For the most part, one would expect condo fees to align reasonably well with inflation. If inflation is around 4%, and fees just went up by another 9%, it’s not unreasonable to think that something must be wrong with the board or management company. While in some cases this may be true, the real reason can be a lot more complicated.
Condo fees are composed of several “buckets” of different types of expenses, each contributing to the overall cost. These buckets include administrative costs, contracts, repair and maintenance, utilities, staffing, and contributions to the Reserve Fund. Each of these categories can be subject to varying degrees of cost inflation, and some have been particularly hard-hit in recent years.
One of the largest buckets, typically representing 30-45% of condo fees, is the contribution to the Reserve Fund. This fund is essential for covering major construction projects, such as roof replacements, structural repairs, and significant updates to common areas. The Reserve Fund ensures that funds are available when needed for these substantial expenses, preventing the need for sudden large assessments on condo owners.
The Reserve Fund contributions have been significantly affected by the skyrocketing costs in the construction industry. According to Statistics Canada, the construction price index has increased by over 90% in Toronto since 2020, with similar increases in other municipalities across Canada. This surge is driven by rapidly rising prices for materials, fuel, and, to some extent, salary increases for skilled labor. These factors mean that the cost of major repairs and upgrades has increased dramatically, necessitating higher contributions to the Reserve Fund to keep up with these expenses.
Another significant bucket of expenses is utilities. The price of fuel has been on the rise, and this has directly impacted the cost of heating, cooling, and electricity for condo buildings. Additionally, the carbon tax on natural gas has further exacerbated these costs, leading to increases that outpace general inflation. Utility costs are a substantial part of the overall budget, and when these prices rise, they push condo fees up as well.
Administrative costs and contracted services also contribute to rising condo fees. These services include property management, security, cleaning, and landscaping. With general salary increases and the rising cost of doing business, contracts for these services have become more expensive. As these costs increase, they are passed on to condo owners in the form of higher fees.
Repair and maintenance is another bucket that can experience significant inflation. Regular upkeep of the property is essential to maintain its value and livability, but the cost of materials and labor for even routine maintenance tasks has been climbing. This category includes everything from minor repairs to ongoing maintenance contracts, and increases here also contribute to higher overall condo fees.
That will be $60 for the truck charge, and $17,961 for the one hour of labour
In summary, the reason condo fees are rising faster than inflation is multifaceted. The significant increase in construction costs, driven by material prices, fuel costs, and labor expenses, has necessitated higher contributions to the Reserve Fund. Utility costs have also seen sharp increases, compounded by the carbon tax on natural gas. Additionally, rising costs for administrative and contracted services further add to the overall increase in fees. Each of these factors plays a role in pushing condo fees up at a rate that exceeds general inflation, reflecting the complex and interdependent nature of managing condominium properties.
TLDR
- Fees are made up of several categories of expenses
- One of these is the cost of major repairs (construction projects) which has seen dramatic increases in material and labour costs
- Another is utilities, which have gone up far faster than inflation.
- Even the cost of basic service calls for regular repair and maintenance have gone up substantially, as these costs are subject to gas prices, labour rates, and other factors that have seen above average price increases
- Your board and management should be able to explain this in a transparent way.