The National Asset Management Agency is to provide the upfront funding for social housing under proposals being considered by the Government as one of the measures designed to tackle the social housing crisis.

Nama chairman Frank Daly told a meeting of the parliamentary Labour Party at its think-in in Wexford that the agency will pay the upfront costs of social housing on developments it funds.

Part V of the Planning and Development Acts 2000-2007 is a mechanism whereby a certain percentage of land zoned for housing development can be set aside for social and affordable housing.

Local authorities pay developers the cost of building the house while also allowing for a small profit, as well as the cost of the site, although this is calculated at “existing use value” rather than “development value”.

Under Nama’s proposals for its own developments, it will pay the upfront costs of the social housing and then it will use a special purpose vehicle it established in 2012 to acquire the houses before leasing them directly to the local housing agencies. Mr Daly told Labour TDs and senators it effectively means there will not be an upfront cost, providing a saving to the State, and sources said the long-term leasing arrangements spread out the costs over a longer period.

It is understood the proposal emerged during discussions between Nama and officials from the Department of the Environment in recent weeks. A spokesperson for Minister for the Environment Alan Kelly said: "It is among a number of options being considered as part of the Government's social housing strategy."

In its Construction 2020 plan, the Coalition did not specify the proportion of land to be set aside under Part V, and Minister for Public Expenditure and Reform Brendan Howlin yesterday said a final decision has yet to be made.

Mr Daly said Nama will deliver the required level of social housing irrespective of what level the Coalition decides, and said it will allow for integration, as the Part V scheme had originally intended.

Nama last week said it has identified potential for up to 25,000 new housing units in sites linked to its debtors, and said funding was already in place to deliver 4,500 new houses and apartments in Dublin over the next 18 months.

“ Nama will put up the cost and lease the house to the local authorities or the housing agencies,” Mr Daly said. “So it will relieve them of the pressure of coming up with the capital. I know there is discussion in Government about Part V at the moment, and whatever it ends up at.

He added: “One of the issues around all of this is local authorities or housing bodies might be strapped for cash so they can’t put upfront the capital cost of buying these houses and I was making the point that Nama will do that.”