Higher inflation has impacted operational expenses, insurance, reserve fund planning and capital projects, but the ongoing threat of tariffs is beginning to incite additional concerns within condo corporations.

“It’s triggered a new wave of tensions set to disrupt supply chains again and fuel inflation, particularly in construction and materials—right where it hits your reserve fund planning,” said Will MacKay, an investment advisor and portfolio manager with CIBC Wood Gundy.

With more volatility, condo boards will need to balance rising costs against long-term capital needs to ensure financial stability for owners, he advised. Yet many reserve fund studies already underestimate the true cost of major repairs and replacements due to material shortages, labour constraints and construction inflation. This concern was echoed across a panel of speakers during an event hosted by CCI Huronia on March 21.

“We may see some price escalations in tendering; a recession could delay some projects. Contributions may need to increase sooner than planned. ” MacKay added. “When inflation is above expectations, your reserve fund planner is going to put some increases in there to get you back to that cost program you should be on. This may mean you need to accelerate your reserve fund study update if you have a large project.”

Since the pandemic, many condo corporations have already seen much higher prices for capital projects. Omar Khan, market development manager at Normac, particularly noted how inflation has impacted insurance premiums and reserve fund contributions.

For insurance premiums, condos corporations should be insured to full replacement cost. However, the growth of these costs has exceeded inflation. He advises that condo declarations have a clause in their insurance sections about obtaining appraisals every year to three years to guarantee they are properly insured.

Capital project planning must also account for inflationary pressures as labour and material cost hikes continue. “The challenge for condo corporations is how to responsibly save for repair and replacement of common elements and systems, while setting up adequate reserve fund contributions,” said Khan. “Expenses coming out of these funds may incur over a year and sometimes decades, which means planning ahead to ensure the right amount is contributed annually is imperative.”

The availability of construction labour is expected to decline for another decade, creating a supply and demand issue. BuildForce Canada estimates nearly 300,000 skilled trade workers will need to enter the industry by 2032 to meet demand amid a looming wave of retirement. In Ontario, the average trade worker is now more than 50 years old.

Demand for skilled labour will drive up wages and, ultimately, the cost of projects. Meanwhile, construction material expenses are another impact.

“We routinely see month-to-month fluctuations on a variety of prices; however, what is most impactful when communicating to your boards about the role material prices play in construction cost increases is the long-term trends,” noted Khan.

According to Statistics Canada, between February 2020 and December 2024, there have been price increases of between 25 and 45 per cent for materials that condos use to a significant degree. For instance, concrete, glass and other non-metallic mineral products increased by 37.7 per cent.

The total cost of projects, such as window replacements, can drastically increase when accounting for both high levels of labour and materials. Condos also use materials that contain petroleum, such as asphalt shingles on roofing, which adds more to the end cost.

Cement makers are already expecting large increases over time. Tariffs may add further pressure. “Every material is going to be slightly different. We haven’t seen a lot of price increases coming through yet,” he said. “Right now, we’re seeing a slight decrease in order of materials from the U.S., but nothing at scale yet.”

Through his correspondence with industry members, ahead of the April 2 tariff rollout, one large concrete supplier predicted having to increase its price of concrete by more than 20 per cent overnight, while some members of the wood industry forecasted a delayed reaction.

Khan suggests reaching out to vendors to obtain annual material-related costs guides and forecasts and then sharing with board members to anticipate changes.

“Ask your vendors and providers what they’re doing to be proactively ready for it and what impacts could be on a variety of areas,” he said. “We may be back in the area of heightened inflation, which has been on a reprieve over the last few years.”

Financing Options

Some condos are already contending with insufficient funds and either deferring work, imposing special assessments or undertaking commercial loans.

“More and more in today’s market we are seeing shortfalls in amounts that condominium corporations have already saved toward their capital repair projects and an escalation in the rate at which they have to save for future projects,” warned Lyndsey McNally, director at Condominium Lending Group and president of the Toronto & Area Chapter of the Canadian Condominium Institute.

If condos choose to defer a current project, she suggests doing so very carefully. “Sometimes, in order to push projects further into the future, you might have to make interim or emergency repairs that come at a cost,” she said. “How does that impact your overall savings plan if you’re introducing new costs into your reserve fund study that weren’t already there?”

Condos should also review how the cost of that project will inflate over time and consider potential effects on unit values. “The board really needs to be mindful that they’re not making decisions that limit the owner’s ability to get the best value in resale and to protect and preserve the investment they’ve put towards their home.”

Phasing projects over several years is another strategy, which could add a “surprisingly significant” cost when factoring in multiple mobilizations, such as getting a contractor and all their equipment to the site.

Special assessments are another way to manage financial shortfalls. “Boards of directors have authority already built into by-laws to levy assessment for extraordinary expenditures,” she said. “They are able to collect it just like a condo fee with the same protocols.”

