speculator. The question arising is whether adequate efforts are being made to ensure that properties are not disposed of to speculators. I have no difficulty with somebody making a profit but the profit has been made several times. We are now talking about a vital piece of national infrastructure, housing for people.

My next question relates to Kildare County Council, a body of which I was a member for more than a few years. There were 298 houses, I presume, made available. Why was it not able to take those houses? Were they unsuitable, as I have been informed, or in the wrong place, which is a possibility? Was there some other reason? Properties were purchased by NAMA, some at a large write-down of 40%, but in the context of the overall cost to the State, to what extent have those properties progressed in the interim? In other words, if NAMA paid €100 million for a group of properties, how would they have appreciated since? What is the profit range, taking into account how much was paid for the properties and how much they are now worth? Could NAMA be hoarding them?

John Curran (Dublin Mid West, Fianna Fail)
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The issue of properties not taken up by local authorities has come up a number of times. In order to try to address it for everybody, does Mr. McDonagh have the detailed replies from each local authority or does the committee need to approach each local authority to seek that information? It will keep coming up throughout the meeting.

Mr. Brendan McDonagh:

All the co-ordination of the local authorities taking or not taking the properties was done through the Housing Agency. It told us if local authorities did not want the properties. That is it. We have information and we can go through our files-----

John Curran (Dublin Mid West, Fianna Fail)
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That might be forwarded to the committee.

Mr. Brendan McDonagh:

We will give as much as we have to the committee. The body with the central co-ordination role is the Housing Agency, with Mr. John O'Connor as the chief executive.

John Curran (Dublin Mid West, Fianna Fail)
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Thank you. Will you deal with Deputy Durkan's series of questions?

Mr. Brendan McDonagh:

The first question was whether we should inquire as to the buyer's intentions when we sell properties. Our properties are openly marketed and there are different types of buyers bidding on them. The buyers will not necessarily advise on what they are going to do. If somebody buys an income-producing property, it might be kept in order to get that income.

However, if they are buying land, effectively they are tying up their money and there is no income from that, so obviously they must have a different rationale for holding it. They might well say that they just put the money away. Even if we do know the reasons people are buying the properties, that can change once somebody buys them. For example, the Deputy might buy a house from somebody else and say that he will buy it to live in it, but he might not live in it at all. One will not achieve much on that basis.

Bernard Durkan (Kildare North, Fine Gael)
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Does NAMA not have a different obligation? Does it not have a responsibility to the State that a normal open market seller does not have? For example, NAMA does not have to accept the highest bidder. If the purchaser wanted to go on holidays on the basis of his profits over the next 20 years, NAMA does not have to accept that given that there is a requirement, over which NAMA has some control, to deliver something to the State. I am sorry for interrupting.

Mr. Brendan McDonagh:

The reality is that if a debtor owes us a huge amount of money, he wants to sell the property for the best value he can so he can pay off as much of his debt as possible. If there is a receiver in place, the receiver has a legal obligation to take the best price. That is a legal obligation so he has to have a very good reason for not accepting the best price. Both the receiver and debtor are incentivised to get the best price for it. Our obligation, like any secured lender, is to decide whether to release our security on the basis of the price that is offered.

The Deputy spoke about the local authorities' reluctance and how sometimes they said the property was suitable or unsuitable, be it a house or apartment. We offer what is available in a portfolio, whether it is houses or apartments, one-bedroom or two-bedroom apartments and so forth, and ask if it is any use to them. They can make their own decisions on whether they will take it on that basis.

The Deputy referred to the cost of building. I refer him to page 20 of my presentation. The Society of Chartered Surveyors benchmarked the building costs. We saw that and examined it ourselves with our in-house quantity surveyors and we have seen what our debtors are doing as well. It is a reasonable representation of the costs involved in terms of build out. It takes account of the VAT that goes to the Exchequer, which is approximately €30,000 on a typical €300,000 house. Local authority costs, planning costs, finance costs and so forth amount to approximately €46,000. The site cost in Dublin is typically up to €40,000 per unit on average and less than that outside Dublin. It is well benchmarked.

We often hear people say that the big issue is driving down the cost of construction, but the reality can be seen in one of my charts. One would have thought that the cost of construction would have fallen dramatically during the recession, but it did not. Effectively, it was flatlined. The reason is that many of the costs of construction are fixed. These are effectively union agreements on pay rates, which have not changed.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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Pay rates have fallen dramatically, in fairness.

Mr. Brendan McDonagh:

No, the rates have not changed for people under registered employment contracts.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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They are all on self-employment contracts now.

Mr. Brendan McDonagh:

There are certain costs in it.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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It is €5 per hour.

Mr. Brendan McDonagh:

There are also other costs there which are linked to external factors, such as the cost of materials.

The Deputy spoke about the Central Bank rules. They certainly have had the effect of dampening the market. We accept that it is difficult for people to get a mortgage, especially people starting with a starter home. That is certainly an issue.

The Deputy also mentioned Kildare. We will have a look at that and refer back to the committee as part of the general response on the local authorities. He also talked about changes in NAMA asset values since inception. When we got the loans in 2010 and 2011, the board made a strategic decision to sell very little in Ireland because the market was continuing to fall. Between 2010 and 2012, only €1 billion worth of properties were sold from the NAMA portfolio. We concentrated on selling the overseas assets. It is only since the Irish market began to recover that we have sold additional units and different properties in the market.

We paid the banks by reference to the valuation on 30 November 2009. Between 2009 and 2012, property values dropped by 30%. Now they are back up again and if one looks at the residential CSO index, it fell over 50%. It has recovered somewhat now, but valuations are still 33% down from their peak, so we are not immune. The commercial market in Dublin is completely different because at the peak, rents for commercial office space in Dublin in 2007 were about €55 per square foot on average. They went down to €27 per square foot and now they are back up towards €55 per square foot and that is-----

Bernard Durkan (Kildare North, Fine Gael)
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What about the cost of building?

Mr. Brendan McDonagh:

The cost of building really has not changed that much for a commercial building; it is typically around €35 per square foot. Much of that is a factor of demand in the market. There has been a great deal of FDI. People are coming in and renting the space. There is a lot of new product in the pipeline, which will become available from 2018 onwards, but until that becomes available, there is an issue about commercial office space in Dublin. I think they are all the Deputy's questions.

Mr. Martin Whelan:

On whether local authorities had access to the social housing that we offered, it was a two-step process. In the first instance, as the housing authority in any functional area, local authorities are responsible for determining whether there is demand. They do that by reference to their own housing strategies. The first step in this process, therefore, was a confirmation or otherwise from local authorities. Thereafter, if demand was confirmed, we worked through the Housing Agency to make the units available in whatever way was deemed the most appropriate and efficient. In most instances, because of the capital constraints the Deputy raised, the preference was for long-term leasing and, as the NAMA CEO has said, rather than trying to recreate the wheel for every single lease, NARPS was set up. Local authorities had first option in terms of taking the units themselves, but it has to be said that because of capital constraints, the big focus moved to long-term leasing and it is through NARPS that we have sought to expedite or to facilitate that.

Mr. Brendan McDonagh:

All our units were made available through the Housing Agency, which then went to local authorities and told them how many houses and apartments were available and where they were available, in Kildare, Naas, Sallins or wherever. We offered them up and the local authority came back to the Housing Agency to say, for example, it only wanted ten in Kildare town, six in Naas and so on. That was completely the decision of the local authority. As I said earlier, the reality is that if we had ten more left in Naas that the local authority did not take, the debtor would advertise them in the private market and would rent them very quickly because the demand was there. Whether the local authority took them was its own decision.

Bernard Durkan (Kildare North, Fine Gael)
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The overhanging question is one that I am still at sea about. Where NAMA has acquired a property that achieved a hugely inflated cost or value - I am not certain which, but I would think it was cost - by virtue of repeated speculation beforehand, is NAMA expected to make a profit? In other words, if that property comes onto the market, it has the impact of inflating property prices artificially now by borrowing what happened in the past.

