Nearly NOK 700 million worth of residential real estate purchases by the City of Oslo, for use as housing units for troubled or financially strapped welfare clients, are now the target of various investigations. The purchases were made from serial bankruptcy filers who are believed to have logged huge gains at the expense of Oslo taxpayers.
The deals were handled through the City of Oslo’s real estate operation called Boligbygg. Its staff of purchasing agents have earlier claimed that they followed real estate ads, went to property showings (open houses known as visninger), took part in “ordinary” bidding rounds and bought housing units on the open market.
Newspaper Dagens Næringsliv (DN) has, however, revealed in a series of articles over the past week that Boligbygg also engaged in questionable so-called “direct sales,” conducted outside the open housing market. Boligbygg officials have claimed that such deals are not “representative” of its activities, but DN reported on Wednesday that at least 148 housing units were bought by Boligbygg, on behalf of the City of Oslo, outside the open market in 2016 and so far this year.
Documents that Boligbygg has shared with DN show that it has purchased 33 housing units for a total price of NOK 106 million (USD 13.5 million) since March 2016. In addition it bought entire apartment buildings, or parts of them, directly and outside the open market for prices totalling NOK 570 million.
All of these purchases, totalling NOK 676 million, are now under probe by Boligbygg itself, external auditors, tax authorities and Norway’s state police’s economic crime unit Økokrim. At issue is why Boligbygg paid prices that DN has shown to be wildly inflated, in transactions involving sellers with a history of bankruptcies behind them. In most cases, they had recently bought the properties on the open market themselves, only to turn around and resell them to Boligbygg just weeks later, at prices hundreds of thousands, if not millions, of kroner higher than what they’d paid.
Two of the sellers have already been raided by police and tax authorities, while one of Boligbygg’s purchasing agents was arrested last week and charged with severe misappropriation of funds and breach of trust. He was arrested after Boligbygg officials themselves filed a complaint against him with police.
Weak administrative and political control
Boligbygg officials have admitted to deficient routines and a lack of control over the housing purchases. Most of them lack documentation and emails exchanged between sellers and buyers appear to have been deleted. Tom-Erik Holte, real estate director at Boligbygg, insists, however, that 65 percent of housing units purchased from 2015 until now were bought on the open market.
Political control of the purchases has only come when individual deals total more than NOK 50 million. Newspaper Dagsavisen reported this week that the city government (byråd), formed by the Labour, Greens and Socialist Left (SV) parties, has proposed raising that amount to NOK 100 million and eliminating any need for approval from the multi-partisan city council (bystyret), to expedite purchases at a time when the city needs housing units for welfare clients.
Challenging city’s attempt to alter approval process
The city government’s proposal, however, was made before the Boligbygg scandal broke, and opposition politicians are already trying to block it. “They (the Labour-Greens-SV politicians) are asking for full power to buy real estate for as many billions as they want,” Øystein Sundelin of the Conservative Party told Dagsavisen, “but they won’t get it from us.”
The Conservatives, however, appeared willing this week to go along with increasing the approval exemption to NOK 85 million, while the Reds party is skeptical, noting that the current NOK 50 million level hasn’t protected the city from paying too much for property. Even some city politicans from the city government’s own Labour Party are skeptical of eliminating the exemption limit, and seem only inclined to raise it to NOK 100 million. The matter was due to come up for a vote on Wednesday.