The agency that regulates the real estate industry in Canada’s most populated province is failing to adequately protect consumers during one of the biggest purchases of their lives, a recent report from Ontario’s auditor general concluded.
Bonnie Lysyk’s value-for-money audit examined the effectiveness of the Real Estate Council of Ontario (RECO) and the Ministry of Public and Business Service Delivery, which oversees Ontario’s multibillion-dollar real estate industry.
The critical report, which was released last week, cited concerns around RECO’s ranging from a failure to systematically track and analyze complaints, a lack of regular brokerage inspections, and the absence of any process to monitor if investigations are completed and whether appropriate action was taken, or any action at all.
Many of the issues flagged in the report have been ongoing points of frustration for Ontario homebuyers and sellers, who’ve expressed concern over RECO’s handling of complaints and lack of regulatory rigour for years.
“It seems RECO is just of the realtors, by the realtors, for the realtors, working only to protect themselves,” Swati Dhawale said in response to the report.
Swati Dhawale, right, and Amol Walunj filed a complaint with RECO in February 2022 after losing $40,000 in a real estate transaction in the Greater Toronto Area. RECO closed the complaint several months later, saying simply that allegations of misconduct against their real estate agent ‘could not be substantiated.’ (Swati Dhawale and Amol Walunj)
After losing tens of thousands of dollars in a questionable real estate transaction in the Greater Toronto Area involving an agent from the brokerage HomeLife Miracle Realty Ltd., Dhawale and her husband, Amol Walunj, filed a complaint with RECO last February.
Chris and Bibi Harding, of Brampton, Ont., had also submitted a complaint to RECO about two months later, in April, over their own dealings with the same brokerage.
Both couples spoke out as part of a recent Marketplace investigation into real estate agents engaging in mortgage fraud, to the detriment of unwitting buyers.
After submitting their complaints, each couple waited months to receive a response from RECO. When an investigator did call, the Hardings said he seemed to suggest they were at fault and not the real estate agent in question.
In April 2022, Chris and Bibi Harding filed a complaint with RECO in relation to a questionable real estate transaction. They have not yet been updated on the status of their case. (CBC)
For Dhawale and Walunj, it was seven months before they were emailed a notice from RECO saying their complaint file was being closed, as the allegations of misconduct against their real estate agent “could not be substantiated.”
When Marketplace investigated that same brokerage as part of its hidden-camera investigation, it found a pattern of questionable behaviour by some real estate agents working for that same brokerage, HomeLife Miracle Realty Ltd.
Mortgage Fraud
We go undercover to investigate mortgage brokers and real estate agents perpetrating mortgage fraud for a fee, securing commissions by submitting fake documents for approval.
At the time, Ajay Shah, the broker of record for HomeLife Miracle Realty Ltd., said he does not condone the behaviour Marketplace told him it captured on hidden camera; he said the agents documented represent just a fraction of the brokerage’s sales and the 3,000 agents working under his supervision.
How RECO handles and investigates complaints was one of the issues highlighted in the auditor general’s report. In the past five years, RECO received approximately 11,700 complaints against real estate agents and brokers, it said, but Lysyk found that RECO has no system in place for identifying systemic trends and issues it should address.
She also found that RECO had not categorized or recorded any description for 55 per cent of the complaints received.
“Seriously?” exclaimed Dhawahle in response to those findings.
“We cannot believe that in this day and age, when companies use data to analyze all aspects about the most trivial things, RECO is not even bothered about categorizing the complaints involving hundreds of thousands and even millions of dollars.”
When Marketplace reached Shah for comment following the release of the auditor general’s report, he said he would like to see RECO categorize complaints based on the seriousness of the charge, so the regulator can apply the appropriate time and resources based on the level of wrongdoing.
“A complaint about a real estate agent sharing a lockbox code with a client should not be treated the same as accusations of fraud,” he said.
RECO told Marketplace that Shah is co-operating fully with their own investigation, launched after Marketplace‘s report.
Lack of on-site inspections
A lack of on-site inspections for brokerages was also found to be an issue in the regulator’s operations, according to the audit, which found RECO has never conducted a routine on-site inspection at 27 per cent of registered brokerages. A further 35 per cent have not had one in more than five years.
The auditor general also found that RECO rarely follows up on violations found during inspections, recommending that a framework be created to inspect brokerages based on risk level.
This week, CBC Newsasked RECO for the date of the last regular inspection of HomeLife Miracle Ltd., and was told this information is not a matter of public record.
