Home > Uncategorized > Fine Gael-Labour Government Worsened Housing Crisis through terms of sale of State Assets to Vulture Funds

Fine Gael-Labour Government Worsened Housing Crisis through terms of sale of State Assets to Vulture Funds

Read two Articles from The Business Section of Sunday Business Post, Aug 13, 2017 below

Both Articles speak of huge “mistakes” by government. The Government actions were indeed the wrong thing to do. But it is clear that they were deliberate

When FG-Lab authorised the sale of very many building sites to Vultures, they made no stipulation that houses should be built urgently or indeed at any time. -Paddy Healy

Ian Kehoe, Researcher for RTE Programme “The Great Irish Sell-Off”   SBP   Aug 13

“They(Vultures) are not developers. They are masters of speculative capital. They buy cheap, sweat the assets and move on to the next  distressed market. At the moment, the demand for houses is pushing up the value of their asset. So they are profiting from standing idly by.

NAMA Chief Executive, Brendan McDonagh, admitted as much in recent months when he linked the low level of residential development on sites sold by his agency to land hoarding.

McDonagh was asked at the Oireachtas Finance Committee if NAMA should have imposed stipulations on the buyers of portfolios requiring them to develop sites within a specific period.

He argued that this would have led to a discount on the price being achieved .”

It’s Time To Admit We Made Huge Mistakes With Vulture Funds

In the dying months of his tenure as finance minister, Michael Noonan was repeatedly questioned about the arrival of vulture funds in Ireland.

There was context to the questioning -90,000 mortgages and tens of billions of Euro in distressed property debts and business loans had been acquired by a handful of hedge funds and private equity giants at knock-down prices and most of the funds were unregulated and largely untaxed.

Noonan’s Policies, implemented by NAMA and IBRC , lit a fire that was without international comparison

Noonans replies to questioning missed the point.

The wholesale acquisition of debt by vulture funds will have generational consequences here, and it is only right to have a public debate about it.

I have long believed that the sell-off was too quick, too large and that Ireland was unprepared.

First, we saw the fact that many of the buyers of mortgages were unregulated and outside the scope of the Central Bank. Many have signed up to a code of conduct, while intermediaries are now regulated. The owners of the mortgages (vultures), however, remain unregulated

Second we saw it in the case of Tyrellstown, whereby a deal between a developer of an estate and Goldman Sachs resulted in eviction letters sent to 40 tenants. This exposed Irelands lack of rent security.

We have also seen it in terms of tax. As our RTE Programme “The Great Irish Sell-Off” revealed, 25 subsidiaries of vulture funds paid less than 18,000 euro in tax on assets of 20 billion Euro, with an estimated loss to the exchequer of 700 million euro.

There is another point here and it needs to be examined. Ireland’s Housing Calamity

Is affecting mobility, demography and the economy. We simply do not have enough houses. And, somehow, most of the prime development land is held by funds who do not build. These funds are not builders.

They are not developers. They are masters of speculative capital. They buy cheap, sweat the assets and move on to the next  distressed market. At the moment, the demand for houses is pushing up the value of their asset. So they are profiting from standing idly by.

NAMA Chief Executive, Brendan McDonagh, admitted as much in recent months when he linked the low level of residential development on sites sold by his agency to land hoarding.

McDonagh was asked at the Oireachtas Finance Committee if NAMA should have imposed stipulations on the buyers of portfolios requiring them to develop sites within a specific period.

He argued that this would have led to a discount on the price being achieved.

He is right about that.  But if NAMA had done it, Ireland might have a pipeline of houses that could help the homeless. Decisions have consequences. Decisions must be debated

—————————————————————

Massive Increase in Repossessions by Vulture Funds

Huge Mistakes With Vulture Funds-SBP Aug 13

Jack-Horgan Jones

How many times have the “vultures”resorted to the courts, looking to secure a judgement over a debtor?  There has been a very real explosion in this figure.  According to figures compiled by SBP, the share of the summary judgement application market accounted for by vulture fund activities has almost trebled. Last year they accounted for 10% of the total. This year that has rocketed to 27.4%.

The most aggressive funds, it seems, are those who have bought the largest debt. Most active are Goldman Sachs and CarVal, who between them have purchased billions of non-performing Irish debt. Goldman subsidiaries accounted for 105 actions since January 2016. CarVal far eclipses that at 183. Cabot accounts for125 actions in 2016 alone.

What is Driving this?

Colm Lyons is a British Barrister, Specialising in Transfer of Debt. He is not surprised by the increase in cases. He says: “what you are seeing is a pretty significant increase in the number of summary judgements being made. That is entirely to be expected because the word is that the vulture funds in Ireland are trying to get out and without losses. When a judgement is secured the funds can assign that judgement and the debt to someone else for a fee. It tidies up messy battles, and ease their passage out of Ireland.”

What jumps out a Lyons is the scale of the issue in Ireland. And how that might have knock-on affects for debtors.

He continues: “I’ve never seen a situation where an economy has been dictated by vulture funds. You had a government that didn’t that did not know what it was doing, went into a bank bail-out and bankrupted the country, and then it had to recover the situation. The only way that was ever going to happen was  a tripartite deal with banks and vulture funds

The root of this is a Faustian Pact (Deal with the Devil) made by the Enda Kenny government with funds. Faced with the consequences of the Cowen Governments stewardship, they jumped at the chance to offload debt to the funds via NAMA.”

The fallout, as funds crunch their way through the toxic debt they have bought, is being managed through the apparatus of the state-namely the courts and the receivership system.

