09/03/2019 16:19 EDT | Updated 09/03/2019 16:34 EDT

Is It Worth It To Buy A Condo In Canada Anymore? New Book Warns Of Risk Of Collapse

Taxpayers may find themselves on the hook for bailing out bankrupt condo corporations.

Hyungwon Kang / Reuters
Condo buildings line both sides of the Gardiner Expressway in Toronto, Aug. 31, 2017.

Beset by overly ambitious developers, absentee landlords and rising costs ― among many other things ― Canada’s condo corporations could one day collapse, an Ontario academic is warning.

University of Windsor professor Randy Lippert’s book “Condo Conquest,” which comes out in paperback this week, describes an often dysfunctional world of condo development and governance in Toronto and New York. 

Lippert argues the 50-year-old ideal of the condo ― a vertical community of urban homeowners ― is disappearing in favour of commodified investment properties and short-term rentals.

Watch: How Canada’s housing market is impacting jobs. Story continues below.


Among many issues highlighted: Developers often sell new condo units promising unrealistically low condo fees ― which spike very quickly after the building’s move-in date. That means owners face much higher costs than they expected, and will often resist spending money on maintenance work. As a result, buildings can quickly fall into disrepair.

And Lippert expects maintenance costs to keep rising faster than incomes, which could prompt some condo corporations to go bankrupt eventually. 

“I think there will be a number of condos where those fees will become unsustainable and people will want to get out, and there’s a point at which it (all) becomes unsustainable,” Lippert said in an interview with HuffPost Canada. 

“We saw this in the U.S. in 2008, where some condo corporations had to dissolve.” 

Condos account for an increasing share of housing in Canada’s major cities ― it’s 21 per cent of all residences in Toronto today, more than double what it was 20 years ago. So the sector has in essence become “too big to fail,” and the result is likely to be a bailout at the taxpayers’ expense, Lippert predicts.

Governments could institute a bailout, for instance, by lowering the property tax rate for people in struggling buildings, Lippert suggested.

Because condo boards are often secretive about finances, and because owners are often unaware of their condo corporation’s financial state, condo owners may not know that their building is in trouble until it’s too late, Lippert warned.

One problem the book identifies is that developers often sell condos promising unrealistically low monthly fees. Costs spike soon after the move-in date, and buyers end up owning properties they would not have bought had they known what maintenance would really cost. When they resist spending on maintenance, buildings can very quickly fall into disrepair.

Rene Johnston via Getty Images
Construction cranes fill the sky at a site at Queen's Quay in Toronto, June 12.

The book also chronicles the growing tension between condo owner-occupiers and investor-owners, both individual investors and corporations that own many large units. 

These two groups have different interests. Owner-occupiers are willing to spend more to maintain the quality of life in a building; investor-owners just want the lowest possible costs to maximize profits. In between these two are condo renters ― who Lippert says end up with all the blame in conflicts between condo owners.

In the world of condo boards, renters are seen “as variously immoral, risky, unsafe or transient.” And yet, Lippert argues, renters are essential to the whole thing. Many condo buildings would not have been built had it not been for assumed demand from renters.

Developers prevent banning Airbnb

The Airbnb phenomenon is changing condos, turning some buildings essentially into hotels, but condo boards may not be able to change that. This is because developers can still control the governance of a building after they hand it over to a condo corporation. 

Developers write the declaration, or the “constitution,” of the condo corporation, and often they will dictate that short-term rentals are allowed.

It’s often impossible to change that rule afterwards, Lippert says, because condo owners are largely disengaged from governance issues and don’t show up for meetings, making it impossible to reach quorum to change a by-law. This is especially true in buildings that already have many absentee landlords.

I think there will be a number of condos where those fees will become unsustainable and people will want to get out, and there’s a point at which it (all) becomes unsustainable."Randy Lippert, author, "Condo Conquest"

Lippert would like to see developers’ ability to control condo boards reduced. For instance, governments could write generic condo board declarations that would apply to new buildings until tenants write their own rules.

More generally, Lippert wants to see more government oversight of condo corporations, and he praises Ontario’s creation of a Condo Authority, a sort of consumer-protection agency for condo dwellers.

But he notes that these agencies are quasi-non-governmental organizations, often heavily influenced by the industry they regulate. He would rather see fully-controlled government agencies in charge of regulating condos.

All of which is not to say that all condos are bad and headed for financial disaster, Lippert stresses. 

“Some buildings are functional. I spoke with people where clearly things were going quite well and (there was) no reason to be concerned,” Lippert said.

In the end, the real trick may be recognizing which is which.

“Condo Conquest,” from UBC Press, was released in paperback on Sept. 1.