There are, political policies and attitudes, that have created our present crisis. Additionally, there are many political beneficiaries to your financial misfortune. Next week, I’ll share with you, more of Mr. Eby’s insights; until then, consider our regional situation and how it affects you and perhaps, a timely political change. – Anastasia Anthony Zervos
Back again! Thanks for joining me again this week, reader, in my continued profiling of my conversation with David Eby, Housing Critic for the N.D.P. and N.D.P. – M.L.A.
As I’ve mentioned before, Mr. Eby has no shortage of insight to our dysfunctional housing market and how it has devolved into the unsustainable, unaffordable situation we all live in. It is for this reason, that I believe his views are worth listening to and implementing.
Mr. Eby holds, that the problems in our housing market have developed because of many factors. He pointed to one of those factors being lack of oversight at FICOM and a lack of budgetary support for it as an entity. FICOM, lacks auditors. What is FICOM, you may ask. FICOM´s areas of regulatory responsibility include credit unions and trust companies, insurance companies, pension plans, real estate, mortgage brokers and the Credit Union Deposit Corporation. They look for anomalies in all these areas and industries. They are to sound the alarm when something is wrong. Hard to do if there is insufficient manpower.
He also pointed to a lack of willingness to address international money in our real estate market, by the Liberal government. Much of that money being of a questionable origin, such as money laundering and the proceeds of crime.
Related to the problem I’ve just mentioned, another contributing problem he brought to my attention is, two streams of mortgage funding, one for the local buyer and other for the foreign buyer. In the stream reserved for the wealthy foreign buyer, income has not had to be proven. In contrast, you of course, have to prove yours before obtaining any loan of any kind. What does that mean to you? Well, the Canadian taxpayer is underwriting those loans for foreign buyers. What if they default?
Canadian banks allow foreign clients with no credit history, including students, to qualify for uninsured mortgages, without proving the sources of their income. This practice exempts non-Canadians, who have money in the bank, from the scrutiny that domestic borrowers face when buying a home or an investment property. Loans officers do not need to verify foreign clients’ sources of income if they make down payments of 50 per cent, at one financial institution. At another, such clients need only 35 per cent down to qualify for mortgages up to $2-million. The criteria from both banks show that income verification is also not required for new immigrants who have been in Canada less than five years if they put 35 per cent down.
The federal regulator chastised these banks in July, for inadequate foreign income verification because they can be exposed to more risk if they do not ensure these clients have the means to pay their mortgages in the long term. The regulator also pointed out that banks can be vulnerable to money laundering if they do not verify that a customer’s money was obtained legitimately.
When I asked him about the foreign buyer tax, Mr. Eby explained that he did not feel it was a complete measure or entirely effective. Why? He didn’t see the point of taxing a person’s nationality. He advocates instead, taxing behaviour. Obviously, someone moving here to work for his or her company for several years, and live, and pay taxes, should not be burdened by this tax. Someone who will never live or work here, should; someone who buys property here, but resides elsewhere, and pays income taxes elsewhere. He felt that it was likely that fraud would increase, as overseas nationals simply looked for ways to avoid the tax by using a local connection to make the purchase for him or her instead. He found it the least effective way of monitoring foreign money in our market. Tax on behaviour not origin.
Finally, Mr. Eby, how do you repair it all? Drastically increase rental housing supply. Allow locals access to property first. Hang in for the long haul. Correction will take a long time.