If nothing else is clear from the extensive report of the Independent Advisory Group (IAG) on the conduct and practices in the real estate industry in British Columbia, it is this: Self-regulation has been a disastrous failure.
It is a failure the provincial Liberals have had a hand in beginning with former Premier Gordon Campbell. But it is more than just about the self-regulation of this industry; you should also understand that they have knowingly starved the very government body that has oversight of that body; specifically the Office of the Superintendent of Real Estate.
Of course the Independent Advisory Group’s substantial recommendations will definitely catch the headlines. Those will include significantly increasing “broker misconduct” penalties for individual realtors from $10,000 to $250,000 and for real estate companies from $20,000 to $500,000. Then there is the proposal to make the self-regulating Real Estate Council of B.C. more representative of the public instead of now having 13 of its 17 members from the real estate industry on its board.
But if you think back to when news of the scandalous behaviour of some real estate agents broke, it broke not because the industry itself decided to come clean, nor because the Superintendent of Real Estate decided to go public with her findings. It broke because disgruntled real estate agents decided to go to the Globe and Mail to talk about “shadow flipping.”
In fact, until that point, most of you had never even heard of or knew we had a Superintendent of Real Estate.
Of course, the B.C. Auditor General was well aware of that post. It is part of the larger oversight body FICOM, the Financial Institutions Commission of B.C. led by Carolyn Rogers.
The auditor’s 2014 report to the legislature pointed out that for a number of years there had been a serious staff shortage in that watchdog agency. In fact, Rogers, who in her role as Superintendent of Real Estate, chaired that Independent Advisory Group that produced Tuesday’s 60-page report looking into the real estate industry.
It is on page 31 of that report you can read about how her powers have been severely limited by a lack of funds combined with government salary caps and other spending restrictions. “These constraints include limits on hiring of staff, limits on travel and public advertising.” Adding that, “This creates the risk that real estate issues could be put on the back burner.” It was like cutting the police budget when a crime wave is breaking out.
Not that the government was particularly concerned. Last month, in an exchange in the legislature between B.C. Finance Minister Mike de Jong and NDP Housing critic David Eby, we learned that while the unfilled positions among the civil service are about five per cent, at FICOM the vacancy rate is 35 per cent. Regulators are in high demand. Pay and benefits are clearly better elsewhere in the country.
And while the funding of FICOM comes in large part from the industries being policed, including real estate, insurance and pensions, because of staff shortages the government last year managed to pull $3 million out of FICOM’s budget and put it back into general revenue.
But that doesn’t mean that nobody knew what was going on in an industry that has been badly broken. The Independent Advisory Group that produced the report with its 28 recommendations managed to crank it out is 15 weeks. They did this with virtually no additional resources save for a public email address and a website that produced a number of submissions, and with what folks in the industry already had in their heads.
At the press conference Tuesday, there were folks who had been on the self-regulating real estate council for decades or who had been in the real estate business for an equally long time.
But there was no apparent extensive audit or public inquiry.
One point that Rogers made was this: The oversight structure we have now was designed for an industry where people bought and sold homes.
With the dramatic price escalation, it has turned into an industry where properties have become investments much like stocks. It’s like a “gold rush,” she said, with everyone hustling to make a “quick buck.”
And it finally has everyone’s attention.
Now let’s see what government and the industry will do about it.
(Note: Finance Minister Mike de Jong revealed in a press release issued Tuesday, in response to the IAG report, that the government would announce “actions to strengthen consumer protection” Wednesday)
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