The real estate brokerage HomeLife Miracle Realty Ltd., has five branches across the Greater Toronto Area and Cambridge, Ont. Three real estate agents connected to the brokerage were caught on camera by Marketplace offering to facilitate mortgage fraud for a fee. (CBC)
RECO’s registrar, Joseph Richer, said that many of the recommendations in the auditor general’s report align with their own strategy, including those that relate to the inspection program.
“We are considering these as we develop a new brokerage inspection program, which will launch in 2023,” he said in an email.
‘Not delivering on its mandate’
RECO was created in 1997 to administer and enforce Ontario’s Real Estate and Business Brokers Act. Its stated mission is “to promote a fair, safe and informed real estate market for consumers in Ontario through effective, innovative regulation of those who trade in real estate.”
By law, every real estate agent, broker and brokerage must be registered with RECO, whose operations are funded primarily through the registration fees it collects. In 2021, RECO’s operating revenues totalled $33.6 million.
However, despite its mandate to protect consumers, the auditor general’s report called attention to the fact that RECO’s board of directors is almost exclusively comprised of industry representatives.
The board is required to have a process for input on issues of importance to consumers, but for most of RECO’s existence, Lysyk said, this has not been in place.
In RECO’s overall response to the report, it said it is committed to delivering on its mandate and to sharing its progress in a transparent manner. The Ministry of Public and Business Service Delivery added that some legislative updates around the regulation of real estate professionals are already planned and will come into force on April 1, 2023.
But those planned changes don’t address the issues highlighted by Ontario’s auditor general, said Murtaza Haider, a professor of data science and real estate management at Toronto Metropolitan University.
“It is a serious document, and they have to really reinvent themselves, the way I read this report,” he said. “And it is not that they are without resources; they are bringing in millions of dollars of revenue.”
The audit ultimately outlines 25 recommendations for the RECO, and the Ministry of Public and Business Service Delivery, to ensure it can ultimately fulfil its mandate.
Fines as ‘the cost of doing business’
The auditor general’s findings add to the frustration Jeanhie Park feels over her dealings with RECO.
Park submitted a complaint in May 2021 over a real estate agent she believes provided her with misleading information about competing offers, on a property she purchased for $200,000 over asking.
“We felt duped and manipulated,” Park said. “The fact that there were zero registered offers, that we were misled with false information in order for us to put in our top price.”
More than 18 months later, Park says there is still no resolution from RECO.
Jeanhie Park filed a complaint with RECO in May 2021. She said her real estate agent misled her into believing she was competing against multiple offers when there were none. (Tina MacKenzie/CBC)
“After following up with RECO every month last year, I finally received a call from one of RECO’s senior investigators back in May,” Park told CBC News.
Park said the investigator told her the video evidence she submitted with her complaint was “damning” and that disciplinary action against her agent — if taken — would likely be in the form of an educational course. She said she’s heard nothing since.
“It’s just nothing but a slap on the wrist,” Park said of the potential disciplinary actions.
Between 2017 and 2021, the average fine issued by RECO for violations of the Real Estate and Business Brokers Act was $8,273, and 78 per cent of fines came in under $10,000.
Based on the average home price in Ontario of $835,090, a typical commission earned by real estate is $20,879.
In her audit, Lysyk expressed concern that registrants may see such fines as “the cost of doing business.”
Ontario lagging in consumer protection laws
The auditor general also found Ontario is lagging behind when it comes to implementing consumer protection laws in real estate.
In July, the B.C. government introduced a mandatory three-day cooling-off period on real estate transactions, giving buyers time to conduct home inspections or confirm financing.
There is no legislated cooling-off period in Ontario.
Murtaza Haider is a professor of data science and real estate management at Toronto Metropolitan University. (Doug Husby/CBC)
Furthermore, in Ontario, real estate agents or brokers are allowed to represent both a buyer and seller in a single real estate transaction — a practice commonly referred to as double-ending, which has long been criticized for its inherent conflict of interest. It has been banned in some other provinces, including Quebec and B.C. In Alberta, agents cannot negotiate for both sides.
As for Haider, the industry expert, he believes outside oversight of RECO is needed to ensure the auditor general’s recommendations are addressed quickly. He suggests a task force made up of representatives from real estate, academic and consumer groups.
“Without such oversight, it would take years for these things to materialize.”
Housing affordability is a key issue in the provincial election campaign in British Columbia, particularly in major centres.
Here are some statistics about housing in B.C. from the Canada Mortgage and Housing Corporation’s 2024 Rental Market Report, issued in January, and the B.C. Real Estate Association’s August 2024 report.
