The Canadian Real Estate Association (CREA) recently released its latest episode of its REAL TIME podcast, featuring yours truly and CREA CEO, Janice Myers. On it, we discussed the draft business case CREA released earlier this summer that outlines a path forward for REALTOR.ca as a taxable entity and the incredible opportunity that could provide.

Here are two key takeaways of our podcast conversation:

1. I fully acknowledge and understand any concern and hesitation that’s been shared with us about the proposed transition — REALTOR.ca is our most valuable asset. But I firmly believe our biggest risk is inaction. Let’s seize this incredible opportunity to ensure REALTOR.ca continues to be the trusted platform for all things Canadian real estate — with REALTORS® planted firmly at the centre of it all.
2. If you haven’t already, please read the draft business case, which can be found at CREA.ca/REALTORinc.

REALTORS® have seen firsthand how REALTOR.ca has paved the way for how real estate is marketed and consumed in Canada. The platform has become a cornerstone of our industry, providing unparalleled value for both our business and consumers.

REALTOR.ca has evolved from a public-facing website to a comprehensive platform with integrated components, like native apps for iOS and Android for both REALTORS® and consumers, and the REALTOR.ca Data Distribution Facility (REALTOR.ca DDF®), which facilitates the consistent and accurate distribution of real estate listings across 10,000 advertisement, franchisor and member websites.

We are the proud owners of a REALTOR®-centric tool that commands more than 50 per cent market share¹ in Canada because of the trust and appreciation of the consumers who turn to it. As a business tool, there’s really no comparison to the reach and exposure it provides.
How we use the internet has changed dramatically in the last decade. You could even say that about five years ago. To help ensure REALTOR.ca’s future success, we need to change our approach to maintaining such a powerhouse platform.

Year after year, competition in the tech landscape grows, consumers expect more and operational costs increase. The status quo isn’t sustainable.

CREA is proposing it turn REALTOR.ca into a taxable, wholly owned subsidiary as both a financial necessity and a strategic move to secure REALTORS® at the centre of Canadian home buying, selling and renting journeys.

Why change is essential

Currently, REALTOR.ca is operated by CREA under its not-for-profit status. While this structure has served us well, under this model, REALTOR.ca isn’t able to pursue new revenue streams or engage in certain business-related activities. Transitioning to a business model would give us the ability to unlock that potential, better positioning us to stay ahead in an increasingly competitive market.

PricewaterhouseCoopers (PwC) conducted a comprehensive analysis and presented an overview of the opportunities this transition could offer in the draft business case.
Based on initial revenue and cost projections associated with the transition, operational enhancements and pursuit of revenue opportunities, REALTOR.ca as a taxable entity could generate significant estimated revenues that could help reduce dependence on CREA funding from member dues. In other words, the current allocation of my annual $310 CREA membership dues that goes to REALTOR.ca (43 per cent) could be reduced — allowing CREA to instead allocate those funds to equally impactful priorities like government relations work and enhancing and protecting the REALTOR® reputation.

The dollars and cents are important but shouldn’t be what motivate you to consider this path forward. What’s at stake here is possibility. We can’t do more or be more by staying the same. If we want to remain the go-to choice for consumers, we need to set ourselves up to take advantage of all that’s possible for REALTOR.ca.

The benefits of a taxable subsidiary

Turning REALTOR.ca into a taxable entity could create other key benefits:

1. Innovation. With the ability to generate new sources of revenue, REALTOR.ca could adopt new technology like artificial intelligence, reach new demographics and introduce new features and tools.
2. Enhanced value for REALTORS®. REALTOR.ca could deliver things like higher-quality leads, better tools for managing client relationships and new features that enhance the overall REALTOR® experience.
3. Long-term viability. Creating opportunities for REALTOR.ca to better compete in today’s fast-paced tech landscape is crucial for maintaining our competitive edge and continuing to provide the high level of service that consumers have come to expect from the platform.
4. Self-sustainability. Reducing REALTOR.ca’s dependence on member dues could enable CREA to allocate more resources to core services like government relations, professionalism and promoting and protecting the value of working with a REALTOR®. This could help better position both entities for greater long-term sustainability and success.

The path forward

I’ve had the pleasure of connecting with many across the REALTOR® association community on this proposed transition. We know what’s at stake.

As stewards of this powerhouse brand, we have a duty to ensure its future success. The proposed transformation is a responsible and forward-thinking step towards securing REALTOR.ca’s market leadership in an increasingly competitive environment while also keeping REALTORS® firmly at the heart of that future.

Once again, I encourage you to visit CREA.ca/REALTORinc to read the draft business case, check out the other resources and share your feedback. We’re excited about what’s possible and look forward to bringing this to a membership vote at CREA’s 2024 Special General Meeting on Wednesday, October 23.

James Mabey
CREA Chair

¹ Comscore

A report issued by PwC Canada and Urban Land Institute reveals the 2024 Canadian real estate market will be complex. It indicates that recent trends will magnify — trends like the division of real estate and difficulties for companies, stemming from rising interest rates and the need for more capital.

That said, the report also outlines insights that show adaptability and resilience in the industry. Generally, real estate companies are confident about demand — thanks to the country’s population growth from immigration — and focused on creating value through digital transformation investment and asset optimization, along with keeping up with trends like generative AI and housing affordability among others.

Here are some key trends outlined in the report.

Outlook for capital availability

Compared to previous years, many more 2024 survey respondents expect various types of debt and equity capital will be undersupplied, adding to the financing challenges real estate companies deal with and affecting their 2024 investment strategies and development plans.

“This year it was all about capital. There is compelling data to show that scarcity of capital has impacted investment volumes. However, this creates opportunity as we saw many new private debt funds established to take advantage of this unique moment in time,” Frank Magliocco, real estate leader for PwC Canada, notes.

Many factors are holding industry activity back, like interest rates predicted to stay higher, longer, climbing financing costs and less available capital for real estate. This presents an opportunity to strategize about how to add long-term value — perhaps by adopting transformative technology in construction, generative AI or process changes and innovation.

All hope is not lost

Some hope can still be found among the everpresent housing affordability issues in multifamily housing. Recent initiatives from government, like no GST on purpose-built housing and housing approval streamlining, are helping, as are solutions from the industry.

“Market forces are challenging public policy objectives and corporate ESG goals. Industry leaders are keenly watching this space as they look for some respite from the economic headwinds, inflation and volatile interest rates,” Richard Joy, executive director, Urban Land Institute, Toronto, mentions.

Long-term sustainability goals balanced with short-term financing challenges

Environmental, social and governance (ESG)’s importance remains high. Considerations around ESG are prominent in the industry, though some industry players are being measured. There is plenty of potential for business value from ESG and regulatory changes are happening. With less available and more expensive financing, those with strong ESG records will benefit from attracting investment and finding new capital sources.

The outlook for 2024

The report notes that multifamily and industrial real estate products will be top choices for the second year in a row, followed by retail anchored by grocery. Office spaces continue to decline as a favoured asset class, which is compounded by the move to hybrid work — something that’s majorly impacted corporate real estate.

Read the full report here.