Christy Clark vows to close loophole that's driving up housing prices.
Premier Christy Clark: 'The shady practice that we've seen around shadow flipping in Vancouver has been driven by greed.' Photo: BC Gov’t Flickr.
Premier Christy Clark lashed out Friday at a "few bad apples" in real estate who've made a killing by using a legal loophole that allows brokers to transfer properties for a profit several times before they're even sold -- tax-free and off the books.
Clark announced new measures to crack down on profits earned through contract assignment clauses, dubbed 'shadow flipping,' and to ensure that sellers give their informed consent to such clauses.
"If someone assigns the sale of their home to someone else, and the person to whom it is assigned makes an additional profit on the final sale of that home, that profit will go back to the seller," the premier vowed.
Clark made the announcement in Stanley Park against a backdrop of Coal Harbour's green-hued glass condominium towers, a neighbourhood that realtors boast is Vancouver's "premier location for luxury waterfront condos." Researchers say it has one of the highest vacancy rates in the city.
"The shady practice that we've seen around shadow flipping in Vancouver has been driven by greed -- pure, naked greed," Clark told reporters. "And the way to end that shady practice of greedy people is to take the profit out of it."
The new rules come a day after the opposition New Democrats introduced two bills into the legislature to tackle exploding real estate prices, and on the heels of a sold-out town hall the opposition party organized on the topic Wednesday.
One NDP motion suggested a Speculator Fee Act, proposing a two per cent tax on property bought by "speculators who treat housing purely as an investment and leave properties empty." Another bill, the Property Transfer Tax Fairness Act, would have subjected 'shadow flipping' and speculative investment to property transfer taxes.
Clark didn't take up either idea, but New Democrat housing critic David Eby acknowledged that her action might help curb some of the speculation that's driving property prices skyward.
"The premier's announcement will hopefully go some way to limiting some of the speculation happening in our housing market," Eby said in a phone interview. But residents hoping to see housing prices actually cool will likely be disappointed, he cautioned.
To take the heat off, Eby said, "the premier needs to rein in the international capital coming into our market that's resulting in housing prices being totally disconnected from incomes."
Eby's boss, NDP leader John Horgan, issued a dismissive tweet: "The premier woke up today, saw some bad headlines and decided to delete shadow flipping. But it does nothing for affordable housing."
'Nothing's off the table'
Clark made it clear, however, that her priority was to "keep taxes as low as we possibly can" and ensure that nothing jeopardizes existing homeowners' equity.
"We want to stay away from solutions that would address the cost of housing by trying to reduce the value of people's existing homes," she said. "Anybody who owns a house, a condo, a townhouse, or any property doesn't want to see the value of that cut in half after they've already paid for it.
"This is the single largest investment that most people will ever make, and we need to be really careful about that."
Clark added that it's unfair to tar the entire real estate sector with the same brush, and expressed confidence in an investigation into realtor practices launched by the Real Estate Council of B.C. after a Globe and Mail exposé last month.
The council unveiled an eight-member advisory panel on Tuesday, chaired by Superintendent of Real Estate Carolyn Rogers, to examine existing rules around predatory sales, shadow flipping and false advertising, and to make recommendations.
"This is fundamentally about strengthening protection for consumers," Rogers said in a statement, adding that the panel will "focus on the public interest" in scrutinizing the conduct of licensed real estate brokers in the province.
Clark told reporters she expected the industry-appointed panel to make "tough" recommendations to crack down on unscrupulous practices.
"Professional self-regulating bodies are something we rely on across the province," she said, adding, "I really do believe that the vast majority of realtors really hate the fact that these few bad apples make all of them look terrible."
But the premier acknowledged that unlicensed realtors and wholesalers -- brokers who approach individual homeowners with sale offers -- are outside the panel's mandate.
Asked by The Tyee about those other players who may escape investigation, Clark replied: "I don't have an answer to that today. I'm sure it will be one of the things that we discuss over the coming weeks with cities and with the Mayor of Vancouver. Nothing's off the table."