Mr. Brendan McDonagh:

Not at all. What happens is that if a property goes on the market today, it is priced by reference to whatever the market value is today. People let on that there is a huge amount of science involved in this business and there is not. Effectively, much of it is based on the idea that, for example, if an equivalent house down the road sold for €250,000 and this is a similar house, it will be advertised on the market at €250,000. People will then bid on that with the local auctioneer or whoever and will buy the house for whatever they think it is worth. That is the way the market works.

John Curran (Dublin Mid West, Fianna Fail)
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I thank Mr. McDonagh and call Deputy Ó Broin.

Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Mr. Daly said earlier that repaying the debt was NAMA's top priority.

I do not need to remind him that is not what the NAMA Act says. The Act gives NAMA a number of tasks. Section 2(b)(viii) of the Act talks about contributing "to the social and economic development of the State". Mr. Daly went on to say that in his view, repaying the debt is the best social dividend. I would have thought that at a time when the economy is growing and the debt-to-GDP ratio in general is falling, we should calculate the best social dividend by reference to the more clear social requirement to do more to tackle the housing crisis in addition to the need to repay the debt. I say that because, as we have seen today, 6,000 people are now homeless. According to figures released by the Department of the Environment, Community and Local Government today, 2,000 children are homeless.

I will come to my questions in a second. I acknowledge that NAMA has played a role in increasing social housing stock in the State but my concern is that much of the work it has done has, in the main, been driven more by commercial calculations to the detriment of a crucial part of its legislative remit. For example, we have heard a lot of talk about how NAMA has offered 6,700 units for social housing. I would hate the message to go out from here today that local authorities are somehow refusing units. People seem to forget that central government places enormous constraints on what local authorities can accept when NAMA presents properties. I will give an example. NAMA proposed to present 591 units to South Dublin County Council but almost 500 of them were in one location. Central government policy under the last Government and the current Government does not allow local authorities to buy 500 units in a single location. Even if a council wanted to do so, it would be constrained by central government policy. Many of these units were offered in 2011 and 2012. Not only was tenure mix a constraint from central government but location, cost and the availability of resources were also issues at a time when central government funding of local authorities was at its lowest.

I think we should explore this and I think people are right to ask these questions. I am reminded of a headline in yesterday's Irish Examinerthat criticised local authorities for not spending their capital allocations. Nobody is mentioning that the procurement and tendering process insisted on by the Department of Public Expenditure and Reform takes a year and a half. It is not as if local authorities are sitting there, not spending money. I make that point because I think the debate needs some balance.

John Curran (Dublin Mid West, Fianna Fail)
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I would like to be helpful. A number of people are raising this issue. I think the committee will get correspondence from the Housing Agency.

Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I know.

John Curran (Dublin Mid West, Fianna Fail)
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I think clarity is wanted.

Bernard Durkan (Kildare North, Fine Gael)
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It is not true to suggest that it takes a year and a half.

Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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It is not that I want clarity.

John Curran (Dublin Mid West, Fianna Fail)
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The committee wants clarity.

Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Until recently, I was a councillor on a local authority that worked extensively on this issue. I understand some of these dynamics. I am conscious that it is important in these public sessions to challenge the suggestion that local authorities are simply not taking units by putting it on the record that the picture is more complex.

Bernard Durkan (Kildare North, Fine Gael)
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The suggestion that it takes a year and a half is not true.

Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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It is.

John Curran (Dublin Mid West, Fianna Fail)
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Deputy Durkan, please. We are on questions.

Bernard Durkan (Kildare North, Fine Gael)
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It still is not true. That is the point.

John Curran (Dublin Mid West, Fianna Fail)
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I ask Deputy Durkan to allow Deputy Ó Broin to question the witness without interruption.

Bernard Durkan (Kildare North, Fine Gael)
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The maximum amount of time it takes is two or three months.

Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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We had two of the most senior housing managers in the country, from Dublin City Council and South Dublin County Council, at our first session. They told us that after the planning stage has passed, the tendering and procurement stage can take between a year and a half and two years. The shortened process that was made available for the rapid build project in Ballymun is currently available for rapid build projects only. While the Department is looking at the possibility of applying that process elsewhere, it has not been applied elsewhere up to now. They are the facts that have been presented to the committee.

I would like to ask some questions. According to the report, 1,647 units were originally offered to local authorities but were subsequently sold or leased onto the private market. I would be interested to know whether these units were part of the original pool of units that were rejected by local authorities. Alternatively, was the decision to put them into the private market a commercial decision of NAMA? Perhaps it was a mix of the two.

I am concerned that one of the problems for local authorities and approved housing bodies is that the more streamlined and standardised leasing model that has emerged is very cumbersome, particularly for approved housing bodies. To what extent is NAMA aware of that? To what extent are attempts being made to make it easier for approved housing bodies to function, particularly in the context of the NARPS vehicle? Such bodies frequently tell us that the model in question is tricky and cumbersome and delays their ability to bring more social housing units on line.

I would be interested in getting more detail on how things have been going with the special purpose vehicle, particularly since it was given an additional role by the former Minister, Deputy Kelly, under the 2020 social housing strategy. I know there have been more than 100 meetings of the working group over the last while. If the witnesses could give the committee more information on what it is doing and what they hope its output will be, that would be useful.

Mr. Daly referred to the delivery by the National Asset Management Agency of 20,000 private sector units. It is my understanding - perhaps Mr. Daly will correct me if I am wrong - that the new Part V requirements will apply to these units in the same way as they will apply to any other commercial housing development. Given the scale of the housing crisis and the point I made about securing a social dividend, would it not be appropriate to increase the Part V element of the 20,000 new units? Has the National Asset Management Agency discussed the possibility of increasing it to 20% or 25%, as I believe would be appropriate?

We also discussed the issue of land. I am aware that, as in the case of the housing units, NAMA does not own land but holds the debts relating to it. However, in the Fingal area - I am sure Deputy Coppinger will know more about this issue than I - one of the problems facing the local authority is the absence of publicly owned land. As part of the social dividend set out in section 2 of the NAMA Act, could the agency transfer land owned by its debtors to the State, either at no cost or a low cost, for the provision of social housing?

Mr. Daly spoke about special development zones, SDZs, and their benefits. The Clonburris SDZ is the last major parcel of development land in the South Dublin County Council area. The majority of these lands, perhaps two thirds of them, are privately owned. I assume the owners of at least a chunk of this land are debtors of NAMA and have a relationship with the agency. Could innovative ideas that have not yet been discussed in the public domain be brought to bear to maximise the delivery of social units in this SDZ?

The programme for Government refers to the investment of a future NAMA surplus in infrastructure and social housing. One innovative idea would be for NAMA not to return this surplus to the Exchequer on the basis that the latter may have obligations under the European Union's fiscal rules. Portions of this surplus could then be transferred in other assets, either land or housing. Is this possibility being considered and would it be permitted under the Act? This could be another useful way of achieving progress.

I would like to see the research on which figures on housing construction costs are based. Will Mr. Daly indicate the data on which the figures he presented are based? Are they based on an assessment of a certain number of units across a certain period in a certain number of counties? Every witness who has appeared before the committee gives a different account in respect of this issue. If NAMA has more detailed research on the matter, I and other members would like to see it and the data on which it is based. I ask Mr. Daly to provide it to us.

On the infrastructural deficits and the proposal to spend €164 million on infrastructure development, what are these infrastructural deficits and how do they differ from the services for which developers ordinarily pay development levies to local authorities and any other levies they pay, for example, to the ESB and Irish Water?

While I may be taking liberties in raising the SPV model, Mr. Daly noted that Mr. Whelan has expertise in this area. Many of us, including the new Government in its programme for Government, are discussing the possibility of using arm's-length companies or municipal housing trusts as another vehicle for having off-balance sheet spending, in this case on social housing. Could the model to which Mr. Daly referred be applicable to municipal housing trusts or arm's-length companies which would be operated by local authorities for the purpose of increasing direct social housing provision through off-balance sheet activities? It is currently applied to private sector interests such as insurance companies and credit unions, whose involvement in this area I would also welcome.