Average residential home price in B.C.: $938,500
Average price in greater Vancouver (2024 year to date): $1,304,438
Average price in greater Victoria (2024 year to date): $979,103
Average price in the Okanagan (2024 year to date): $748,015
Average two-bedroom purpose-built rental in Vancouver: $2,181
Average two-bedroom purpose-built rental in Victoria: $1,839
Average two-bedroom purpose-built rental in Canada: $1,359
Rental vacancy rate in Vancouver: 0.9 per cent
How much more do new renters in Vancouver pay compared with renters who have occupied their home for at least a year: 27 per cent
This report by The Canadian Press was first published Oct. 17, 2024.
VANCOUVER – Voters along the south coast of British Columbia who have not cast their ballots yet will have to contend with heavy rain and high winds from an incoming atmospheric river weather system on election day.
Environment Canada says the weather system will bring prolonged heavy rain to Metro Vancouver, the Sunshine Coast, Fraser Valley, Howe Sound, Whistler and Vancouver Island starting Friday.
The agency says strong winds with gusts up to 80 kilometres an hour will also develop on Saturday — the day thousands are expected to go to the polls across B.C. — in parts of Vancouver Island and Metro Vancouver.
Wednesday was the last day for advance voting, which started on Oct. 10.
More than 180,000 voters cast their votes Wednesday — the most ever on an advance voting day in B.C., beating the record set just days earlier on Oct. 10 of more than 170,000 votes.
Environment Canada says voters in the area of the atmospheric river can expect around 70 millimetres of precipitation generally and up to 100 millimetres along the coastal mountains, while parts of Vancouver Island could see as much as 200 millimetres of rainfall for the weekend.
An atmospheric river system in November 2021 created severe flooding and landslides that at one point severed most rail links between Vancouver’s port and the rest of Canada while inundating communities in the Fraser Valley and B.C. Interior.
This report by The Canadian Press was first published Oct. 17, 2024.
British Columbia voters face no shortage of policies when it comes to tackling the province’s housing woes in the run-up to Saturday’s election, with a clear choice for the next government’s approach.
David Eby’s New Democrats say the housing market on its own will not deliver the homes people need, while B.C. Conservative Leader John Rustad saysgovernment is part of the problem and B.C. needs to “unleash” the potential of the private sector.
But Andy Yan, director of the City Program at Simon Fraser University, said the “punchline” was that neither would have a hand in regulating interest rates, the “giant X-factor” in housing affordability.
“The one policy that controls it all just happens to be a policy that the province, whoever wins, has absolutely no control over,” said Yan, who made a name for himself scrutinizing B.C.’s chronic affordability problems.
Some metrics have shown those problems easing, with Eby pointing to what he said was a seven per cent drop in rent prices in Vancouver.
But Statistics Canada says 2021 census data shows that 25.5 per cent of B.C. households were paying at least 30 per cent of their income on shelter costs, the worst for any province or territory.
Yan said government had “access to a few levers” aimed at boosting housing affordability, and Eby has been pulling several.
Yet a host of other factors are at play, rates in particular, Yan said.
“This is what makes housing so frustrating, right? It takes time. It takes decades through which solutions and policies play out,” Yan said.
Rustad, meanwhile, is running on a “deregulation” platform.
He has pledged to scrap key NDP housing initiatives, including the speculation and vacancy tax, restrictions on short-term rentals,and legislation aimed at boosting small-scale density in single-family neighbourhoods.
Green Leader Sonia Furstenau, meanwhile, says “commodification” of housing by large investors is a major factor driving up costs, and her party would prioritize people most vulnerable in the housing market.
Yan said it was too soon to fully assess the impact of the NDP government’s housing measures, but there was a risk housing challenges could get worse if certain safeguards were removed, such as policies that preserve existing rental homes.
If interest rates were to drop, spurring a surge of redevelopment, Yan said the new homes with higher rents could wipe the older, cheaper units off the map.
“There is this element of change and redevelopment that needs to occur as a city grows, yet the loss of that stock is part of really, the ongoing challenges,” Yan said.
Given the external forces buffeting the housing market, Yan said the question before voters this month was more about “narrative” than numbers.
“Who do you believe will deliver a better tomorrow?”
Yan said the market has limits, and governments play an important role in providing safeguards for those most vulnerable.
The market “won’t by itself deal with their housing needs,” Yan said, especially given what he described as B.C.’s “30-year deficit of non-market housing.”
IS HOUSING THE ‘GOVERNMENT’S JOB’?
Craig Jones, associate director of the Housing Research Collaborative at the University of British Columbia, echoed Yan, saying people are in “housing distress” and in urgent need of help in the form of social or non-market housing.
