A new 600-page report by auditing firm Deloitte confirms what can only be described as the City of Oslo’s utter lack of control over a major public housing project. Deloitte has determined that the city paid as much as NOK 115 million too much for residential units in the scandal within its housing agency known as Boligbygg.
Newspaper Dagens Næringsliv (DN) was the first to uncover massive irregularities in how Boligbygg purchased housing units. Boligbygg is charged with acquiring, managing and renting out housing units at subsidized rental rates to Oslo residents who need help to find and afford a home.
In 2013, Boligbygg’s portfolio was also expanded dramatically as part of a political compromise to move Oslo’s Munch Museum from its long-time site at Tøyen to a brand-new and much larger buildig that’s now rising on the city’s eastern waterfront. Tøyen has long been a struggling neighbourhood that also is home to many of Boligbygg’s public housing units. To compensate the area for the loss of its major attraction, the Munch Museum, city politicians approved a program to buy around 600 new public housing units in other parts of the city, especially on its more affluent west side. The idea, according to commentator Aslak Borgersrud in newspaper Dagsavisen, was “to spread poverty” into other areas of the city.
Boligbygg was given the task of acquiring all the new housing units, even though it lacked the staff and expertise to do so. No one, not at the political level nor within Boligbygg, rang any alarms, though. Some students and external consultants were hired in to help purchase and manage the massive real estate program that involved hundreds of millions of taxpayers’ money.
Through a combination of incapacity, incompetence and sheer greed, the program quickly veered out of control. While many units were bought on the open market, real estate speculators out after quick profits also got involved. Many deals were done behind closed doors, Deloitte confirmed, referring to so-called “gentlemen’s agreements” that resulted in the city paying somewhere between NOK 80 million and NOK 115 million for residential property. Several sales were concluded without even an independent appraisal known as a takst.
Only 60 percent of one batch of 249 apartments were purchased at what Deloitte considers “reasonable market price.” Another 15 involved questionable prices while fully 170 were purchased at prices well over market value. When DN started digging into the questionable deals, and launched a series of prize-winning articles on them last year, the scandal was complete.
Heads have been rolling
Geir Lippestad, the otherwise highly acclaimed lawyer who had gone into full-time politics and became the Labour Party’s city government leader responsible for Boligbygg, resigned in the aftermath. Boligbygg’s entire board of directors has also been replaced, as have its top officials and several staffers. A Swedish carpenter who, along with a partner, sold 54 apartments to Boligbygg for a total price of NOK 240 million has been charged with corruption as has one of the men hired in by Boligbygg to buy properties for the city. The two sellers earned an estimated NOK 60 million on the deals.
Norway’s economic crimes unit Økokrim has launched an investigation, which led to the charges filed already, while the state financial regulator Finanstilsynet cracked down on two lawyers who handled several of the questionable real estate deals. Both lost their licenses to conduct future real estate transactions.
In addition to commissioning the report from Deloitte, city auditors are also examining Boligbygg’s operations. Oslo’s City Council has also proposed an open hearing on the scandal that’s likely to be full of political accusations.
DN reported on Wednesday that Boligbygg officials and employees and, according to Dagsavisen, politicians alike are pointing fingers at each other. The reports suggests they’re all at fault: Politicians who ordered the massive real estate acquisition program failed to follow it up, as did those who succeeded them after the election in 2015. Boligbygg officials themselves never warned that they lacked capacity and competence to carry out such a program. That left the city vulnerable to what Borgersrud calls a combination of stupidity and stealth. Deloitte points to “serious weaknesses” with Boligbygg’s organization and management. The top politician who took over for Lippestad, Kjetil Lund, told Dagsavisen that the scandal stems from the failures of management, the system and individuals to carry out the job.
Tøyen, meanwhile, remains a district in need of assistance, and taxpayers’ money has been squandered.