John Curran (Dublin Mid West, Fianna Fail)
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Mr. Daly and Mr. McDonagh have been asked a range of questions. NAMA indicated there are 48,000 constraint units across the four local authorities in Dublin. How many of these fall under the remit of NAMA?

Mr. Frank Daly:

I will start with the first point, which relates to NAMA being driven by commercial priorities. One must go back to the purposes of NAMA and the NAMA Act. While I agree that the Act includes a clause on a social dividend, it makes clear that the main purposes of the legislation were to deal with the economic difficulties in the State and what NAMA could do in this regard. It is clear in section-----

Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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It is fair to say that section 10 of the Act does not prioritise any of the eight objectives?

Mr. Frank Daly:

Section 10 is very clear in that NAMA has a commercial remit and its objective must be to obtain the best financial return for the State. In our reading of the Act, this is its primary purpose and the one which overrides everything else. That is what drives us but we are also driven by a belief that the debt, whether the €32 billion that we started off with or the €7 billion senior debt we currently hold, is a contingent liability on the State and impacts in a greater sense on the State's standing in the money markets and its capacity to borrow.

That the State can borrow at extremely low rates at the moment, as acknowledged by the markets and the rating agencies, is due partly to the fact that NAMA was quite clear about its commitment to repay that debt. One of those, Moody's - the committee may not think much of these rating agencies and I have views on them myself - declared not long ago that NAMA is no longer a material contingent liability on the State. All of that is important. On top of that, we have used the cash we have generated not just to repay the debt, but also, as has been much mentioned here today, to buy and refurbish units for social housing. We have also worked on ghost estates with local authorities and local bodies in terms of sites for schools and local communities. There is a social overhang to everything we do. Unless we are actually commercial and unless we had generated the funds we did in the past seven years, we would not be able to do any of that work. We would not be funding 20,000 houses between now and 2020 and we would not have been able to deal with the social housing issue that we are discussing.

Many of the other questions relate to detail about units. The Chairman has already referred to that issue. We will give the committee as much detail as we can. We have not come here to criticise the local authorities in any way.

Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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My point had more to do with some of my colleagues.

Mr. Frank Daly:

It is perhaps more general and I think the Deputy got into other wider policy areas which have nothing to do with NAMA. The reality is that we have found the local authorities quite effective to deal with by and large. I also refer to Deputy Bernard Durkan, who was somewhat critical of the housing bodies. By and large, we have not found that and instead have found that we have quite a productive and useful relationship with those bodies.

Bernard Durkan (Kildare North, Fine Gael)
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I cannot agree on that one.

Mr. Frank Daly:

There are many things on which, perhaps, we will not agree.

In regard to NAMA land, we mentioned earlier that we have about 2,800 hectares but about 1,500 hectares of that is required to deliver NAMA's 2020 target of 20,000 houses. We are looking at the balance of the land all the time to see what are the possibilities. To be honest with the Deputy, much of it is land which probably will never be built on. Much of it was bought with hope value and will probably go back to agricultural use.

Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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In regard to Clonburris land, that would not apply.

Mr. Frank Daly:

No. We are continually scouring our portfolio and we have always done that. We had a meeting yesterday with the Minister with responsibility for housing which was very useful. He has encouraged us to look again at our portfolio to see whether we can find more for social housing. We have said we will do that and we are confident that we can come up with several hundred additional units which we will offer to the local authorities as soon as we possibly can. We will do that fairly soon. We will continue to do that and we will continue to look at the possibilities around the 20,000 units we hope to deliver by 2020 to see whether we deliver them faster.

I ask the committee not to forget that there is a state aid complaint in Brussels about which we have to be very careful. In some ways, that goes back to the Deputy's earlier point. The substantive defence to the state aid complaint is that NAMA is acting commercially. The day we stop acting commercially in that area is the day we will be in trouble with Brussels. I do not think anybody wants that because that has the potential to hold things up and not to get the 20,000 houses that NAMA proposes to build. I will ask Mr. Brendan McDonagh or Mr. Martin Whelan to respond to other questions.

Mr. Brendan McDonagh:

In regard to the 1,647 properties sold or leased, we have a live portfolio and our debtors are anxious to sell if they have an opportunity to do so at a good price. It is very hard to stop that happening. If they say they have kept properties vacant for three months and the local authority has not come back to them or the Housing Agency has not been in touch, they will just lease them again to the private sector. That is the nature of a live portfolio

The Deputy spoke about our leases being cumbersome. We do not accept that at all. We have established leases with almost all of the major approved housing bodies now and they are well used to our lease. There are no tricks in the lease as it is a standard format. We accept that, at the start, each housing body had its own form of lease and did not want to move away from that. However, we have said we would use our lease and they have come around and accepted it. I understand everybody finds it difficult to change, but we try to do it the same way for everybody.

The Deputy mentioned the various working groups established by the former Minister, Deputy Alan Kelly. We are not directly involved in that area. Members of my team are involved in some working groups which arose on foot of Construction 2020 and which are looking at various issues, including as infrastructure and planning. We are participating in that in so far as it is relevant. The Deputy suggested providing land free to local authorities. We cannot do that. Under section 10 of the Act, the receiver will insist that he gets market value for the land. However, we have facilitated the passing over of land to State bodies at market value where they have raised their hands and said they wanted it.

Deputy Ó Broin mentioned the Clonburris SDZ in terms of innovation. We are all for innovation. Some previous SDZs have not worked. One of the highest profile ones that did not work out was probably Cherrywood as there were issues around it. Another SDZ that has not worked out is Hansfield, Blanchardstown. We have a very good relationship with South Dublin County Council and its excellent manager, Mr. McLoughlin and in terms of our experience with SDZs, our planning team has engaged with him frequently in regard to SDZs and we are all for whatever will produce the best outcome.

The programme for Government mentions the surplus and whether the surplus can be cash or something else. This is provided for under section 60 of the NAMA Act. It provides that either cash or residual assets will be returned at the end. Therefore, if we have unsold assets, that can be done. In regard to information on house costs, we will come back to Deputy on those. Our internal quantity surveyors are looking at costs and we have examined them with our debtors also. There is no huge variation at this stage, which is the reason I raised the issue of the report of the Society of Chartered Surveyors Ireland, SCSI. Although industry bodies sometimes have their own agenda, I feel that the SCSI has produced a reasonable report.

Deputy Ó Broin mentioned infrastructural deficits such as roads, sewerage and water. Previously, in the good times, developers used to borrow from the banks and pay for the infrastructure. That day is gone and nobody, including NAMA, will provide all the money up-front as there may be no product at the end. We want product. The Chairman asked how many of the 48,000 housing units in Dublin that need this infrastructure are in NAMA and the answer is approximately 13,000 to 14,000. We are very anxious that local authorities will take on this work and we are engaged with the Department in informing it of the deficits and making it fully aware of them.

Mention was also made of the special purchase vehicle, SPV. This is a model that can be replicated and all that is required is funding. If the SPV has the funding capital to buy the housing stock, it can then lease to local authorities.

I do accept the Deputy's point that the local authorities are constrained, effectively because their capital budgets were taken away and they could not buy the houses. That is why we did the leasing model. We do recognise that the local authorities and the approved housing bodies do not have the capital to buy. However, I think one of the big points here is - if one looks at the UK model - there has been a move to merge a large number of approved housing bodies in the UK. When a merger was enforced among them it resulted in a lot of stock on their balance sheets which had been funded by capital grants over the years. The approved housing bodies then became municipal vehicles in that they can borrow money on the strength of existing stock on their balance sheets and use that to buy new stock. I would welcome this type of innovative model and it could be looked upon as a sensible way to leverage up.

Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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There was one question that was not answered about increasing the Part V element of the 20,000 units.

Mr. Brendan McDonagh:

I said that our debtors and receivers have the same legal obligations as non-NAMA debtors and they would say to us that they are not going to be disadvantaged vis-à-visthe non-NAMA debtors; that they would have to provide more than 10% because it would affect the profitability of their schemes and therefore in trying to maximise the repayments of their debt. I believe the issue here, again, is a policy decision. People can say it should not be 10% and that it should be 15%, but whatever law applies it will be complied with by our debtors. However, it would be very hard to single them out as different to other people who are operating in the market and put them at a disadvantage. The committee might have different views.

Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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NAMA is funding them and that does not happen with their competitors who are outside of NAMA, but that is a separate issue.

Mr. Brendan McDonagh:

Their competitors are being funded and there are other people in the market who are building houses who have a lot of institutional money now also. The market is the market. This is about getting more houses and housing stock built and that is the most important thing. There is huge demand and a huge crisis.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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I want to ask some questions about NAMA's role in actually contributing to the housing crisis and its very minimal contribution to social and affordable housing. I also want to ask about NAMA's connection to the vulture funds and the impact that has on tenants who are living in those properties. I also want to ask about NAMA's write-downs to developers. Firstly I will turn to NAMA's contribution to social and affordable housing. In the presentation NAMA said it will deliver 20,000 homes. Lest anyone is unclear, that is 20,000 homes in general, 10% of which will be social housing.

Mr. Brendan McDonagh:

Or whatever our Part V obligation is.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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Yes, exactly. The reason I raise this figure is because I am a little sick of hearing about starter homes that NAMA is allegedly delivering all over the country where demand is clear or where demand is greatest, as the witness said in his presentation. There is great demand in Dublin 15 where we have a massive housing crisis. However, there are two NAMA housing estates which are building on rare land that is left in the area; Hamilton Park and Diswellstown Manor have NAMA involvement. The minimum price of those three bedroom units is €410,000 and €395,000. I checked the prices two days ago, if they have changed then Mr. McDonagh could let me know. Can the witness explain how these are starter homes and how they are ever going to get into the hands of the people who need them? They will not. With regard to NAMA's delivery of social housing, Mr. McDonagh says that the totality of vacant housing stock inherited by NAMA was passed over for social housing. However, Mr. Daly says it was 14,000 empty houses.

Mr. Frank Daly:

No. I said we inherited 14,000 at the beginning of NAMA.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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Yes, NAMA inherited them, but how many were offered to the local authorities because it seems in this-----

Mr. Frank Daly:

Some 6,500.

Mr. Brendan McDonagh:

It was 6,500.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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And what happened to the others?

Mr. Frank Daly:

They were all tenanted with people living in them.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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Did NAMA offer 14,000 for social housing?

Mr. Frank Daly:

No, we offered 6,500.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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Okay. So why did NAMA say that it offered the vacant housing stock within the original portfolio?

Mr. Frank Daly:

No, we offered-----

Mr. Brendan McDonagh:

No-----

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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The witnesses can respond later on this.

Mr. Frank Daly:

The key word is "vacant" housing stock. There is no point in offering houses to local authorities or housing bodies if they are already occupied.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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Mr. Daly said we inherited 14,000 empty homes and then he said NAMA offered the totality of vacant housing stock for social housing. I am just wondering where is the gap.

John Curran (Dublin Mid West, Fianna Fail)
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Mr. Daly can reply to them separately but we will take the questions.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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Now NAMA is building on 46 sites. I do not know about the prices in other areas, and I would be interested in hearing from Deputies in those areas, but in Dublin, what are the prices of these houses and how will they ever do anything to help anyone involved in the housing crisis? There is a way NAMA could house between 50,000 and 100,000 people right now. NAMA could wipe out the social housing list in this country, if its brief was changed. I am not blaming the three witnesses here today because it is the Government that decides the brief. However, in an answer to a parliamentary question, and on one of the pages of his presentation Mr. Daly confirms this, it was stated that NAMA has a claim over 2,800 ha of residential land in the country, for example, 1,100 ha in Dublin and 620 ha in Cork. These are two of the biggest problem areas for the housing crisis. If NAMA built social and affordable houses on those hectares of land in Dublin, for example, with 1,100 ha at, say, 50 houses per hectare, it could house 55,000 people. The brief of NAMA is run along profit lines, bailing out developers and getting loans repaid for the State. However, if its brief was changed, it has enough land already zoned and, if emergency legislation was introduced, we could build houses quite quickly on it.

The other issue is the hoarding of land which NAMA has been involved in. It is not just me saying it. The Minister, Deputy Michael Noonan, has said it in replies to parliamentary questions. It was not until 2014 that NAMA started releasing land for housing. Meanwhile, the housing crisis was building up and NAMA had all this land. It is, therefore, about time that there was an honest discussion about the role the previous and current Governments, in setting up NAMA, have played in allowing housing to become very scarce. For example, in a housing forum last month, NAMA said it had sold enough land for 20,500 units since 2014 "in the most sought-after areas of the capital, the commuter counties of Wicklow, Kildare, Meath and Louth and the cities of Cork, Limerick and Galway". At the height of the housing crisis and in the areas where the crisis is worse, NAMA has sold enough land for those units. By the way, only 1,100 units have been built on that land, indicating developers have been hoarding land while waiting for house prices and profits to rise.

That is the key problem. The private sector is in control of housing in this country and it is being facilitated by NAMA as it is currently set up. I would argue NAMA encourages developers to hoard land and it let a housing shortage develop. I do not have time to give all the quotes. However, for example, a report on a freedom of information request in The Irish Independentlast month shows that the Minister for Finance, Deputy Michael Noonan, wrote to NAMA saying it must bring land to market more quickly to stop developers hoarding sites. He went on to say that NAMA was contributing to the problem. Why was that decision taken when even the Minister himself had to intervene?

On the social housing spend to date and that projected in the NAMA wind-up, NAMA brags about the €260 million it contributed to social housing but it had a turnover of €34 billion. That is the problem; it is so minuscule. Why has so little been spent on new social housing? I know NAMA's primary aim is financial return. There seems to be no social element to NAMA whatsoever. Is NAMA making the decision that there is not much of a social element or is it the Government ordering it? We need to know that. Of the remaining money NAMA has, I think it has €3 billion in cash at the moment, or it had recently. Will the witnesses clarify the position? If that was even used now, at this very late stage, for affordable and social housing, it would make a huge in-road into the problem.

The next question is about NAMA's connection to vulture funds. Today, the NAMA representatives denied that the agency sold 90% of its stock to vulture funds. I am not talking about housing alone. If we include land and all of the loans, then 90% was sold to vulture funds, as far as I can see.

The NAMA representatives have also said that the existing tenancy arrangements tend not to be impacted. I offer an example of an apartment block in Clontarf that NAMA sold to Grant Thornton, which was acting as receiver. The receiver immediately went about imposing a 25% rent increase on the tenants last year. The tenants challenged this at the Private Residential Tenancies Board and have been doing so ever since. Do the NAMA representatives not believe the agency should have some kind of conscience about who it sells to and what lease arrangements are going to be put in place? Does NAMA have any policy of maintaining affordable rents when it sells on apartment complexes or houses? Some of these apartments are still empty because, it would seem, they were being held on to. Apparently, part of the reason is that the loans on the apartments are in the process of being sold to a vulture fund, Promontoria (Arrow), as part of NAMA's Project Arrow deal. The units in question are in Bay Apartments in Clontarf. No one living in those apartments was informed by NAMA that they had been sold on or that the tenants now had a new landlord. The first residents heard about it was on 28 April, when they got a letter telling them about it and asking for information on the lease arrangements they had in place, etc.

One would have thought NAMA should not be contributing to rent increases, but by selling to vulture funds that is inevitable. Most of these vulture funds pay no tax whatsoever in this country. Apparently, one of them paid €250 tax in 2014 despite holding over €500 million in assets. The fund in question is Beltany Property Finance, which is related to Goldman Sachs.

