Jan D Weir
8 min readJan 24, 2022


Part 1 in a Series on the Housing Crisis

A clutter of tent cities spill over the U.S. urban landscape

Oence the average family could expect to work for a few years, save a down payment and buy a house with a mortgage monthly installment taking only one third of the family’s gross income. Even then they were considered house poor until the mortgage was paid off.

It’s clear that the average family can no longer afford an average house. But house prices are subject to the law of demand and supply. If the demand from the average US citizen because of unaffordability is drying up, where is the demand coming from?

While there are a number of causes, the most undefendable is foreign black money from: drug lords, mafiosos, wealthy tax evaders and corrupt politicians looting their countries.

The prestigious Wharton School (it is worth mentioning here that this is Trump’s alma mater; so it’s no bleeding heart lefty academy) gave this warning about foreign investment in America that is pushing up housing prices:

Housing markets are preferred destinations for foreign investors looking for yields, vacation homes or safe havens, or for those dodging tax restraints and corruption crackdowns in their home countries.

In the fall of 2021, the Pandora Papers showed that real estate was becoming a prime investment for the use of secretly owned corporations in secrecy jurisdictions. While the original target was high-end homes, even those purchases caused a ripple effect raising the price of average homes. But now, these stealthy buyers are turning to the average priced home in the US and to rental properties.

We don’t really know the full extent of foreign investment in the US housing market because US laws allowed these foreign investors to hide their identity using secret ownership corporations and secret ownership trusts.

Why do the politicians allow this state of affairs? The policymakers have a problem. If they pass an effective law to expose these foreign criminals, it would also expose wealthy US citizens who use the same techniques to hide their money from the taxman.

The key to understanding this conundrum is that, traditionally, ownership of all private corporations was secret. When you wanted to incorporate a company, you needed only reveal one name as a director. That director can be a mere nominee. In fact there are people who sell their names to be used as a director in companies. I understand the going rate is $100 a year. In the movie The Laundromat, Meryl Streep, in clever disguise, played a secretary in the Panama law office of Mossack Fonseca who spent most of her day signing corporate records to hide the identity of the true owners.

A Solution Made by Tax Havens for Tax Havens

Europe is the cradle of tax havens. Switzerland, Liechtenstein and Luxembourg pioneered that most valuable of commodities, tax relief for the rich by secrecy jurisdiction. Ireland, among others, has quietly joined the ranks by offering companies like Apple Computer this benefit.

However, the European press created enough outrage about the use of these secret ownership corporations for tax evasion that the EU politicians were forced to act to appear to end the secrecy.

Politicians don’t know more about subjects like secrecy jurisdictions than the average voter. They rely on their advisors, who always remain behind the scenes. They are mostly lawyers and accountants with expertise in tax matters — so you can immediately see the conflict of interest. They will only benefit personally if the reform legislation has loopholes so they can continue to earn their lucrative pay.

Even if they are civil servants, when they leave the government, they are allowed to join firms that advise the rich on tax strategies which depend on loopholes. Their salaries jump from a comfortable six figures to seven figures overnight. Decades ago, commentators called this flow from positions of government regulator to the firms they regulated, the revolving door. But nothing has been done to stop it.

For those who want more on the revolving door and ways to stop it see: How Wall Street Has Created the New Divisive America.

Crafting Ineffective Legislation

One of my purposes in writing these articles is to expose how politicians pass legislation that appears to remedy some mischief relating to economic inequality, but actually does little. Here’s how the supposed remedy for secret corporate ownership fooled the European voters into passivity.

The true owner of the shares of a corporation is called the beneficial owner in law. Because those initials have an unattractive connotation as initials, the true owner is referred to as the ultimate beneficial owner (UBO).

The EU reform stated that corporations need to keep a record in their private corporate records disclosing who the beneficial owners of a corporation are — except where no one owns more than 25% of the shares.

if no one has more than 25% interest in the corporation, they need only reveal the name of one person who has control — which is different from ownership.

The framers of the legislation justify this exception saying it saves administrative costs. But what saving? Even if there were 100 shareholders, it would take a low-level clerk, who is paid $25 an hour, less than 15 minutes to cut-and-paste the names into a government form.

Yet, as a bulletin on a Canadian accounting association website indicates, to give an opinion that the corporation meets the 25% exemption, an accountant must examine the relevant shareholder agreements and trust documents (and some corporate structures resemble the rigging of an 18th-century schooner), which take professional involvement and considerable time.

