By the start of 2018, the price of housing in Metro Vancouver had shot up more than 50 per cent in just three years. There were concerns about prices being driven by non-resident buyers, and investors who neither lived in their homes nor rented them out, which led to a provincial tax on foreign buyers and an empty-home levy in Vancouver.
But some buyers remained opaque, especially at the high end where the typical home on the west side of Vancouver was selling for $3.5-million. A 2016 report from Transparency International found that nearly half of the region’s 100 most expensive homes were held by legal structures, often shell companies, that hid the names of their actual owners.
In its 2018 budget, the New Democratic government promised to shine a light on hidden ownership. “The concealment of beneficial ownership can be part of international webs used to facilitate tax evasion, money laundering, corruption and other criminal activities,” the budget said.
The NDP began work on a public registry of the true ownership of real estate. It was, in concept, what organizations like Transparency International advocated, and the direction G20 nations broadly committed to in 2014 – a way of battling against domestic and cross-border money laundering. Real estate owners would be known by human names, not numbered companies.
Legislation was passed in spring 2019. The NDP billed it as “world leading.” At the same time, two reports on money laundering in B.C., commissioned by the province, landed. They underscored the need for the registry. The studies found that more than $7-billion of dirty money had washed through B.C. in 2018; it was estimated that this was responsible for a 5-per-cent increase in the cost of housing.
But 2 ½ years later, B.C.’s Land Owner Transparency Registry is still not fully up and running.
Beginning in late 2020, transparency reports were required for new real estate deals, and the registry became searchable last April – though contrary to expert advice, it costs $5 per search. The biggest step was supposed to be transparency reporting from all the existing property in the province owned by entities such as shell companies. It would reveal real names, country of residence, and other information. That was scheduled to go into effect on Nov. 30, but earlier this month, the provincial government blinked. It’s been nearly four years since the NDP announced its plan, yet an additional one-year filing extension was put in place.
Here’s how things should work: Anyone should be able to type in an address and all relevant information, from ownership to previous sales, should be available. That is, of course, not what exists, in B.C. or pretty much anywhere. Real estate is a market where, in Canada at least, the most basic data is either hard to get or not available. That opacity is a big negative for the efficient functioning of such a big part of our economy, and the ability of scholars and lawmakers to understand it.
A Transparency International report last December showed that little has changed in recent years, in Canada, as well Australia, the United Kingdom and the United States. Limited data, especially on beneficial ownership, “means that we still know very little about who owns properties, and whether they have been purchased with dirty money.”
In B.C., experts decry the absence of identity verification in the registry and argue punishments need to be stiffer than monetary penalties, more akin to the securities market, where misleading statements can lead to jail time. Then there is question of data accessibility. If it’s not easy – and free – to search, it’s not as public as it should be.
And though B.C.’s progress has been slow and incomplete, it’s actually a Canadian trailblazer. There have been calls for a public land registry in Ontario, from the province’s real estate association two years ago and, this week, from the opposition NDP. Transparency International estimates that corporate entities bought $28-billion of residential real estate in the Greater Toronto Area between 2008 and 2018, with $10-billion of deals done in cash.
The long boom in Canadian home prices has been propelled by many factors, from a lack of supply to ultralow interest rates. What’s been the impact of suspicious funds of questionable provenance? Canada should know, but Canada has chosen not to. In real estate, it’s still far too easy for dirty money to operate without fear of being noticed – or caught.
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