The last question relates to write-downs to developers. They impact on the money available to use for social and affordable housing. The Anti-Austerity Alliance tabled a parliamentary question on 14 April. As of 31 March, 442 of NAMA's original 779 debtor connections had exited the NAMA process. These 442 debtors owed €18.5 billion but they only paid €9.6 billion, or half of it. Only 44 debtors have paid their debts in full to NAMA, which means that between them almost 400 debtors have effectively had an €8.9 billion write-off of debt from NAMA, with an average write-off of €24 million per developer. Do the NAMA representatives believe that it is acceptable, when people are struggling with mortgages, for many of these developers to have profited handsomely from these deals or that they should be let off so easily? It seems only one in 20 NAMA developers have paid their debts in full. It is great to hear that NAMA is going to meet its targets ahead of time, but do the agency representatives not believe there has been undue haste in getting rid of assets and lands with no care as to who they are going to?

John Curran (Dublin Mid West, Fianna Fail)
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We will afford Mr. Daly and Mr. McDonagh an opportunity to respond. There was a range of questions, gentlemen, so you may address them in whatever order.

Mr. Frank Daly:

The general point is that it is back to the question about how we interpret our mandate under the Act, the responsibilities we have and what we can do under the Act. I have already spoken about these in response to Deputy Ó Broin's questions. Short of repeating myself, we have to act in accordance with the mandate and the responsibilities in the NAMA Act. We cannot go outside that. We have to get the best financial return we can for the taxpayer and to do that as expeditiously as possible - that is in the Act as well.

That is a primary driver for us.

I know the Deputy will probably not agree with me but our view is that the repayment of the debt is a priority for all sorts of other reasons. Only when we are sure we can do that can we invest money in other things, like social housing, ghost estates and the funding of 20,000 units. Whether the Deputy thinks that is adequate is not the point. For NAMA, we cannot do any of that until we are sure we are generating the cash to repay our debt and have enough cash to fund that. The housing programme we are going to fund will cost approximately €5 billion. The Docklands development we are going to fund will cost approximately €2 billion. We will do all of that. We will repay the debt and we will return a surplus to the State.

To respond to the Deputy’s central point, we cannot really do that unless we operate commercially and unless we deal with the investors who are prepared to buy our assets. The Deputy labels them vulture funds, but other people would call them investment companies. There will be others; there are private individuals and Irish investors. We put everything on the market and we take the best price we can, generally speaking. Unless we do that, we are not acting commercially; we are departing from our brief and are open to challenge by our debtors and receivers and will not get the wherewithal to do what we propose to do in housing, in the Docklands or anything else. That is the responsibility the NAMA Act places on us. I know the Deputy has a different view but that is a policy view, which is beyond our remit here today.

There were a lot of questions about individual sites and I will leave those to Mr. McDonagh. Deputy Coppinger said NAMA has been hoarding land. She is quite right that we have 2,800 hectares of residential development land but 1,500 of those are earmarked to deliver the 20,000 houses. That leaves approximately 1,300 hectares. Not all of that will ever be built on because it is not suitable. It is not zoned and is not in the right area. We are not hoarding it. We continually look through it. If there are local authorities interested in some of that land for residential development, or whatever, we are quite happy to talk to them about it. They know what we have and I am not sure that in that 1,300 acres, which we do not think is viable, there is the potential that the Deputy says is there. Maybe it will become viable in the future.

The amount of cash we have on hand varies from time to time. Whatever cash we have is earmarked to repay the debt and we have to repay more this year, for the housing development, the Docklands and other things we do and to pay our own way because we do not borrow. The question about the apartment blocks in Clontarf is so specific that I am not sure we can answer it today. Maybe Mr. McDonagh has some information.

Mr. Brendan McDonagh:

Some of the land our debtors have across the portfolio is in good locations where house prices are higher than the norm but that is the market. The majority of our schemes are in this €300,000 bracket. There are exceptions to that as there are anywhere. When we inherited the portfolio, it was built stock. We wanted to get money on the portfolio straightaway. If it could not be sold to the market, we told our debtors and receivers to get people in to rent it. They let as much as they could and the residual amount of 6,500 was offered to the local authorities when they and the housing agency approached us. That was approximately a year after we came into operation. In the first year of operation, we were renting into the private market.

We offered what was available at that point in time.

The Deputy referred to land and claimed that 1,100 ha with 50 units per hectare could deliver 55,000 units but the reality is, as I said, that not all of the land is zoned properly. Local area plans and infrastructure are required. If they were in place, the land could become available for housing. It will take time to put everything in place and even with everybody working at full steam, some of the land may not be available for housing through the planning system until 2019 or 2020.

We have delivered more than 20,000 units since the start of 2014. Between 2010 and the end of 2013, we sold land that could deliver 3,000 units. The reality is that during the period concerned, there was no significant demand for housing or land in the Irish market.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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There was major demand. People were paying significant rents. They could not afford to buy.

Mr. Brendan McDonagh:

People did not have the money to buy. We were obliged to sell the portfolio in order to pay off the debt but there was not much demand in terms of buyers who had money to purchase land and wanted to invest. Ireland was in a troika programme at the time and there was little confidence.

The Deputy referred to cash balances changing from time to time. As of today, the cash balance is about €2.4 billion and we have another €2 billion in bond redemptions this year. We need money to fund the various developments in which we are involved. She referred to a specific scheme in Clontarf but I do not have the detail on that. It is not up to NAMA to write to tenants because we are a secured lender. Bank of Ireland, AIB or Ulster Bank would not write to tenants. It is the owners of properties who write to tenants. If a receiver was in place, he or she would be in the shoes of the owner and have to deal with tenants. I do not have the detail with me on whether schemes are part of NAMA. Once a buyer purchases a portfolio, he or she will deal with it.

We answered the parliamentary question to which the Deputy referred. Not all of the debt has been written off. I understand the answer stated that €1.6 billion of par debt has been written off. The reality is that where a debtor has borrowed money, sold all the assets and given up any other assets to the maximum extent possible, that is what will be realised. The problem is that the debtors who came into NAMA had borrowed €74 billion from the banks. When we bought the assets from the banks, they were only worth €26 billion. We ended up paying the banks €31 billion, which was €5.6 billion more than what they were worth at the time because that was what the Government wanted. It was State aid and we have had to work to claw back the overpayment of €5.6 billion and now generate a surplus.

We would love to be in a position to say today that we bought a €74 billion portfolio for €32 billion and have been able to sell it for €74 billion but that is not the reality. The reality is that the lending in the first place was bad and property values were overinflated. That is something we inherited, not something we created.

Mr. Martin Whelan:

I have one further point. Deputy Coppinger asked whether we were sitting on land. She is very aware of the development financing model that built up during the boom. The loans we inherited were secured on sites that had no planning or planning that simply could not be delivered. They were in areas that required new local area plans, county development plans or new STZs. From 2010 to 2012, NAMA worked with debtors and local authorities to try to secure planning.

We have a land strategy in place for every single hectare of land within the portfolio. The units that we are now delivering are the by-product of the planning work that was done. We do not work as was previously the case under the model. We work on a cluster basis with local authorities. We go in with local authorities and identify contiguous land, neighbouring land, what needs to happen first and whether it is this side or that side. I understand Deputy Coppinger's point, but, to be fair, there was a large proportion of development land inherited that required a huge amount of intensive asset management and planning work to get it to where it is today.

Mr. Brendan McDonagh:

When we acquired the portfolio at the very start, our debtors controlled less than 30% of the development land in Dublin. That meant that other people who were not in NAMA had 70% of the development land in Dublin. We watch what is going on with land and things like this. There is not much happening on a lot of that land. We are not the only player in the market. We accept that our debtors are reasonable players when they are all close together, but there are other major players in the market who have a lot of land.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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I have one sentence in response.

John Curran (Dublin Mid West, Fianna Fail)
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The Deputy may respond very briefly because there are other members who wish to contribute and I am conscious of the time.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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NAMA did have 30% of the development land in Dublin. The witnesses keep saying that they only have a relationship with these debtors. The debtors are in default. NAMA can foreclose and repossess at any time. Let us not make out that it is just a little relationship.

Mr. Brendan McDonagh:

The important aspect there is that the receiver is legally obliged to maximise the return if he or she steps into the shoes of the debtor. That is what he or she is legally obliged to do under the legislation passed by the Oireachtas. It is the same in the UK as it is in Ireland. NAMA cannot simply cast people aside and say, "We are going to take that off you and give it away for free". NAMA cannot do that.

