James Cohen is the director of policy and programs at Transparency International Canada, an anti-corruption organization headquartered at York University. Peter Dent is a former chair.
When we say that Statistics Canada got it wrong on how much real estate is owned by foreign buyers, we are not pretending that we could come up with a more accurate number.
Anyone who estimates the amount of foreign ownership of real estate in Canada will be wrong. Everyone will be wrong because in Canada, a foreign investor can pour money into Canadian real estate through a Canadian company they set up either federally, provincially or territorially, using a Canadian as a nominee director/shareholder/beneficiary, without disclosing the true beneficial owner.
How much real estate is owned through privately held corporations registered in Canada? How many of these privately held corporations are owned or controlled by foreigners? Our fractured system does not allow the tracking of foreign ownership of privately held companies so how can Statscan create a measurement of foreign ownership? It can't.
In Transparency International Canada's 2016 report, "No Reason to Hide: Unmasking the Anonymous Owners of Canadian Companies and Trust," our data revealed that among 2015's 100 most valuable real estate transactions in Vancouver, nearly 50 per cent of the beneficial owners are unknown. Twenty-five per cent over all are owned by Canadian shell companies, 11 per cent are owned through nominees, and 6 per cent are owned through trusts.
Only 4 per cent of unknown property ownership was through offshore shell companies, which would count toward the government's definition of non-resident ownership.
Canada is one of the few G20 countries where real estate agents and developers are not required to identify the beneficial owners of clients buying and selling property. In addition, the real estate sector has been criticized by the Financial Transactions and Reports Analysis Centre of Canada (FinTRAC) for major deficiencies in money laundering controls.
We are not surprised that "real estate leaders" point to this study as proof of their claims that foreign ownership is not all that important. But they too are wrong, since foreign ownership of real estate in Canada cannot be measured. The Statscan study needs more robust scrutiny before it is relied upon as a basis for making policy decisions, and tougher rules around the disclosure of beneficial ownership in real estate transactions are required.
Canada continues to lag further behind international standards as the federal, provincial and territorial governments are not keeping pace with new standards being set across the Atlantic.
Last week the Canadian finance ministers announced that federal, provincial, and territorial governments will require companies to keep information on beneficial owners that can be made available to authorities. In the same week, all 28 EU members agreed to make such information publicly available on registries and to make beneficial owners of trusts available to authorities.
In the United Kingdom, where beneficial ownership of companies is already on a public registry, the government will propose legislation next year for a public register of foreign owners of property as part of the new National Anti-Corruption Strategy.
If foreigners want to buy property in Canada, then we all have a right to know who they are and the source of their funds and wealth. The Canadian government and public need a full picture on property ownership before we become an increasingly attractive target for "snow washing" illicit funds. But how big is the problem ... who knows?