The Financialization of Housing: The role of transparency

Without knowing who actually owns our housing, how can we understand what is really going on? And how can we hold owners and landlords accountable to tenants? Find out why it is so hard to trace ownership, and how this impacts our housing crisis.

Like all communities across Canada, Edmonton has a housing problem. And despite many best efforts, this crisis only continues to worsen.

How can we best understand and fix this issue of (in)access to adequate housing?

The key to understanding and effectively addressing our housing crisis is to take a human rights approach (UNHRC 2019).

One way we can apply a rights based approach is by identifying major trends and emerging challenges that negatively impact housing rights (UNHRC 2019, p 20).

One major trend that has been identified as a driver of our prolonged housing crisis, and emerging challenges such as the rise of unacceptable housing, is the financialization of housing.

The Importance of Transparency

Despite the monumental impact the financialization of housing continues to have on our housing system and prolonged housing crisis, we still lack good data on the scale and volume of financialized ownership.

While some entities are publicly traded and share investor information openly, it can be difficult to trace ownership due to name changes, acquisitions through subsidiary companies as well as the use of numbered companies on titles. This is not by chance.

A legal tool often used is beneficial ownership. Any person or company can own property anonymously under a different name. The title can be written for a (numbered) company, (blind) trust, or even another person – a ‘straw man.’

At best, this obscures who the real owners of residential properties are – those who have the most to gain from the financialization of rental housing. At worst, this lack of transparency and accountability can result in tax evasion or money laundering, where a buyer may provide an all cash offer above asking price.

This issue has become so bad that Canada has become known as an international haven for tax avoidance and money laundering – described as ‘snow washing.’

In 2016, Transparency Canada shared the results of analyzing land titles of the top 100 most expensive homes in Vancouver to see if they could identify the owners. Almost half were held through beneficial ownership – 1/3 through shell companies.

In 2019 The Expert Panel on Money Laundering in BC Real Estate estimated that during the previous year, 72% of dirty money was laundered through real estate in British Columbia. Which resulted in a 5% increase in the cost of housing that same year.

The Expert Panel also found that across Canada, Alberta by far had the highest concentration of money laundering – an estimated $10.2 Billion in 2015 (p. 126) – 25% of the national estimate of $41.3 Billion (p. 47).

Click on the chart above to enlarge.
Data: The Expert Panel on Money Laundering in BC Real Estate. Combatting Money Laundering in Real Estate. 2019, p.126.

In Edmonton, the use of beneficial ownership through straw buyers, facilitated an unprecedented case of mortgage fraud (estimated around $30 million) that unfolded in the courts between 2005 – 2010. The fraud involved 125 properties, was the largest case of fraud in Alberta to date, and was also the first time a Canadian was convicted of economic fraud on behalf of a criminal organization.

Without being in the middle of a housing crisis it is unlikely this mortgage fraud could have unfolded in the way and to extent that it did. A continually growing number of households are unable to access adequate housing in Edmonton. Between the impacts of varying forms of financialization, structural barriers, and decades of chronic underfunding and investment by the province and federal governments, marginalized members of our community are left vulnerable to exploitation and are forced to self resolve. Either through encampments or by securing the only housing that may be available with the only landlord willing – again, without having access to adequate housing choices.

This ongoing housing crisis is also why neighborhoods and stably housed residents still continue to feel the impacts of this case, more than a decade later – by experiencing our housing crisis second-handedly. And without a clear understanding of the factors listed above, including the spillover effects of one’s housing needs still being unmet while living under a slumlord or in an encampment, this issue is often mistakenly individualized.

Today it still seems like effective deterrents are almost non-existent:

  • Real estate agents, brokers or developers are not obliged to do checks on beneficial ownership or on a buyer’s source of funds.
  • Transactions can be arranged by lawyers who are exempt from Anti-Money Laundering laws.
  • Even where reporting bodies do have rights and responsibilities, self-regulatory bodies seem largely ineffective with poor rates of compliance
    • Something regulatory agencies seem unbothered by.
  • Very few cases of money laundering cases go to trial, many of which collapse.
  • Federal agencies – FINTRAC and the RCMP – are incapable of effectively investigating money laundering.

However, there is one positive development of note. This past March, the federal government finally announced proposed legislation aimed at creating a beneficial ownership registry. Collaboration across jurisdictions will be a key in the success of any efforts.

In advance of this long awaited development, the province of British Columbia had already passed legislation (2020) and created their own land registry. Québec has plans to share a public registry. Most have done some work towards establishing a beneficial ownership registry, with the exception of the Territories and Alberta – Alberta also being the only government to publicly question the results (and likely the unsettling implications) of the Expert Panel.

Learn more about the financialization of housing and what this means for Edmonton:

The National Housing Advocate also has excellent resources.

1 thought on “The Financialization of Housing: The role of transparency

  1. Pingback: The Financialization of Housing: The Alberta Advantage - The Pivot

Leave a Reply