However, boards are struggling to unexpectedly impose this onto their communities due to higher dollar values attached to special assessments in today’s economy. McNally finds this isn’t the fairest approach when considering reserve fund legislation in Ontario.

“The whole purpose of the way we plan reserve funding is that every condo owner in the corporation pays their fair share of capital repair costs over time,” she noted. “A special assessment creates an imbalance where the current owner becomes responsible for all these costs because of past underfunding.”

Another strategy involves commercial loans, which are deemed more affordable. “A loan can be taken out on behalf of the condominium corporation and not individual unit owners,” McNally advised. Doing so doesn’t impact owners’ personal credit, the equity in their homes, or their ability to borrow for other personal reasons.

“The owners today in a condo corporation can choose to allocate the costs of the project over its useful lifespan,” she added. “This allows the owner, now, to share some of the costs with the future owners who also benefit from the work done by the condo corporation.”

Condos have two loan structures to consider, the first being a loan on behalf of all owners. “With this structure we’re able to take advantage of some of the cash flow in the reserve fund and slow down the rate that condo fees need to increase, which minimizes the impact of the loan repayment through the condo fees, thereby reducing the burden on the individual unit owner.”

In such a case, it’s important to consider whether the condo fees will stay reasonably competitive when compared to fees of similar available real estate on the market.

Another loan structure is a hybrid or opt-in-opt-out loan, where the condo levies a special assessment yet each owner can choose to either pay the sum upfront or participate in long-term loan repayments through the condo corporation and future condo fees.

This approach drops a significant administration burden onto condo corporations and creates risk in the long-term management of prepayment. As McNally explained, if the participating owner wanted to sell the unit while the term is locked in, they may want to pay out their obligation rather than pass the loan payments onto the future owners. The condo corporation will then hold that as a liability to be paid out in the future. The funds, however, must be managed correctly to make sure they are still available to cover the loan when it matures.

Secondly, with this solution, there is no way to minimize the impact of the loan repayment on the condo fees. Participating owners would see immediate increases in their fees instead of being able to phase increases over time.

In order to borrow money, a condo corporation has to pass a borrowing by-law, which requires the consent of a majority of all units in the condo. In this case, the board of directors won’t feel as much burden from financial decision-making.

“The board doesn’t have to impose what they believe to be the right strategy for their community,” said McNally, adding that due diligence is crucial when facing shortfalls for capital projects. Boards should understand and consider all options and be prepared to discuss their rationale.

Staying On Top of Operating Expenses

Maryann Barrie, property manager with York Simcoe Management Services, has been helping boards navigate higher operating costs, particularly with utility rate increases, insurance premiums and labour costs for skilled trades.

“Over the past years, we’ve all seen increases in operating expenses with some that have had significant impact on annual budgets,” she said. “As a property manager, I specifically work towards ensuring the best value for the operating cost through negotiation and bulk servicing tactics, which is my main goal. I also work towards proactive scheduling to support cost-savings measures, which help manage and optimize expenses for my portfolio.”

She advises that condos actively negotiate contracts with vendors to secure multiple-year terms and lock in rates that protect against price increases, as well as consolidate contracts for landscaping, security and maintenance to reduce overhead costs.

“One of the contracts I’ve implemented recently is to include salt and sand winter maintenance as opposed to a per-use application, she said. “By doing this, over the last few years, it’s significantly decreased the operating budget and gives a set budget for my clients as well.”

A preventative maintenance program can include maintenance schedules to avoid unnecessary and unexpected emergency repairs, regular inspections, which include reporting within vendor contracts, crack repair in asphalt to prolong the life of common elements, and reminders and educational tips in newsletters, which also extends to seasonal matters like air conditioning units and hot water tanks.

To reduce the cost of energy-efficiency upgrades and audits that identify opportunities in lighting, heating and cooling systems, condos can stay on top of incentives and programs by building healthy vendor relationships. To reduce facility consumption, owner education is key for items like smart thermostats or irrigation timer systems.

Condos are advised to update insurance appraisals to avoid surprise increases in annual insurance policy renewals and to add volunteer and legal expense insurance coverages. Condos can create volunteer committees, jumpstart community events like “garbage bin days” for waste management savings and introduce condo management software to streamline processes and reduce administration costs.

The road ahead

When integrating the impact of tariffs into operating costs, there are many components creating uncertainty, such as what will be affected and how long tariffs will endure. According to CCI B.C., tariffs are expected to have a minimal impact in the next year, with general costs ramping up for corporations later on in 2025 and at the beginning of 2026.

“It’s not a time to panic, but it is a time for discipline, MacKay cautioned. “The economic road ahead may include rate cuts, recession risk, international volatility, but with a thoughtful approach to investing and reserve fund planning, your condominium corporation can remain financially healthy and well positioned.”