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Reports released by the B.C. government last week reveal that of the $7 billion money laundered in BC in 2018, $5.3B (or 72%) was in real estate.  Both revealed how criminals are using real estate to clean their money. As a result, the BC Government has called for a public enquiry into the problem.

The premier says, “The depth and the magnitude of money laundering in British Columbia was far worse than we imagined.”  Finance Minister Carole James says, "Housing should provide shelter, not a vehicle for proceeds of crime."  She continues, “Homes in BC are for people, not speculative investment or money laundering.”

However, is a public enquiry needed?  We have extensive material from two recently released reports.  Is there anything more we can learn?  Let’s do a quick review of what we do know.

The two recently released reports that have sparked the public enquiry are the  Combating Money Laundering in B.C. Real Estate report which puts forward 29 recommendations; and the aptly named, Dirty Money Part 2 which outlines some of the red flags that signal when illegal money is behind a real-estate purchase — including unfinanced purchases, private lending, unusual interest rates and purchases by homemakers and students.  Both documents identify numerous gaps in provincial and federal regulatory systems for keeping track of purchases and reporting suspicious transactions. 

There are many actions to be taken.  The BC Government has already taken some action that includes introducing proposed legislation called the "Land Owner Transparency Act.”  This Act would establish a public registry of beneficial owners of property in BC.  Corporations, trusts and partnerships that buy land would be required to disclose their beneficial owners in the registry hopefully ending the use of these vehicles to shield real estate purchases. Transparency International Canada highlighted Vancouver real estate in a 2016 report, concluding nearly one-third of the 100 most valuable residential properties in Greater Vancouver were owned by shell companies.

There is also the 30 Point Housing Plan – BC Document.   The main features of the plan are a speculation tax, a ramped-up foreign buyers’ tax, and a new property transfer tax:

  • The speculation tax is aimed at both the current 25,000 and future residences owned by local profiteers, out-of-province investors and “satellite families” who buy up housing stock and leave the homes empty, or vest nominal ownership in a “homemaker” or “student” who pays little if any taxes.  If it is found that the declared taxable household incomes are lower than the amount they pay in property taxes, utilities and mortgage payments; and equivalent incomes to those reported in the Downtown Eastside. CRA estimates that about $170 million in taxes went uncollected from BC real estate over the past three years. The speculation tax aims to fix this disconnect between declared income and housing wealth.

  • The existing (and largely ineffectual) 15 per cent Metro Vancouver foreign buyers’ tax will increase to 20 per cent; and

  • The new 5 per cent property transfer tax will target sales of homes worth $3 million and up.

These are the efforts underway to undo a decade of political indifference that turned Vancouver into an epicentre of fraud, scams and real estate mania.  Will this be enough?  The current picture of the Vancouver housing market is not pretty.  Here is more data.

A Globe investigation;"> published in February, 2018, uncovered how 17 underground lenders provided $47 million in drug-money mortgages and liens on 45 Metro Vancouver mansions. An RCMP intelligence report estimated that up to $1-billion from the proceeds of crime was used to purchase expensive Metro Vancouver homes.

Vancouver has become known as a free trade zone for gangland money launderers, absentee offshore real-estate speculators, Chinese princelings on the lam and globe-trotting tax frauds. Over the past decade, homelessness has doubled, at least 4,000 people are sleeping rough in the streets, and there are now 70 homeless camps across the region.

In January 2018, Vancouver showed up as the third most unaffordable city on Demographia’s list of 92 cities around the world. When it comes to cities undergoing a deterioration in housing affordability, Vancouver ends up the worst. 

At least we have a starting point and a current BC Government that has expressed their commitment to address the issues.  The Public Enquiry will release an interim report within 18 months and a final report by May 2021. The BC election is scheduled for October 2021.

We at CCEC plan to keep our members informed on developments in this area.

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Raise the Rates says that the BC Government $2million grant for “food rescue” operations will not solve the problem of food insecurity in BC as the root cause is income poverty.  

