I propose to take Questions Nos. 72 and 73 together.
The Deputy rightly identifies increased social housing provision as a priority for the Government. That priority is reflected in the housing package announced recently by Minister Alan Kelly and in the substantial increases in direct Exchequer funding for social housing over the lifetime of this Government.
I welcome the announcement by NAMA that, subject to commercial viability, it expects to be in a position to fund the construction of up to 20,000 new residential units, predominantly located in Dublin and the neighbouring counties of Wicklow, Kildare and Meath, over the next five years. NAMA will in this way make an important contribution, on a strictly commercial basis, to increased supply over the coming years. Section 10 of the NAMA Act requires NAMA to in all instances act in a commercial manner to obtain the best financial return for taxpayers. In line with NAMA's obligations under Section 10, all residential projects will be required to pass a stringent commercial viability threshold before NAMA approves funding. NAMA must act akin to a private sector commercial entity in this respect.
NAMA is not a property developer. NAMA's role in relation to new housing output is, like a bank, that of a secured lender which makes a commercial decision to advance funding to maximise its return. As a secured lender, NAMA provides funding to its debtors and receivers where it is shown that this will increase the overall recovery for NAMA from the security being funded. Residential projects funded by NAMA are delivered by NAMA's debtors and receivers who are subject to the same planning requirements as all other applicants in the planning process, including Part V legislation which requires the provision of 10% of their housing units for social housing.
Government recently amended Part V to remove the ability of developers to account for their social housing commitments through cash payments to local authorities and furthermore to ensure that the social housing will be located predominantly on the site of the original developments, not off-site as had been a feature of Part V since its introduction. NAMA debtors and receivers will fulfil their Part V obligation to deliver 10% of residential units in the form of on-site social housing units.
NAMA has stated publicly its intention to facilitate, where feasible, the provision by its debtors and receivers of future Part V housing on NAMA-funded developments through its social housing SPV, NARPS. This is a very important initiative, which means that NAMA, as opposed to the relevant local authority, will, in many cases, bear the up-front capital cost of delivering Part V housing on estates it funds and that such housing will, in line with Government policy be aimed at ensuring greater integration in housing, be delivered on-site.
Any delivery via NARPS, through Part V or otherwise, must be on a commercial basis in line with Section 10 of the NAMA Act. In this regard, NARPS leases properties to either local authorities or approved housing bodies on the basis of commercial long-term lease arrangements which include an option for the local authority or approved housing body to buy the leased unit.
Part V agreements are facilitated through the Planning Process and the design and planning specification of new houses and apartments are determined in the planning consent by reference to national and local policy and standards. NAMA does not own properties, is not a developer and NAMA is not a planning applicant in any instance so NAMA is not a direct party in the planning process, so while it may facilitate development, NAMA does not negotiate housing specification with local authorities as this is a reserved function of the planning process.
NAMA has already played a very important role in facilitating on a commercial basis the supply of houses and apartments from within its existing portfolio for social housing. By the end of this year, NAMA will have facilitated the supply of 2,000 houses and apartments for social housing through its debtors and receivers under this initiative and NARPS, alongside the direct leasing or sale by NAMA debtors and receivers, is an important mechanism in ensuring this supply. Properties are leased by NARPS to approved housing bodies on the basis of long-term leasing arrangements. The NARPS lease provides, typically, for up to an average 20% discount to market rents, with the rent fixed for the first six years, and reviewed every three years thereafter, and includes an option for the approved housing body to purchase the property outright after a number of years at market value. The discount reflects the fact that the local authority and\or approved housing body take full responsibility for property maintenance and repairs over the lifetime of the lease. NAMA expects to have delivered close to 800 units out of end-2015 figure of 2,000 through the NARPS mechanism.
The 2,000 units that will be delivered by NAMA from within its existing portfolio by the end of this year for social housing equates to more than one-third of total social housing provision under Part V in the years between 2002 and 2011. This underlines the important contribution that NAMA has already made in this area. It should also be noted that NAMA originally made over 6,500 houses and apartments from within its existing portfolio available for social housing under this commercial initiative but local authorities confirmed demand for just over 2,500 of these.
Decisions relating to the disposal of the social housing portfolio leased by NARPS or to the possible dissolution of NARPS will be a matter for the NAMA Board to make at the appropriate time in the future. However, possible options could include selling the SPV at market value as part of NAMA's ongoing de-leveraging, in which case a market participant would keep the long term lease arrangements with local authorities in place, or allowing local authorities to buy the properties from NAMA.
While there may be commercially attractive opportunities in the social housing sector, any such opportunities are based upon the current social housing delivery model of direct Exchequer subvention. As previously stated, NAMA cannot provide that subvention.
It is clear however that the social housing supply problem is a subset of the wider supply problem in the property market and NAMA's funding commitment in terms of commercially viable residential output will be part of the overall housing solution, although it can only be part of the solution.
Looking at the private market, NAMA debtors and receivers control only about 30% of zoned residential sites in the Dublin area and accordingly, market participants who control the other 70% of the sites also have a major role to play if the supply/demand imbalance is to be addressed in the years ahead.
The Government is examining what role it can play in supporting increased output by the wider development sector and in particular is examining how to address infrastructure deficits that are holding up the supply of commercially viable new housing in the main urban growth centres.
