Ontario MPPs have left Queen’s Park for their annual summer hiatus, but the problem of money laundering and how it affects housing affordability lingers.
According to a report by Transparency International Canada released in March, money laundering through real estate is considerably high in the GTA.
While there is not a consensus method for tracking money laundering, TI Canada uses home purchases where the true owner of the property is not revealed as an indicator. Such purchases are called opaque.
The easiest way to do an opaque purchase is through a corporation, where the true owner does not need to be revealed. According to TI Canada, corporate entities have bought more than $28 billion in home purchases in the GTA since 2008, accounting for nearly four per cent of total transactions for that timeframe.
This coincides with the increasing lack of affordability in GTA housing.
According to the Royal Bank of Canada’s annual report on housing affordability, the average Toronto household costs over $850, 000, where the Canadian average is $562,000, with Toronto buyers taking nearly three-quarters of their household income to cover home ownership costs. It is a finding the report states makes home ownership in near Toronto “a huge stretch for many buyers”.
More money laundering means a domino effect for the prices for housing according to Geordie Dent, Executive Director at Federation of Metro Tenants’ Associations.
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“It (money laundering) keeps pushing the marginal price of a condominium or a house higher and higher,” Dent said.
To combat the housing crisis in the GTA, the Ford government passed Bill 108: More Homes, More Choices Act. The bill intends to reduce to costs for housing by increasing supply. To do this, the government is reducing what they see as “red tape,” eliminating development fees and decreasing the amount of time municipalities must approve development projects.
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However, money laundering is not mentioned in this bill.
Action needs to be taken according to Denis Meunier, a former Deputy Director at Financial Transactions and Reports Centre of Canada (FINTRAC), one of Canada’s key anti-money laundering agencies.
“Whether it’s in this bill or another bill, they (Ontario’s government) know there’s a problem,” Meunier said.
Meunier says Ontario needs to develop a central registry for property purchases, which mandates ownership is registered. British Columbia’s provincial government has committed to set one up in their province.
However, Christine Duhaime does not see a central registry like B.C.’s as a solution. As a lawyer with expertise in anti-money laundering practice, Duhaime said B.C.’s central registry does not prevent law offices from keeping the shareholders of corporations secret, meaning the true owners of property can stay hidden.
“You hit a wall where you can’t go behind the paperwork,” Duhaime said of investigating the documents that reveal actual owners of property.
“Because that paperwork is in a law firm, in their records…and no one can ever access it.”
On Thursday, Emily Hogeveen, a spokesperson for Finance Minister Rod Phillips told Global News in a statement: “Our government takes money laundering concerns seriously. We are currently reviewing Ontario’s Mortgage Brokerages, Lenders and Administrators Act, 2006, which prohibits mortgage brokerages from engaging in fraud or any other illegal conduct.”
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Phillips office confirmed that additional consumer protection measures could be implemented, however no timeline for the completion of the review was provided.
Hoogeveen also said that while the federal government has allocated dedicated funding to fight money laundering in British Columbia, they have not done so in Ontario.
“That is why we are requesting that federal funding also be targeted towards measures to address similar challenges in Ontario,” she said.
But for people connected to housing affordability in the GTA like Dent, he said money laundering will continue until the provincial government addresses it through legislation.
“The (money laundering) party is going to go on for another five months minimum.”
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