Current proposals largely ignore the elephant in the room
Policy proposals aimed at improving low-cost housing supply or adjusting zoning regulations won’t help solve the affordability crisis in Canada’s largest markets, according to the Financial Post’s editor-at-large.
In a recent thought piece, Diane Francis argued that while the intentions of these policies’ proponents are admirable, their suggestions do not address the main cause: the federal government’s failure to patch up the weak laws that have paved the way for a vastly increased volume of dirty money laundered through Canadian real estate.
Francis noted that these legal loopholes are the major reason for the entry of up to $15 billion of laundered funds per year, according to Statistics Canada and RCMP estimates.
“What governments must do … is crack down on money laundering enablers in Canada — lawyers, real estate agents, notaries and developers,” Francis wrote.
The Liberal administration should also be prepared to take more serious action, as appropriate.
“Where real estate prices have soared above affordable levels for locals, bans on foreign ownership should be imposed as has been done in New Zealand, China, Hong Kong, Switzerland, Greece, Hungary, Denmark, Poland and Malta, among others,” she said.
Another potent policy instrument that can help clamp down on laundering and regulate home prices is the creation of “a public registry of beneficial owners, and penalties for non-disclosure.”
“The foreign-buyer tax can be evaded easily because there are no transparency and disclosure requirements. Anti-corruption organization Transparency International offered a glimpse into the scale of foreign speculation abuse in 2015 with an analysis of Vancouver’s 100 most valuable property deals. It found nearly 50% of ownerships were hidden through shell companies, nominees and trusts. The same likely applies to Toronto and Montreal, where money is parked in condos that are often left vacant.”
Francis added that lawyers and real estate professionals should be mandated to adhere to the same reporting requirements that banks follow, especially in terms of raising the alarm on suspicious transactions and the entities involved.