While the 25% exemption does not actually save any administrative time, as the Tax Justice Network shows, it does provide a freight-train-sized, easy-to-implement loophole. Any tax evader could simply claim their spouse and two children each have a 25% interest in the corporation, then reveal the person in control as one of their children, preferably a married daughter with a different last name. Who can prove otherwise? Of course, an owner can get a lot more sophisticated using a network of corporations and trusts to make it next to impossible to determine if the 25% claim is accurate.

The Danger of a Free Press

leaders mentioned in the Pandora Papers

The shocking revelations of politicians, rulers and celebrities in the sports and movie industry using shell corporations to hide assets from their country’s taxman are coming almost yearly under names such as the Panama Papers, the Paradise Papers, The Pandora Papers, and so on. These exposés were not the work of government tax departments but whistleblowers and investigative journalists. One group, in particular, left the mainstream media to form the Washington-based International Consortium of Investigative Journalists (ICIJ) that eventually linked 107 media outlets over 80 countries and developed sophisticated software to analyze data leaks from wealth management law firms.

These independent investigative journalists are a great danger to the wealth management industry. So it was important for the safety of tax evasion that these corporate records be kept confidential.

To give further protection to wealthy tax evaders, the EU initially mandated that this information need only be kept by the corporation in its confidential files and be made available only to law enforcement if requested. After significant public pressure, the law was changed so that the UBO information must be recorded on a public register.

In the U.S.

The recently passed Corporate Transparency Act adopted both initial EU protections for the elite: the 25% exemption and a private database kept safely from the prying eyes of investigative reporters. As the government website says:

“The CTA will create a beneficial ownership registry within the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).”

However, a study in Britain proved that public registration there was not sufficient. The wealth management industry who did the registrations often supplied misleading information. Global Witness — using advanced data techniques and tools to analyse 10 million registrations — found that thousands of companies have no obvious owner or have submitted paperwork that raised red flags for potential wrongdoing.

Other Ineffective Solutions

Foreign buyers are often only looking to take advantage of the security of the country without making a contribution. They are not speculators looking for a profit. Countries have levied taxes on vacant homes, but that only incentivizes the buyers to hire people to make the houses look occupied. Ontario and British Columbia levied a 20% tax on foreign buyers, but the buyers can make that up in a year or two. Both of these methods have proved totally ineffective and it is easy to see why.

The Solution

While it may seem that the obvious solution is to ban foreign ownership, that alone would be ineffective because, as explained above, foreign buyers hide their identity using corporations and trusts. Rules regarding corporate ownership must be made effective.

Corporations should be required to file on the existing public corporate registry a declaration of who the UBO is, no 25% exemption, no secrecy. It would not take more than 1/4 of a page for most corporations and add little cost to the existing registration system. It should be in digital format for easy checking.

The government does not have the resources to do the kind of analysis that Global Witness did. The reform legislation could provide a financial penalty for providing false or misleading information with a citizens’ Qui Tam action similar to that under the False Claims Act. Any citizen would be allowed to bring a civil action and be awarded that fine plus their full legal costs. Organizations such as Global Witness, the ICIJ and others would ensure compliance.

Then, a purchaser can be required to file an affidavit attached to the deed to the property affirming that they are an individual, i.e., a human being of flesh and blood, or if a corporation or trust is involved, disclose the UBO — and there would be a public register to check against.

Of course, banning foreign ownership is only one factor. Housing prices will not suddenly become affordable from that alone. I selected this one factor for simplification and because I believed it would be the most offensive to most people.

There are other causes on the demand side, such as the recent entry of equity/hedge funds and corporations into the single-family dwelling market along with house flippers and other speculators who extract value without adding any. There are also causes on the supply side. I’ll deal with those in upcoming posts.

Author: Jan D. Weir is a trial lawyer who has advised international corporations, banks, accounting firms and Lloyds of London that insured auditors. He has taught business law at the University of Toronto, and is the co-author of The Essential Concepts of Canadian Business Law (available on KOBO). He discusses how the superrich use unrecognized methods for the upward transfer of wealth in the tax, corporate and banking areas on https://janweirlaw.medium.com/, and Twitter@JanWeirLaw.



Jan D Weir

Retired trial lawyer, has taught Business Law at the University of Toronto, Author, text on business law @JanWeirLaw | http://jdweir.com