John Curran (Dublin Mid West, Fianna Fail)
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A number of other members are offering. I ask that they keep an eye on the time when making their contributions. Deputy Maureen O'Sullivan is next.

Maureen O'Sullivan (Dublin Central, Independent)
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There are various questions about the units that local authorities turned down. I have one specific question. Has every unit that was turned down been disposed of at this stage?

My second question relates to the docklands. I understand NAMA has control of 75% of the undeveloped land in the docklands area. The bulk of the development is going to be for commercial purposes and office space. Dublin City Council will get 10% of the 2,000 proposed apartments. From what the witnesses said earlier, if Dublin City Council came back and looked for more in that area, would NAMA be open to talking to it? An opportunity to do more in the area in question has been lost. I do not think NAMA is fulfilling the social development aspect of its brief in the context of what is being offered for housing in that area.

We know how totally unsuitable hotels are, particularly for families, but because we have an emergency, I am of the view there is scope for them to be used for certain people. Does NAMA have hotels that could be used in this way? Is NAMA sitting on vacant hotels at present?

My final question is in regard to Project Jewel and the loans that NAMA sold on. There are many concerns over the fact that part of what NAMA sold on was an area of great historical and cultural significance as a battlefield site. I believe there was an opportunity there for housing and I wish to know why that was not considered at all when those loans were being sold on.

John Curran (Dublin Mid West, Fianna Fail)
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There are some very direct questions for Mr. McDonagh.

Mr. Brendan McDonagh:

The Deputy asked about the units that were turned down. When they were turned down, we had 6,000 units left. Some of them would have been units the local authorities turned down and they were taken up by the private sector.

Maureen O'Sullivan (Dublin Central, Independent)
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Are they all gone?

Mr. Brendan McDonagh:

Yes. There is 99% occupancy in them at present and the other 1% represents people moving in and out as they come to the end of their leases.

The Deputy asked about the Dublin docklands. The SDZ was proposed and adopted by Dublin City Council. It went to the then Minister for the Environment, Community and Local Government and to An Bord Pleanála. The Deputy is correct that NAMA debtors had 75% of the land in that area. The policy decision was for 3.8 million sq. ft. of commercial office space and 2,000 apartments. That was the policy decision and not NAMA's decision. The Part V obligation meant that 10% of that would become social housing units. That obligation must be complied with. The issue of whether Dublin City Council wants more units than that is always up for discussion. They would have to buy them at market value or whatever the case may be. That is the reality.

The Deputy also raised the question of NAMA hotels. There are 31 hotels left in NAMA and they are all operating so there are no vacant ones. Project Jewel was also raised, as was Moore Street. As the Deputy will be aware, the Department of Arts, Heritage and the Gaeltacht bought a certain site on Moore Street as part of the preparations for an historic monument. The plan is for a rejuvenation of the area, including a shopping centre. A certain amount of residential units are planned for that but it will be for the new owners, a major UK plc, to decide on that in conjunction with the debtor.

Mick Wallace (Wexford, Independent)
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Given the forum we are in, I am far more interested in what NAMA is going to do in the future than in what it did in the past. Mr. McDonagh said NAMA paid approximately €32 billion for assets that were worth approximately €5 billion less. I do not dispute the claim that they were worth no more than €25 billion but when NAMA was set up, the idea was not to flood the market with assets at fire sale prices, which would have meant it would have been worse than what we got. The idea was to put them into deep freeze, hold them for a while and wait for some recovery in the market. In that context, it is a bit disingenuous to say there was always going to be some form of recovery and the value was not going to stay for ever at €25 billion or €32 billion. We can argue until the cows come home about what something was worth on a particular day.

I understand that the NAMA Act and the approach of the Minister for Finance are very strongly linked to how NAMA has acted but I feel there is some room for movement. NAMA seems to have been under great time pressure, which meant some stuff was sold at a high discount. The decision to sell in large bundles brought in the vulture funds, or investment funds as NAMA prefers to call them, and they have distorted the market dramatically. An example I have given many times is the two-bedroom apartments in Dominick Street, which were €900 per month and are now €1,500 because a small group of big players, investment funds from abroad, are having a big impact on the market.

How much autonomy has NAMA had when making decisions on what to sell, and when and where? How much of a role has the Minister for Finance had in its decision-making? Was NAMA told, "There is the NAMA Act and there are the rules, so away with you"? NAMA wrote a letter to the Minister on 28 September 2015, which included the following, "At our meeting with you on 15 September you requested that the NAMA board assess the increased contribution that NAMA could make to residential delivery if it were to be given a new mandate to maximise the delivery of housing in the period to end-2020." I accept that the Minister for Finance only started to talk about a new mandate in September 2015. NAMA wrote back to him, stating, "During the meeting you stated your endorsement of the board's objective of redeeming all senior debt by 2018 and the repayment of subordinated debt in March 2020 and you indicated that, in your view, achievement of these senior and subordinated debt repayment targets should take precedence over the provision of funding that would be required for NAMA residential projects in any revised strategy."

Am I to understand that NAMA has been strongly dictated to by the Minister for Finance, or am I misreading that?

My second question relates to delivery of the 20,000 units. NAMA has brought a new dimension into it by linking the role of the debtor in that. It is more or less saying that the debtor cannot be treated differently from anybody else, but I would have thought it might have more flexibility on that, or perhaps I am wrong. The land concerned is approximately 1,500 ha. If Brussels will not allow NAMA to deliver in the region of 30% social housing units from thatbecause of state aid rules, is there a mechanism whereby that land could go back to the State and it could carry out the delivery of that project? Is there any way around the state aid challenge to address the problem? Even though social housing provision has probably never gone higher than 15% in the State, realistically, 30% of the people who will be looking for housing in the next 20 years will probably be depending on the State to supply it directly. Therefore, the allocation of 10% from that pool for the supply of social housing is way below demand.

Added to that is the price of €300,000 for a house. I am sure the representatives realise that the people who have the most difficulty gaining access to housing have no hope on earth of coming up with that kind of money. Are they factoring into that price the cost of the land on which NAMA is sitting? Are they also factoring into that price a profit margin for NAMA?

On the issue of the Dublin Docklands strategic development zone, SDZ, which Deputy O'Sullivan also raised, SDZs are obviously very convenient for NAMA to work with. It is predominantly commercially orientated. I can understand the logic behind it. The location suits commercial property, but there is also a dire need for residential units in that area. I am fairly convinced that it was not NAMA but the planners in Dublin City Council that made the call that the Dublin Docklands SDZ area would be dominated by commercial property. Had NAMA any say in that matter?

Mr. McDonagh mentioned the cost of labour in construction and said that it had not changed much over the years. I employed a few hundred people, and most of them are still involved in construction in Ireland. The general worker is taking home a lot less than he was and the subcontractors are still working for crazy rates, and there is a big problem there. The guy who is doing the work on the site is making a lot less than he was. Anyone who tells Mr. McDonagh otherwise is being economical with the truth.

Mr. Daly made the point that the biggest social dividend would be obtained by paying back the debt as soon as possible, and he went on to say that repayment of the debt was a priority. Is that not a political statement also? He started off by saying that he was not going to go into the political area.

How we spend our money and how soon we pay down debt is important but if I am correct, we are taking about a debt in the region of 1%. I know there are people in Europe who would like us to pay down that debt as early as possible but at the same time there is some flexibility in that regard. I see all the countries across Europe availing of certain flexibilities in terms of strong bodies in Europe. It seems irrational to be in a rush to pay down debt that is costing 1% given the huge pressures created by the emergency around housing. Do the witnesses agree there is a political dimension to that statement? I am not saying there is a great deal of flexibility but there must be some options in that area.

