Photograph by: Darryl Dyck , THE CANADIAN PRESS
British Columbia Premier Christy Clark pledges to crack down on "shady" realtors involved in shadow flipping in the hot property market, in Vancouver, B.C., on Friday March 18, 2016.
Premier Christy Clark has pledged to temper the greed of real estate agents involved in shadow flipping properties in Metro Vancouver, but critics say it will do little to slow the blistering market.
Clark announced Friday that any agents involved in shadow flipping will require the informed consent of those involved and, most crucially, any profits from shadow flipping must go to the original seller.
The changes would affect a loophole in property deals, called the assignment clause, in which a property is sold multiple times during one transaction with the agent profiting on each successive sale. The government is not banning the practice, but regulating it.
“The shady practice we’ve seen around shadow flipping in Vancouver, we all know, has been driven by greed — pure naked greed,” Clark said. “And the way to end that shady practice for greedy people is take the profit out of it.
“Ultimately anybody who breaks the rules on this, I hope will lose their real estate licence and not be able to practice.”
Housing experts, municipal politicians and the NDP called the crackdown a good first step, but questioned whether shadow flipping was a driving factor in soaring housing prices.
“This is going to do nothing for the market,” said Tom Davidoff, a University of B.C. professor who specializes in real estate. “As I’ve said before, you don’t see shadow flipping in Manitoba, or Newfoundland, you see it here. Why? Because you have a dynamic market with a lot of uncertainty about what homes are really worth.
“There are some people who see the two coexist — increased prices and sleaziness — and they think the sleaziness is causing the high prices, but that seems unlikely to me.”
The premier’s comments mark an abrupt change in tone for her government, which has largely resisted major intervention into B.C.’s real estate market. She had previously shot down Vancouver Mayor Gregor Robertson’s request for a speculation tax on those who quickly buy and flip properties, but on Friday reopened the door to that measure, among others.
“We are going to work with the City of Vancouver and other cities on issues with respect to vacancy, and speculation and supply,” she said. “So all of those issues are on the table. Nothing is off the table for discussion.”
The goal, she said, is not to reduce the value of homes for people who are locked into paying mortgages at those values.
Clark has refused to blame foreign investors for the skyrocketing prices in Metro, and instead pointed the finger at local government red tape, development fees and zoning as contributing factors is the failure to build enough housing to meet demand, thus causing prices to rise.
She adopted a more conciliatory tone Friday, promising that Finance Minister Mike de Jong and Housing Minister Rich Coleman will meet with Vancouver officials to “discuss ways we can work together to increase supply” and “discourage irresponsible speculation in the market.”
Robertson said it’s time the province took action to correct the market, which has “been out of control for quite some time.”
“We would like to see a higher cost for anyone flipping houses and treating the property market as a commodity,” he said.
Robertson said it “doesn’t make sense” to blame the city for the housing market, noting housing construction in Vancouver has doubled since 2008. The province should help cities deal with the issue of vacant homes and short-term speculators, and the federal government to provide affordable housing.
With housing prices up 30 to 40 per cent in a matter of months, Davidoff said the province is simply being forced to react to the panic.
“I think they are taking housing more seriously than they used to for sure — you’d be out of your mind to be a public official and not try to find some way to do something that helps and doesn’t hurt too many people.”
Davidoff and other academics proposed a plan several months ago that would add a surcharge to the property tax of owners who leave homes vacant, don’t use their homes as their primary residence or have no taxable income in B.C. The resulting money would be pooled in a Housing Affordability Fund to help build new supply.
The Opposition NDP put that plan into a private members’ bill introduced into the legislature this week.
NDP leader John Horgan maintains the province should also take more control over the real estate industry.
“What we’re trying to do is discourage people from buying a house just to make money,” he said.
“My concern is no one is watching the hen house other than the foxes. If we’re going to reduce shadow flipping, we can’t rely on self-regulation.”
Clark defended self-regulation by the real estate industry, saying self-regulation works well for doctors, nurses and other professionals.
She noted the real estate council is studying a variety of issues.
“If they come back with some tough, thoughtful recommendations, I think we can take that as an indication they are prepared to really step up their game,” she said. “I really do believe the vast majority of Realtors look a these shady operators and really hate the fact that these few bad apples make all of them look terrible. So I think we’ll give them the next few weeks to do that report.”
The government can limit shadow flipping through cabinet regulations, rather than a new law, said Clark, but it will be up to each municipality whether to invoke the new regulations.
The premier called Friday’s change a “first step” on housing affordability, with more action coming.
Her government has indicated it will announce further changes in next year’s provincial budget, just months before the 2017 provincial election.
The province plans a new way to track the citizenship of buyers this summer, and was waiting on the results of other studies collecting data on the Lower Mainland’s housing market.
But the government appears to be accelerating the pace of changes, as it faces intense pressure from angry voters and political opponents to act quickly to rebalance the market.
Clark said Friday she’s heard the outcry.
“I wanted to make sure people, particularly in the Lower Mainland and especially in Vancouver, understand their government has heard them and we intend to act on this,” she said.
“This is only the first step. There is more I know we need to do to address people’s really deep concerns on some of these other issues, which are a little bit more complicated and will take us a little bit more time, but we do intend to do everything we can to address all of them.”
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