Tue, 05/24/2016 - 17:27

Posted by H.G. Watson on February 16, 2016

By David P. Ball for the Tyee

The scandal rattling B.C.'s real estate sector this week started with a single word: "Realtors."

While researching Vancouver home demolitions last year, a builder told Globe and Mail reporter Kathy Tomlinson he was quitting the industry because of "all the realtors who are involved" who "tap into" offshore money instead of bank loans.

"What do you mean, 'realtors?'" Tomlinson asked. Real estate brokers, he claimed, were abusing an obscure loophole to rake in commissions from multiple buyers before a house is even sold, jacking up the price of Vancouver housing and shutting locals out of deals.

Three months later, Tomlinson published an explosive story in the Globe that within days brought a promise from the government to investigate.

"Your government will look into allegations of improper behaviour in the housing market, and where appropriate, government will take action,'' the Speech from the Throne promised, committing meanwhile to "protect the savings and equity that existing homeowners have painstakingly placed in their homes."

NDP housing critic David Eby -- whose riding is near ground zero of Vancouver's westside house-buying frenzy -- wants to see that promise translate into an independent inquiry, led by a former judge with authority to subpoena witnesses and documents.

"That will put the fear of God into a lot of realtors who are taking advantage of the system right now," Eby says. "And it should. Their time has come, and the public is fed up. We don't even have the chance to participate."

Tyee Solutions Society asked reporter Tomlinson how her explosive scoop came about. Our interview is edited for clarity and length.

Tyee Solutions: Walk us through how this story began.



Kathy Tomlinson: I was doing one of my earlier stories on a neighbourhood where a lot of houses are being demolished. I talked to one of the builders, who I learned through records was involved. I thought at first he was a bit shady, because of things going on, but he said to me, "I'm out of this. I've been doing this for years... but I'm not doing it any more because of all the realtors who are involved who don't even have to go to the bank -- they've got a bunch of foreign money they can tap into."

I said, "What do you mean realtors?" He said, "They're the ones getting into this big-time now." He said he didn't want to do it any more because he can't compete. It just sort of rattled around in my head, and I thought, "Let's look at it."

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Tyee Solutions did an investigation last summer, and we found there was a $300,000 mystery bump in Vancouver housing prices that couldn't be accounted for by local factors. Did you find any information about that?


One of the big discrepancies in Vancouver is between what people earn and what these properties cost.

The key here is not that they're foreign buyers, per se, but foreign money coming into the market. There are many speculators who are happy to jump in and facilitate it, because they're making money. Many of them are either foreign investors, particularly the end-buyer, or most importantly they're people who have access to foreign money.


Nothing is public; these are all private transactions. It's complicated perhaps to understand when you've never heard of it. But once you understand it, it's beautifully simple. And that's how it's promoted: as a simple, legal way to flip property with no hassle.

After your article came out, David Eby called for an independent inquiry. Then the government vowed to investigate. Does that leave you with concerns?

I just did an investigation for three months; it was very difficult. Frankly, unless whoever's doing this investigation is willing to roll their sleeves up and work at the ground level -- to talk to people in these industries who are dealing in this kind of stuff -- they're not going to figure it out. It's not easy to find. None of it is public.


The other concern I've heard is that the government may focus on existing rules. But the existing rules don't really deal with this. This is a perfectly legal way to flip a property. There are no rules against it. So if you look at this through the prism of rules, it's possible to come out the other end and say, "No rules are being broken." That's because the people involved in this activity have figured out what the rules are, and a way to get around them -- or to make sure they're on the right side of the law -- including the realtors.

We have extensive anti-money laundering legislation in Canada. What's to stop a gang from laundering money through this process? I'm not saying that's what's happening, but there's a big hole there if money can move without being noticed.

Certainly that's a concern. It's bigger than me to be able to figure out what to do about that. It's an age-old problem, isn't it? People who have a tremendous amount of money -- or who are criminal in nature -- if they want to find a way around things, they will. People are writing me saying one of the simplest solutions would be to have everything in real estate transactions be completely transparent. I don't see anything wrong with that; that's a good place to start, maybe.


The impact this story is having it really shows the importance of journalism to the public.

I'm not just saying this because they pay me: The Globe and Mail deserves a huge amount of credit and support for the kind of support it gives me and other investigative journalists to do this kind of work. It cannot be done quickly. You can't tweet about it. You can't come up with it in a day or even a week. This took three months from the last time I filed a story. I have been a reporter for almost 30 years; no one's ever given me three months to do a story. What you get out of it is real knowledge. 

David P. Ball reports on affordable housing for Tyee Solutions Society. This story was originally published by the Tyee and is republished with the author’s consent.

J-Source and ProjetJ are publications of the Canadian Journalism Project, a venture among post-secondary journalism schools and programs across Canada, led by Ryerson University, Université Laval and Carleton University and supported by a group of donors.