They say, “Distributing surplus food has won out over raising welfare rates to enable the hungry and homeless to afford to feed themselves and their families. The year’s humiliating $50 monthly benefit increase keeps them with incomes 50 per cent below the poverty line.” Cash is needed to shop for food in normal and customary ways: a living wage, adequate income benefits, real rent control.

Click here to read the article as it appeared in the Tyee.

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Congratulations to First Call, the BCFed, WestCoast LEAF, the Employment Standards Coalition, and many more for your continued and tenacious advocacy on employment standards. 

On April 29th, 2019 BC’s Minister of Labour introduced Bill 8 in the legislature that will amend the Employment Standards Act to provide better protections for children and adolescents who are working.

This Bill modernizes BC’s employment laws and brings us into compliance with international standards, specifically the International Labour Organization’s Convention 138 on the minimum age of employment – an agreement the Government of Canada ratified in 2016.

 Once enacted, Bill 8 will:

  •  raise the age for formal employment, (this is the age that does not require government oversight), from 12 to 16;
  •  prohibit hazardous work for those under 16;
  • compel government to develop a list of acceptable tasks and conditions (e.g. hours of employment, time of day) for the employment of children aged 14 and 15; 
  •  allow the Director of the Employment Standards Branch to consider applications for permits to hire those under the age of 14; 
  •  compel government to define “hazardous industries and work” prohibitions and regulations for 16 to 18 year olds.

 While these legislative changes set a direction that will greatly improve protections for working children and adolescents, the Ministry must now engage with British Columbians (including youth with recent employment experience), as well as review workplace injury data to determine what jobs, tasks and hours are appropriate.

The BCFed says, the Employment Standards Act will also now provide a more just level of protection for BC workers, including scrapping the self-help kit and extending wage recovery times.  And WestCoast LEAF highlights that the government has introduced leave time for domestic violence but it must be paid to ensure those in need can access it.

While First Call welcome changes that prioritize the health and safety of BC’s children and youth, they say that the Ministry must now engage with British Columbians (including youth with recent employment experience), as well as review workplace injury data to determine what jobs, tasks and hours are appropriate.

First Call has been calling for change for over 15 years! For years, WorkSafeBC data has shown that too many children – 12 to 14-yr-olds are getting injured working in construction, manufacturing, trade and service jobs.

CCEC has signed on as an official supporter of First Call: BC Child and Youth Advocacy Coalition.  

Click here to learn more about the campaigns of First Call and how you can get involved.

 

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The recently announced "First-Time Home Buyer Incentive" is a new way for government to stimulate demand for new housing and for mortgages, while representing the program as 'helping' young Canadians into the market.  Inducing young people into long-term debt obligations is not necessarily in their best interests. 

Under this program, the Canada Mortgage and Housing Corporation ('CMHC', a crown corporation) agrees to be a 'co-owner' of the qualifying property.  In addition, the borrower will have a CMHC insured high ratio mortgage, for which they pay a good fee.  In effect the buyer has to put up less savings to make the deal work.   

In economic terms, this kind of program brings new buyers into a market which puts upward pressure on prices.  This is one of the points made in a recent piece by Rita Trichur in the Globe.  Paradoxically, up price pressures are not benefiting new buyers who have limited debt servicing capacity. 

Additionally, the criteria for qualification may make the program irrelevant in the over-heated markets of Greater Vancouver and Toronto. The program criteria say household income may not exceed $120k, and the property value cannot exceed four-times that income (or $480k).  

Administratively, the program adds complications by introducing a new set of qualifications. In doing so it makes the process more cumbersome for a new buyer.  The program essentially reverses the constraints implemented in recent years on the mortgage insurance program which had required more direct investment by new home buyers, up to at least 10%.  Perhaps backtracking on the mortgage insurance front was viewed as politically unwise, so they've cloaked it. 

CMHC is still working out how this program will work.  However, it appears to be a pre-election gimmick more than a realistic housing program. It is unlikely to have significant beneficial impact in the cities with serious affordability problems. 

 

 

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