Local authorities have incurred debts of about €650 million on loans for land bought for social and affordable housing which was never built.
The Department of the Environment has agreed to pay off the loans of local authorities who want to off-load land banks they are unlikely to develop in order to stop the escalating interest payments.
Under a new land aggregation scheme the loans will be repaid by the department and the land transferred to the recently established Housing and Sustainable Communities Agency.
The agency will then determine the future use of the land. The agency will also consult the National Asset Management Agency (Nama) to determine the best use of all land banks controlled or owned by the State. In some cases Nama may advise that lands originally bought by private developers could be combined with adjacent lands bought by councils for better returns.
Information on loans for almost 2,000 hectares of local authority land at more than 600 locations have been submitted by city and county councils to the department since details of the scheme were issued last April.
All local authorities are likely to apply for the scheme in relation to some portion of their unused lands. However, not all of the land on which the €650 million is owed will be suitable for the scheme and only loans that have fallen due for payment, which in relation to local authority housing loans is generally seven years after the loan was drawn down, will be considered.
From an initial examination of the land details submitted for the 639 sites, the department expects to transfer €100 million to local authorities. However, a spokesman said this figure could rise once more loans fell due for payment. Some €25 million has been set aside for the scheme this year, but this might be increased the spokesman said.
Wicklow Town Council is the first local authority to benefit from the scheme. A spokesman for the council said a loan and interest amounting to almost €1.4 million on a 2.9 hectare site in the town was to be paid by the department.
The site at Hillview, Ballynerrin was bought in 2000 but never developed. The spokesman said he did not know how much was originally paid for the land, but he said interest had been building up for quite some time and the council was “quite pleased” to have qualified for the scheme.
The spokesman for the department stressed that there was no loss to the exchequer in taking on the loans of the local authorities’ books as the loans would have to be repaid in any case. By paying the loans now the department was stopping the debt growing.
Dublin City Council, the State’s largest housing authority, is seeking to transfer about €30 million in loans to the scheme.