“The amount of housing that it’s going to take through straight-up supply to arrive at affordability, it’s more than the system can actually produce,” he said.
Among the three leaders, Yan said it was Furstenau who had focused on the role of the “financialization” of housing, or large investors using housing for profit.
“It really squeezes renters,” he said of the trend. “It captures those units that would ordinarily become affordable and moves (them) into an investment product.”
The Greens’ platform includes a pledge to advocate for federal legislation banning the sale of residential units toreal estate investment trusts, known as REITs.
The party has also proposed a two per cent tax on homes valued at $3 million or higher, while committing $1.5 billion to build 26,000 non-market units each year.
Eby’s NDP government has enacted a suite of policies aimed at speeding up the development and availability of middle-income housing and affordable rentals.
They include the Rental Protection Fund, which Jones described as a “cutting-edge” policy. The $500-million fund enables non-profit organizations to purchase and manage existing rental buildings with the goal of preserving their affordability.
Another flagship NDP housing initiative, dubbed BC Builds, uses $2 billion in government financingto offer low-interest loans for the development of rental buildings on low-cost, underutilized land. Under the program, operators must offer at least 20 per cent of their units at 20 per cent below the market value.
Ravi Kahlon, the NDP candidate for Delta North who serves as Eby’s housing minister,said BC Builds was designed to navigate “huge headwinds” in housing development, including high interest rates, global inflation and the cost of land.
Boosting supply is one piece of the larger housing puzzle, Kahlon said in an interview before the start of the election campaign.
“We also need governments to invest and … come up with innovative programs to be able to get more affordability than the market can deliver,” he said.
The NDP is also pledging to help more middle-class, first-time buyers into the housing market with a plan to finance 40 per cent of the price on certain projects, with the money repayable as a loan and carrying an interest rate of 1.5 per cent. The government’s contribution would have to be repaid upon resale, plus 40 per cent of any increase in value.
The Canadian Press reached out several times requesting a housing-focused interview with Rustad or another Conservative representative, but received no followup.
At a press conference officially launching the Conservatives’ campaign, Rustad said Eby “seems to think that (housing) is government’s job.”
A key element of the Conservatives’ housing plans is a provincial tax exemption dubbed the “Rustad Rebate.” It would start in 2026 with residents able to deduct up to $1,500 per month for rent and mortgage costs, increasing to $3,000 in 2029.
Rustad also wants Ottawa to reintroduce a 1970s federal program that offered tax incentives to spur multi-unit residential building construction.
“It’s critical to bring that back and get the rental stock that we need built,” Rustad said of the so-called MURB program during the recent televised leaders’ debate.
Rustad also wants to axe B.C.’s speculation and vacancy tax, which Eby says has added 20,000 units to the long-term rental market, and repeal rules restricting short-term rentals on platforms such as Airbnb and Vrbo to an operator’s principal residence or one secondary suite.
“(First) of all it was foreigners, and then it was speculators, and then it was vacant properties, and then it was Airbnbs, instead of pointing at the real problem, which is government, and government is getting in the way,” Rustad said during the televised leaders’ debate.
Rustad has also promised to speed up approvals for rezoning and development applications, and to step in if a city fails to meet the six-month target.
Eby’s approach to clearing zoning and regulatory hurdles includes legislation passed last fall that requires municipalities with more than 5,000 residents to allow small-scale, multi-unit housing on lots previously zoned for single family homes.
The New Democrats have also recently announced a series of free, standardized building designs and a plan to fast-track prefabricated homes in the province.
A statement from B.C.’s Housing Ministry said more than 90 per cent of 188 local governments had adopted the New Democrats’ small-scale, multi-unit housing legislation as of last month, while 21 had received extensions allowing more time.
Rustad has pledged to repeal that law too, describing Eby’s approach as “authoritarian.”
The Greens are meanwhile pledging to spend $650 million in annual infrastructure funding for communities, increase subsidies for elderly renters, and bring in vacancy control measures to prevent landlords from drastically raising rents for new tenants.
Yan likened the Oct. 19 election to a “referendum about the course that David Eby has set” for housing, with Rustad “offering a completely different direction.”
Regardless of which party and leader emerges victorious, Yan said B.C.’s next government will be working against the clock, as well as cost pressures.
Yan said failing to deliver affordable homes for everyone, particularly people living on B.C. streets and young, working families, came at a cost to the whole province.
“It diminishes us as a society, but then also as an economy.”
This report by The Canadian Press was first published Oct. 17, 2024.
