September 2014
The Condo Game, a CBC documentary, presents a disturbing view of the condo boom in Toronto.
The program presents an industry plagued with problems which, unless addressed, could continue to cause problems for condo owners and the city.
Toronto is the fastest growing condo market in North America. It is also, according to the documentary, one where developers are putting money ahead of quality. Developers are able to build what they want and do what they want. Toronto has virtually no control over this development. Everyone is making money from the condo buyer in a game rigged against them.
There are now almost ¼ million condo units in Toronto and many experts think at least half are owned as investments.
The population in Toronto is expected to increase by 2.5 million over the next 20 years. To house this increased population we are developing tall residential towers at an unprecedented pace. The number of condo towers in Toronto has doubled over a decade to 1300. The units in these towers are ideal for millennials, young and single, who want to live in the city.
Spring 2011 was when glass began falling from new condos to the street. This is viewed by some as a public indication of poor condo construction and the disruptive long term impact it can have on condo owners and the city.
Problems began in 2005 when greenbelt legislation was implemented to prevent suburban sprawl. This legislation combined with two decades of low interest rates and an influx of investment dollars have created an unprecedented condo development boom.
People began and continue to purchase condo units before buildings are built. These buyers do not always get what they think they have purchased and documentation has become too complex for the average consumer to understand.
Consumers believe the condo game is about home ownership. What they do not realize is that it has much to do about money markets. The industry is structured as a commodities play. It involves reselling of units without moving in (flipping), money laundering and hiding financial assets.
Some buyers have never seen the property they purchase and have never been to Canada.
In 2011, investors began flipping units before they were built. The tax loss to Toronto is estimated to be $230M for 2011. Flipping units sent prices up an estimated 30%.
For investors, faster development of smaller and cheaper units is more appealing. This has resulted in deficient buildings and has become a problem for home owners.
The city does not provide a clear vision. This provides developers with considerable leeway in what they build. The minimum building code currently used by developers means that today’s towers are not as durable as those which were built 20 years ago. Unit problems, falling balconies, leaking membranes in garages, doors that don’t work, faulty piping, poor heating and air conditioning, leaking and mould are just some of the problems encountered in condos.
Toronto’s experience is similar to Vancouver 25 years ago. A Commission of Inquiry confirmed that people were purchasing inferior quality condo units. This resulted in an overhaul in legislation. While housing in Vancouver is too costly for most, many condo units are empty. Some are second or third homes for wealthy jet setters. Businesses that open near condo buildings and not realizing how many are empty do not survive for long. This is not a desirable scenario for the future of Toronto.
Rentals in condo buildings are not restricted. Future estimates of rentals in condo buildings are 60% to 80%. There are concerns about investor ownership, renters with no ownership stake and transients. Young families in condo buildings are few.
Ontario Municipal Board
The ability of Toronto to properly plan and direct development has been adversely affected by the Ontario Municipal Board (OMB).
The Ontario Municipal Board is an independent administrative tribunal with responsibility for hearing appeals and deciding contentious municipal matters. They settle disputes on community planning issues. Their process is seen by some as costly, requiring extensive legal experience and inhospitable to community involvement. The OMB is perceived as taking a simplistic perspective that generally supports developers over community interests.
The City has few if any options once the OMB renders a decision in support of developers. In February 2012, Toronto City Council asked the province to free the city from the Ontario Municipal Board’s jurisdiction. Councillor Josh Matlow was quoted in the Toronto Star as saying “We’ve heard time and time again from our residents that there’s an inequitable playing field…Developers simply have a better chance at the OMB because they have the financial resources, the ability to get planners and lawyers, anything they need to be able to argue their case.”
Reform is currently being pushed by Jennifer Keesmaat, Toronto Chief City Planner. She wants to give the city more authority to plan buildings and areas of the city. The City has been reactive and allowing developers to set the standard. The City needs the ability to plan for the future. This future, according to Ms. Keesmaat, includes more family friendly midrise density. Midrise density buildings are seen as more sustainable and less risky.
There is little incentive for developers to exceed minimum building standards. Once a building is finished and registered, its upkeep becomes the responsibility of the condominium corporation. The developer will have earned its profits and moved onto the next project. Condo boards, volunteers not well equipped to manage a condo building, must deal with problems resulting from building standards many believe are inadequate. The task becomes more difficult as the building ages and there are more problems with leaking pipes, defective windows, flooding and other structural issues.
Currently popular are window wall exteriors.
These are inexpensive and easy to install. They are also an environmental and maintenance nightmare that are illegal in many states (USA) and countries. Problems with these glass exterior walls include mould, maintenance and thermal stress.
St. James Town was built in the 60s for housing the middle class. It may also be a precursor to what some of the newer condo buildings will become. As of 2011, those residing in St. James Town have a mean income 35% below the city average. There are also many social, environmental and safety problems.
Planning for Today and Tomorrow
Condo development returned ¼ billion dollars in fees to the city in 2012. This money is being used to refurbish aging city infrastructure. Yet city building is about more than money. Current economic prosperity should not preclude good planning.
City building requires a 50 or 60 year planning period and that is not something done by developers. Developers build today to sell tomorrow. The city needs to take on this role. This planning should incorporate community building events such as farmer’s markets, schools and parks which are part of what makes an area livable.
This article is a summary of The Condo Game, a CBC documentary. It aired in November 2013 and will re-air on September 11 at 9 pm on CBC-TV. It can also be viewed at www.cbc.ca/doczone/episodes/the-condo-game.
