The provincial government of British Columbia has now responded to public outrage about “shadow flipping” – realtors assigning agreements for sale of property in escalating flips, generating a chain of secret profits and multiple commissions from the single sale. From now on, shadow flipping is prohibited unless the seller has consented to it, and the profits must go back to the homeowner.
We commented about this issue back in February and demanded essentially the reforms that have now been put in place: disclosure of shadow flipping and restoring any gains to the original parties. Hmmm…. does Christy Clark read our blog?
In any event, the government moved unusually quickly, with the rules coming into effect next week. No doubt they are taking heat for their inaction in the face of the crisis in housing affordability.
But this is only one small move toward solving the problem. Not only are rich non-resident investors turning our housing stock into a huge casino and driving prices out of reach, but evidence of large-scale cash purchases at inflated prices should make us wonder how much money laundering could be driving the out-of-control market.
We need solutions that restore our housing stock to its real purpose – providing homes for residents, and not repositories for foreign cash. To achieve that we have to take the profit out of speculative flipping. I suggest a very heavy capital gains tax targeting investors who play in our housing market purely for gain and not to provide homes, to force them to look to other markets.
While City Hall has limited levers to address the problem, Vancouver City Council has adopted a number of initiatives to expand the scale of affordable housing – bearing in mind that the concept of “affordability” has its own meaning in a market where land prices are in the stratosphere. Measures like the City’s Affordable Home Ownership Pilot program, encouraging the development of rental housing, and making land banked in its Property Endowment Fund available for non-market housing, provide some relief. But fixing the problem will require resolute action from the federal and provincial governments with their powers to impose taxes, rules and regulations onto a market that is running wild.
The provincial government has stubbornly resisted any major reforms aimed at keeping Vancouver and other communities affordable. Time to take the big money out of political party financing. We don’t need a government that owes big favours to the very people who are destroying the liveability of our cities.