Garth Turner's version:

It was 1982. I wore cowboy boots, a tie wide enough to be a shirt and mutton chops so thick small animals thought of nesting there. Joe Reporter, with a daily column for a big-city daily paper. All over everywhere. My beat was money, and then (almost as now) that meant houses. Real estate was as hot as Farrah Fawcett. I was on it.

One day the shocking news broke that Canada’s major development company, Cadillac Fairview, was selling 10,900 apartment units in Toronto to some unknown, bit-player former mortgage-broker dude name Leonard Rosenberg, for $270 million. The spectre of massive rent increases exploded on the subsequent revelation that Rosenberg flipped the deal to some other no-name tin-star speculator named Bill Player, for $310 million.

Within days Player has flipped the massive portfolio to a few shady Saudi guys for $500 million, using financing obtained from some weensy trust companies Rosenberg had commandeered. The media went nuts. The government went ballistic. Rosenberg and Player vanished. The manhunt was intense. And then came word Ontario would take the unprecedented step of taking over the trust companies, tighten up rent controls and initiate criminal charges against the flippers.

This, I wrote the next morning, was draconian. No law was broken. Flips weren’t crimes. It was an example of politicians pandering to the great unwashed with laws bound to distort the market and lead to fewer people building rental units. Which, of course, is what happened.

Charged with fraud: Andrew Markle; left; Bill Player; centre; and Leonard Rosenberg are among seven men charged with 82 counts of fraud in connection with Seaway and Greymac trust.

So Rosenberg called me from some borrowed mansion in Palm Beach. “That took guts,” he said. “Come see me. I’ll give you the whole story. Tell no one. I’m sending a plane.”

The next night I was knocking back Scotch with the most wanted white-collar felon in Canada.

For those born after Abba, the whole idea of taxing speculation and flipping, of governments controlling housing costs and pretending real estate ownership’s a human right, is thrilling. Especially now, when the world has organized itself into the 1% and the 99%. Especially in Toronto again, and in Vancouver, where detached houses in the core long ago saw a $1 million tag in the rear view mirror.

“Is there a need for a speculation tax in Toronto,” a media publication asked me yesterday. “How do you think it should work? What other options are available to government to cool the market, if that is what is needed?”

In YVR, this is turning into an obsession. Mayor Gregor Robertson – who recently made a $420,000 short-term killing in a house flip (albeit after his GF walked) – is grandstanding large. He demands  the province (a) create a speculation tax aimed at foreigners (Chinese, natch), (b) goose the land transfer tax to milk those buying luxury properties and (c) track the nationality of buyers and ensure investment properties are occupied, “in a timely fashion.”

The premier says no, but the finance minister says he’ll examine it all. In a city where property values have increased in windfall fashion, the mayor argues, “These measures would help moderate the excesses of the Vancouver housing market, without unfairly punishing those who have built up home equity through hard work and personal savings.” Of course, nobody’s real estate has actually gone up because of hard work and extra savings. Nor will taxing the Chinese or anybody buying a $5 million house make it any easier for the #DontHave1Million Millennials to secure a detached house.

The premier gets it. “Experts estimate that local investors are 3 to 4 times more active in the region’s housing market than foreign investors,” she told the mayor. As this blog has shown a few times, based on available data, foreign buyers are skinny market players – maybe 5% of YVR sales and just 1.6% in Victoria. That has not stopped realtors from creating the Yellow Peril meme, and using it with devastating effectiveness. BTW, real estate association economist Cameron Muir agrees with me. Off shore buyers? “Less than five per cent,” he says.

The premier added this: “Using any method of new taxation with the goal of driving down the price of housing could have the unintended effect of hurting current homeowners across the region.” Translation? The government doesn’t want lower prices. It would be suicidal in a region where the savings rate is negative and houses are a religion.

So, what to do?

First, nothing. The market will tip under its own weight as the population becomes even more pickled in debt. We’re entering years of rising interest rates and leaving almost a decade of historically-low ones. Even Monday’s housing starts – on top of the jobs stats Friday – guarantee no Bank of Canada cut, so we’re now at the bottom. Up from here with predictable consequences.

Second, stop trying to do something. With every ‘break’ given to make housing more affordable, it gets less so. Low mortgage rates bring higher prices. So does the 5%-down CMHC rule. Every first-time-buyer tax incentive, land transfer tax rebate or cash-back loan incentive adds to the value of houses. If politicians are serious about restoring house prices to levels average people can pay, don’t screw around with the market.

Third, shutter the Bank of Mom. More than any other single factor, this inter-generational transfer of housing equity is sustaining price levels, encouraging bidding wars and shutting out those with normal parents. We know that 42% of first-timers wouldn’t be buying now without the BoM, and absent that fuel, the fire would quickly burn out. Imagine how novel that would be – requiring buyers to actually have some of their own money. Just like the olden days when working people could afford houses. I’ll leave it to the evil minds at the CRA how to deal with this untaxed financial benefit.

In conclusion, we don’t subsidize people to buy cars, iPhones or puppies, all of which are about as essential as a house. We don’t pay a portion of people’s rent, either. And whatever government touches becomes more expensive and intrinsically less fair.

So, Rosenberg got a five year sentence, then moved to Florida and ran out of money.

Maybe someday there’ll be a statue of him in downtown Toronto. The father of modern rent control.