Lyons continued: “If that’s going to happen, then the courts  become an arm of economic policy rather than independently determining the facts of any given case.

There did not seem to be an understanding of the legal, economic, social and political cnsequences of doing that.”

From a macro perspective, this is what is driving the rise in cases and a similar trend in receiverships.

Paul O’Grady, an Irish Barrister who represents debtors, shares the view that the funds are in a rush to the door. He says: “the vulture funds  have more than achieved their targeted returns in respect of the loan portfolios they bought. They have therefore put a deadline on the completion of their activities in Ireland, and are seeking to recover as much money as possible in as short a remaining time as possible”

 

 

 

(further from Paddy Healys Blog:  LABOUR-FINE GAEL FED THE VULTURES AT THE EXPENSE OF THE HOMELESS)

Purchasers of Irish Residential Property (including Vultures) will pay NO CAPITAL GAINS TAX if they retain the property for 5 years -Finance Bill Debate in Dail Nov 23 2016

(This applies EVEN IF IT IS EMPTY FOR THE 5 YEARS)

http://www.independent.ie/business/commercial-property/finance-bill-fuels-debate-on-commercial-real-estate-35257323.html

Page 92  Dail Report  November 23, 2016

http://oireachtasdebates.oireachtas.ie/debates%20authoring/debateswebpack.nsf/takes/dail2016112300092?opendocument

 

Deputy Paul Murphy:   I move amendment No. 89:

In page 67, between lines 23 and 24, to insert the following:

“25. The Minister for Finance is to report to the Dáil within six months of the enactment of this Act on the projected cost of property-related exemptions from Capital Gains Tax, including the Capital Gains Tax exemption for properties bought between 7 December 2011 and the end of 2014 and held for seven years and the new exemption introduced for IREFs holding property for 5 years introduced under this Act.”.

I will be very brief. This kind of issue has been debated a lot tonight. The amendment is asking for a report to the Dáil on the projected cost of property related exemptions from CGT, including the CGT exemption for properties bought between 7 December 2011 and the end of 2014 and held for seven years and the new exemption introduced in this Bill for IREFs holding property for five years. We believe there is a substantial amount of tax being legally avoided in this manner and will continue to be under the new proposals. That tax is overwhelmingly avoided by much better-off sections of our population. We want to see what the figures are and how much money is involved.

Deputy Michael Noonan:   A capital gains tax relief on disposals of land or buildings acquired in the period commencing on 7 December 2011 and ending on 31 December 2013 was announced in budget 2013 and in section 64 of the Finance Act 2012. Section 44 of the Finance (No. 2) Act 2013 extended the period within which the land or buildings may be acquired for the purposes of this relief to 31 December 2014. If the property is held for the full seven years, the land or buildings will qualify for the full relief. Partial relief is available if the property is held for longer than seven years.`

I am advised by Revenue that it is not possible to estimate with any degree of accuracy the impact of the capital gains tax relief granted in respect of land and buildings, including commercial property, introduced in budget 2012 and extended in budget 2014. I am further advised by Revenue that, in view of the fact that the nature of the relief is time related and requires a minimum ownership period of seven years, which ownership period could not commence earlier than 7 December 2011, it will not be in a position to offer initial soundly based costings until the returns for the tax year of 2018 have been processed. More detailed costings would follow on from the processing of tax returns from 2019 onwards. There is therefore no basis at present on which to prepare a report on the cost of this relief.

With regard to Irish real estate funds, IREFs, the proposal ensures that any rental income or development profits earned by the IREF will be included in the calculation of the IREF’s profits. Capital gains will also be included in the calculation of profits unless the asset is held for five years or more. The exemption from capital gains has been legislated for to encourage sustainable investment focused on the long-term holding and management of income-producing rental property. This will, in the longer term, lead to a more sustainable and secure property market for both investors and property tenants while generating regular and reliable tax revenues for the Exchequer from the taxation of the rental profits. Although any gain may be exempt where the property is held for more than five years, tax will still be payable on the rental income that is being generated. It should be noted that this exemption reflects the current position regarding capital gains tax, CGT, and funds and does not reduce the current tax burden on funds. Therefore, it does not give rise to an additional cost.

To ensure, however, that the IREFs cannot be used for tax planning, as I have noted, I am proposing a Report Stage amendment which removes from section 22 the ability of an investor who has influence or control over the IREF to receive a distribution of capital gains without the operation of the new 20% withholding tax. This proposed IREF is not a tax incentive for people investing in commercial property. All rental income and development profits earned by the IREF will be included in the calculation of the IREF’s profits. Where an IREF makes a distribution of these profits, non-resident investors will be subject to a withholding tax of 20%. The proposal has been drafted in a balanced way to ensure the Irish tax base is protected where Irish property transactions are taking place within collective investment vehicles while not damaging the commercial property market in the long term. The IREF provisions apply to accounting periods beginning on or after 1 January 2017. Therefore, as the Revenue Commissioners will not receive accounts for these funds until mid-2018, it would not be practicable to prepare the report in the timeframe requested. I cannot accept the proposed amendment. Of course, when the data are available, it will obviously be reported on and the kind of information the Deputy has requested will be provided in due course.

Categories: Uncategorized
  1. dodlaw
    August 26, 2017 at 8:56 pm

    Hello, Paddy

    Your post is first class, to say the least. Will save all of them safely. Bless you Paddy.

    Thank you so much for emails. Peter Mc Verry and myself, and a few other friends were in same class in school.

    We keep in touch always and quietly.

    Sincerely,

    Peter Lawlor

    ________________________________

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