NAMA revisited part II: the Docklands SDZ
The Week in Housing 16/06/23
Back in April I released the first of what will be a three-part retrospective on NAMA. Part I looked at how ‘bad banks’ interaction with property systems in the wake of financial crises. This week I take a closer look at NAMA’s involvement in urban development through the example of the Dublin Docklands.
To my mind, NAMA’s activity in the Dublin Docklands area encapsulates what was so extraordinary about the NAMA experience. Consider this; more or less from the outset of NAMA’s life, there was calls on it to provide a ‘social dividend’, a demand which was to some extent supported by the underlying legislation (I return to this in the next instalment of this series). However, both the politicians (chiefly Michael Noonan, Minster for Finance throughout much of the relevant period) and NAMA hid behind the complexities of the relationship between real estate and finance to side step these demands.
Politicians argued that NAMA’s asset management was a matter for the agency itself, and was not something that it would be appropriate for politicians to meddle in. NAMA’s perspective was, however, even more interesting. NAMA argued that it managed loans, and not real estate. NAMA’s job was simply to deal with the debt, and therefore the actual bricks and mortar real estate linked to that debt was essentially beyond its remit.
During the course of my research, for example, I attempted to interview someone from NAMA’s planning team. Now, the fact that NAMA had a planning time might lead one to suspect that they did indeed have a role in real estate and urban development. But before the interview started one of their senior asset managers came into the room and asked if they could ‘sit in’. The asset manager then proceeded to tell me that they couldn’t continue with the interview because NAMA ‘doesn’t have a role in urban development’! This was the same line I got from their PR people when I approached them in relation to conducting interviews.
Anyway, the Dockland example shows that this whole line of argument was nonsense.
At the end of 2012, the Docklands area encompassing Grand Canal Dock and the North Lotts was designated a Strategic Development Zone (SDZ). SDZs facilitate development in two principal ways. First of all, they provide for the preparation of a specific development plan, known as the Planning Scheme (PS), to provide detailed planning guidelines for the designated area, and they appoint a lead development agency tasked with driving development. Second of all, they provide for ‘fast track planning’ whereby the development agency will approve any planning application deemed consistent with the PS. Importantly, this may not be appealed. SDZs thus substantially reduce ‘planning risk’.
The framing of the Docklands SDZ by central government, and indeed by other public bodies including NAMA and the Industrial Development Authority (IDA), was very much in terms of its catalytic potential. The SDZ was designed to reboot urban development and the property market and, at the same time, to provide office space for multinational companies seeking to locate in Ireland. At the time, the issue of housing supply was not on the agenda and all the talk was about the absence of ‘prime office space’.
NAMA held 75% of undeveloped land in the SDZ area. In addition, the ‘bad bank’ controlled many existing buildings, primarily office blocks. Michael Noonan took the opportunity of a review of NAMA’s performance in mid-2014 to state that:
The Dublin Docklands area presents a unique opportunity for NAMA and the Irish taxpayer. It is rare that such large swathes of prime waterfront land in a modern city such as Dublin has remained undeveloped. It is even rarer that the ownership of such land rests in a State organisation providing the opportunity for truly joined up planning, development and construction of such a large and important area. NAMA now has the opportunity to bring this area to life and create a Dublin Docklands that will rival the likes of London’s Canary Warf, Boston’s Seaport and Singapore’s Marina Bay.
On another occasion, Noonan indicated that because of the potential for NAMA to shape development in the Docklands, his department had decided to give NAMA ‘a new mandate or enhanced mandate’ to prioritize Docklands development (these comments were made on Newstalk Radio’s Lunchtime programme, 16 July 2014). NAMA itself similarly trumpeted its potential to bring ‘coherence, direction and drive to the development process’ in the Docklands.
So much for NAMA not having a role in urban development and being a ‘private agency’ separate from the political process!
NAMA’s role in coordinating this phase of Docklands development was evident on a number of levels. Firstly, the sheer scale of its assets placed it in the unique position of seeing individual assets within the wider context and enjoying the capacity to manage the timing of developments. Secondly, in part due to its role as key landholder and in part due to the fact that it is effectively a state agency, NAMA appears to have exercised significant influence over the Planning Scheme itself, and was in regular contact with DCC senior planners. Thirdly, and finally, NAMA’s ability to provide finance, in the context of an acute absence of development finance from either banks or from public sources, was important. NAMA entered into partnerships (known as Joint Ventures) with various private equity firms and hedge funds to redevelop some of the most strategic sites, and these were often part-financed by NAMA itself.
The key point is that politicians and NAMA could hide behind the obscurity of NAMAs financial nature, but when it suited them NAMA could also be used as an ad hoc development agency, but without any political accountability or democratic input. NAMA was set up to stabilize the banking sector, but morphed into an instrument of urban policy, directed, at least to some degree, by central Government.
One way to make sense of this is to ask the question, was NAMA primarily an intervention in the financial system or in the property system? The answer of course is that it was both, because the financial system (an abstract network of legal obligations and claims on future income) and the property system (material, ‘illiquid’ buildings grounded in specific, concrete locations) are so deeply intertwined they cannot be considered separately. In other words, it’s a very illustrative example of what Manuel Aalbers calls the ‘Real Estate-Financial Complex.
Next week we will look in more detail at the ‘social dividend’ issue.
Events & News
Next week Threshold will hold their annual ‘We are generation rent’ event. Online registration is here. Not entirely housing related, but Social Justice Ireland are holding a seminar to host the 300 year anniversary of the birth of Adam Smith.
What I’m Reading
Kate Hulse is someone whose research on the PRS I always read with great interest. She has a new article out on an issue very relevant to Irish readers - the challenges of reforming the PRS. A lot of empirical research is now coming out of the US on the impact of institutional investors in PRS. This new article looks at an issue that has been the subject of controversy here in Ireland - their impact on homeownership. Also on the subject of institutional PRS, this short article sumarises some recent research on Manchester. And finally, the referendum on socializing part of Berlin’s institutional PRS sector that took place a couple of years ago garnered a lot of interest internationally. This new research assesses the likely impact of socialization.