Mr. Frank Daly:

I might take the Deputy's second and last questions and link them, if that is appropriate. Deputy Wallace asked if we are under time pressure, how much autonomy we have, etc. We are an independent board. Our mandate is the Act. We do engage with the Minister from time to time, and it would be wrong of us not to do so. Generally, we would have a review of our strategy every year. Sometimes he would come along to that and engage with us but at the end of the day the strategy for NAMA, by and large, is that of the board, and we can talk about that right from the beginning.

The strategy was to not dump assets on the Irish market in 2010, 2011 and 2012. That would have only done more damage to a fragile market. That market was recovering in 2013 and NAMA was getting more active in the Irish market; in the earlier years being very active in the United Kingdom market, which has been quite good to us in terms of realising our assets in the UK; and all of that feeding into our capacity to repay debt and invest in housing or the docklands. That is the strategic policy of NAMA set by the NAMA board. I certainly will not deny that we would engage with the Minister from time to time but he has not directed us in any particular area; he has left it to us. We can all argue about whether it was the broadly right strategic approach along the way, but we are convinced it was the right approach.

The Deputy is right that part of that is our focus on paying down the debt. I am not talking about the wider issue of debt repayment in the State, which certainly would get me into a political area, and I am not making a political statement when I say that NAMA's priority is to repay its debt. I and my board colleagues believe that that contingent liability is a drag on the State and that until NAMA has it paid off, it will remain there and it could impact on Ireland's standing in the financial markets or whatever. That is our strategy, and we are well advanced on that. We are probably two years ahead of target and we will have that senior debt, and it is the senior debt that is the contingent liability, repaid by 2018. All of that is a strategy devised by the NAMA board, continually reviewed by the NAMA board and based on whatever expert input we can get from the Executive or external experts. It is our strategy. I am not making a political statement when I say that we regard debt repayment as a priority. I am saying that is the NAMA strategy and that is the view of the board of NAMA, and the Minister has not put us under great time pressure or anything like that.

To go back to the Deputy's final point on the biggest social dividend, I still believe it is to repay the debt and along the way we are generating enough cash, thankfully, to invest in housing and in the docklands.

The Deputy raised another issue about state aid and social housing. State aid is not really the barrier in terms of social housing. The state aid issue arises with regard to the plans of the National Asset Management Agency, NAMA, to build 20,000 private houses for the market. The state aid concern of Brussels lies more there than in whether we offer, as we have, 6,000 houses for social use. That is not an issue that concerns Brussels too much.

As for the docklands SDZ, the Deputy referred to the decision that there would be just 2,000 residential units - the same point was made by Deputy Maureen O'Sullivan - and asked who had made that decision. It was made in the context of the designation of the SDZ, around which there was wide consultation. Any interested parties had the option of making an input to that process and we did as well. I believe the Deputy acknowledges that the anchor programme in the docklands probably is prime commercial office space, which is badly needed in the central business district in Dublin. Perhaps Mr. McDonagh has some other points.

Mr. Brendan McDonagh:

Deputy Wallace raised some other questions. He spoke of how there will be an increased reliance on the State to provide housing in the future and so on, and I do not disagree with him in that regard. The business model by which people try to acquire their homes might be changing and more people might be moving towards renting and things like that. Obviously, as the cost of housing increases, it becomes more difficult for people to get mortgages or to be able to afford it. The Deputy is correct that under the Central Bank rules, at present, one needs a deposit of €38,000 for a €300,000 house, which is a big deposit. Our debtors are telling us that in the schemes they have launched, people are telling them that while they really like the house, they are €10,000 short. They then return the following week to say their brother, sister or father will lend them €5,000 but they are still €5,000 short and so on. People really want to buy those houses but are caught by the Central Bank rules. I am aware that this issue is being reviewed by the Central Bank later this year and, like everything, while it might be good in principle, I have been stating repeatedly that calibration is an important point in this regard. In my view, €220,000 is a very low level for a 10% deposit, but that is a matter for the Central Bank.

The Deputy mentioned the docklands and the Chairman referred to the 2,000 units. That decision started off with the chief executive of Dublin City Council and the council ultimately adopted it. The Deputy also spoke of the value of assets and what they were at that point in time. As I stated, the reality is we should only have paid €26 billion for them but ended up paying €32 billion for them to the banks. Thereafter, the market dropped by another 30%, so they probably were only worth €22 billion at one stage. Consequently, there has been a big turnaround in that regard.

The Deputy raised an issue with regard to the cost of labour, and I do not disagree with him. However, I simply make the point that I also talk to a lot of people who are saying that with registered employment contracts, the cost of labour still is a big issue. I accept that people can have different views but all I am saying is what I am hearing. I assure the Deputy I will go back and interrogate it again, but I hope that answers the Deputy's questions.

John Curran (Dublin Mid West, Fianna Fail)
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Does Mr. Whelan wish to comment?

Mr. Martin Whelan:

Yes, on the SDZ. As the chairman and chief executive officer have noted, the SDZ was adopted by the elected members of Dublin City Council. It actually provides for a 50:50 split in terms of land use. However, the Deputy is aware of what one can build for residential versus commercial property, given the height issues and so on. The land is split into blocks, and across those blocks the average split in respect of plot or site area must be 50:50. That is an adopted plan and we simply made a submission in the same way as any other party.

John Curran (Dublin Mid West, Fianna Fail)
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Deputy Wallace, briefly.

Mick Wallace (Wexford, Independent)
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Mr. Daly insists on sticking to his point that the biggest social dividend is to pay back the debt as soon as possible. Would he agree that would be regarded as a neoliberal position and that those who would think that the best interests of the people should be served before those of business might have a different view?

John Curran (Dublin Mid West, Fianna Fail)
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Mr. Daly may not wish to comment on policy.

Mr. Frank Daly:

I would prefer not to get into a debate on neoliberalism or where I stand on it.

John Curran (Dublin Mid West, Fianna Fail)
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I thought that might be the case.

Mr. Frank Daly:

I suppose Deputy Wallace relates it to the people. The debt is on the people. My point is that we pay that debt because the debt is on the Irish people and let us get rid of it. That is not neoliberalism; that is pragmatism.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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It was the developers' debts, not the Irish people's debts.

John Curran (Dublin Mid West, Fianna Fail)
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One moment, please.

Mr. Frank Daly:

Whether it may have started off as such, it has ended up as a debt around the necks of the Irish people. That is what happened.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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Because certain people chose to do that.

Mr. Frank Daly:

We inherited it.

John Curran (Dublin Mid West, Fianna Fail)
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We have Mr. Daly's answer on it and members may have different views.

We are running late but there are two others who want to contribute. We are resuming at 2 o'clock for the next session, but I will take the two contributors, Deputies Mary Butler and Catherine Byrne, together.

Mary Butler (Waterford, Fianna Fail)
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As Deputy Wallace said, we must look forward. That is the purpose of this committee. We are in crisis mode and the objective of this committee is to look at solutions and to see how we can move on from here.

My question relates to the delivery of 20,000 residential units by the end of 2020 subject to commercial viability. My problem is that 93% of the residential units will be delivered in the greater Dublin area and only 7% will be located outside the greater Dublin area. Of the 20,000 houses subject to commercial viability, 1,400 will be delivered outside the greater Dublin area with 18,600 delivered within the greater Dublin area despite the fact that, for example, Waterford has 3,000 people and Cork has 7,000 people on their housing lists. This is not correct. The majority of the problem is in the greater Dublin area, but Cork is second and then there are the other cities, such as Kilkenny, Limerick and Galway. This aspect should be reviewed.

Returning to the cost of building a house on which we seem rightly to be spending a lot of time, in the breakdown provided for VAT on a house, excluding the land, the figure given was €30,500. Is there merit in reducing the VAT rate from 13.5% to 9% or even lower to reduce the cost of building a home, especially in the case of first-time buyers trying to get onto the property ladder? I had other questions but they have been asked and I wish to keep my contribution as brief as possible.

Catherine Byrne (Dublin South Central, Fine Gael)
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I thank Mr. Daly, Mr. McDonagh and Mr. Whelan for their informative and excellent presentation. Two questions I wanted to ask were asked earlier, including one by Deputy Maureen O'Sullivan.

I have two further questions. I agree with the NAMA representatives that there is no easy answer to the housing crisis. We must build, but it is a complex issue and the sooner we come to terms with how complex it is, the better.

In relation to the 1,073 hectares of land in Dublin, does the Irish Glass Bottle Company form part of that? Is it possible to get a list of the other sites?

Mr. Brendan McDonagh:

We can give that information to the Deputy by general location.

Catherine Byrne (Dublin South Central, Fine Gael)
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That is fine.

Mr. Brendan McDonagh:

It will not be that detailed but the Deputy will get a fair idea of the areas, for example, Rush, the Irish Glass Bottle Company, etc.

Catherine Byrne (Dublin South Central, Fine Gael)
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Most of us would know our own area and we would know what lands are involved.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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So even Deputies cannot get hold of what land NAMA holds.

Mr. Brendan McDonagh:

We are covered by legislation where, effectively, there is an issue of confidentiality. That was passed by the Oireachtas. We must abide by the laws of the land.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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I am merely stating how ironic it is that, in the middle of the crisis, we cannot even find out.

Mr. Brendan McDonagh:

I am saying, in response to Deputy Catherine Byrne's question, that we will be able to give the general areas. We will give the Deputy that information.

Catherine Byrne (Dublin South Central, Fine Gael)
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That is grand.

Mr. Frank Daly:

We cannot identify the debtor but we can be creative.

Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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On an item of information that is relevant to the question, I thought the Land Registry actually has on its map a designation for land relating to NAMA and that this is differentiated from other land.

Mr. Brendan McDonagh:

There is a charge.

Catherine Byrne (Dublin South Central, Fine Gael)
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I was only asking, so that has been clarified a bit more. I will be able to look at that.

Mr. Brendan McDonagh:

We will give it to the Deputy, in as much as we can.

Catherine Byrne (Dublin South Central, Fine Gael)
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The cost of building a house is an issue that has arisen all the time. I thank Mr. McDonagh for his outline. Is the cost of building apartments different? If so, is there any chance of getting that information? Yesterday, we went to see modular housing in Ballymun and I have to say that I was impressed. Cherry Orchard, which is in my constituency, is one of a number of sites designated for modular housing. The biggest problem we heard about yesterday in the context of building modular housing and existing residents does not relate to the actual houses themselves but rather to the tenants who are going to occupy them going into them. In general, local authorities need to tackle that end of things as well. In the past, they have not been able to deal with anti-social behaviour on the part of their own tenants, not to mention private ones. That has been a real downfall on the part of councils. If they dealt with that, people would be more accepting of having certain individuals move into their areas. It is shameful that those to whom I refer are not accepted. My family and I have all lived in social housing. I am surprised that people do not want social housing back in areas where our children want to live. I wanted to make that off-the-cuff comment because I really believe that a social mix is important in the context of every site. If there is going to be a 200-unit development in Cherry Orchard, I hope it will have widespread support.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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We do not have 10% of social houses.

John Curran (Dublin Mid West, Fianna Fail)
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Before Mr. Daly answers, I wish to make one minor point in respect of the correspondence he is to send Deputy Catherine Byrne. We talked about the constrained units because of the deficit in infrastructure, and he might send us a note on that. He indicated that there were 13,000 or 14,000 potential units. I do not want the individual locations but rather a general breakdown of where they are located. This committee is seeking recommendations. If the infrastructure deficits are addressed, how long would it take to deliver units in that context? I do not expect Mr. Daly to have that information with him, but perhaps he could advise us.

Mr. Frank Daly:

Yes.

John Curran (Dublin Mid West, Fianna Fail)
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Mr. Daly might also like to reply to the remaining questions.

Mr. Frank Daly:

In response to Deputy Butler's question, she is quite right that 93% of the houses are in the greater Dublin area. There is not a huge percentage in Waterford, for example.

Mary Butler (Waterford, Fianna Fail)
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No.

Mr. Frank Daly:

That is much to my regret because I come from there. It is really a question of demand and viability. It is not that we have closed off places such as Waterford, Wexford or anywhere like that. If, at any stage, they become viable and there is demand, we will look at it. I remind Deputy Butler that we are making a significant investment in Waterford city in the Michael Street-New Street area.

Mary Butler (Waterford, Fianna Fail)
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Yes.

Mr. Frank Daly:

On VAT, we were asked to give views to the Minister quite some time ago on issues around housing and how to deal with them. We did suggest that one of the options might be a temporary reduction in the rate of VAT on house building. We are strongly of the view that mechanisms should be built in to ensure that such a reduction would be passed on to the purchaser. Is that okay?

Mary Butler (Waterford, Fianna Fail)
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Yes.

Mr. Frank Daly:

I think that is the most important point.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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Why did NAMA recommend that? It is not meant to be political.

Mr. Frank Daly:

We were asked to give views on problems in the housing sector and what we thought, as a body that is trying to build houses, were the barriers and issues. It comes back to the price of housing. There is no issue around that. Those recommendations were published, as I understand it. Linking to the Chairman's last point about seeking recommendations, it might be no harm if we passed on the substance of those recommendations to the committee.

John Curran (Dublin Mid West, Fianna Fail)
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We would appreciate that.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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Would the VAT reduction be for social housing or private housing?

Mr. Frank Daly:

It was all housing.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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It would be all, so there would be no guarantee it will ever benefit people who need houses.

Mr. Frank Daly:

An awful lot of people need houses.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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Yes.

Mr. Frank Daly:

One of the real constraints or difficulties at present is - and we have had this discussion - the cost of a basic starter house for somebody. If a temporary VAT reduction can help with that, and provided one has the mechanism to ensure that it goes to the benefit of the purchaser-----

Mary Butler (Waterford, Fianna Fail)
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The question I asked was about first-time buyers trying to get on the property ladder.

Mr. Frank Daly:

Yes.

Mary Butler (Waterford, Fianna Fail)
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That was the substance of the question.

Mr. Frank Daly:

One can tailor it any way one wants, but the concept of looking at the VAT take where one has a crisis is well worthwhile. We would certainly do so.

Mary Butler (Waterford, Fianna Fail)
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Yes.

Ruth Coppinger (Dublin West, Anti-Austerity Alliance)
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You cannot pass a VAT reduction on to a first-time buyer. You should build it again.

John Curran (Dublin Mid West, Fianna Fail)
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Excuse me.

Mary Butler (Waterford, Fianna Fail)
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I thank Mr. Daly.

Mr. Frank Daly:

I know, but that is part of the difficulty. Once one gets into VAT reductions for starter homes or social housing, one cannot be too selective in relation to VAT. I know because I have spent a long time in Revenue dealing with it. The most important point is that one can create a mechanism whereby it is passed back to the purchaser. The existing VAT repayment is a model that could be looked at, where, if one does some work on one's own house, eventually it gets back to one's self. There were a couple of other questions.

Mr. Brendan McDonagh:

Deputy Butler's questions have been dealt with by the Chairman. There is a common question in there about the cost of building, which Deputy Catherine Byrne also mentioned. The cost of building is the cost of building. The figures we published are not unreasonable. Those costs are for building a house. The cost of building apartments is much higher. Apartments really only work in high-density areas. That is something I would support. The revised regulations in terms of apartments have certainly been helpful. It is not necessarily about the minimum size of apartments because the planning applications we see going in are all for apartments that are bigger than the minimum standards. The real game changer has been the number of cores. That actually allows one to build a better engineered scheme. There are huge sunk costs in apartments which are not necessary, certainly in the city centre. People who live in apartments generally do not want car spaces. What they want are bicycle sheds and perhaps a small gym. We have been involved in some schemes in London which do not have car spaces at all. It dramatically reduces the cost by avoiding the need to put something underground. That is something I hope will be examined.

John Curran (Dublin Mid West, Fianna Fail)
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I thank Mr. Frank Daly, Mr. Brendan McDonagh and Mr. Martin Whelan for their attendance, their presentations and their replies to the questions. I also look forward to the written replies the witnesses have offered the committee.

Colleagues, we will adjourn at this late stage to resume at 2 p.m.