October 11, 2022 Published by Golden Horseshoe Chapter - By Dave Williams

Inflation: Good News for Condos? Not!

From the Volume 13, Fall 2022 issue of the CCI GHC Condo News Magazine

Let’s assume you own a restaurant. You had to lay-off staff and close for COVID. This spring, you decided to re-open. You discover that your staff has moved on to other careers where more money was available. So now you must hire “all-new” people at higher wages.

Now you call your food supplier and find out that your food costs have risen.

In its most simplistic form……this is inflation. The same trend is occurring in all industries. Most if not all products and services are costing more. Worst hit is anything made from petroleum (shingles, asphalt, gasoline); the list goes on.

Mitigating events are the Ukraine War, COVID related payments to people to help them shore-up their incomes, and supply shortages with pent-up demand.

To be sure it is too many dollars chasing too few available products.

The latest US figures indicate 9.1% inflation. In Canada it is *8.1% (June 2022)and maybe higher.

Statistics Canada has a great website where you can see updates on product prices monthly.

Products and Services

Everything is affected. Heather Scoffield, in her excellent article in the June 24th Toronto Star points out that gas prices alone are up 48% year over year and up 12% in May alone. Further she suggests that the CAA indicates that calls from drivers out of gas in April were up 23%. They were trying to push their gas supply to the limit.

The Toronto Star of July 9th, 2022, claims food prices are up anywhere from 20% to 76%.

I can confirm that a Starbucks Latte at the Enroute Centre on the 400 to Barrie is $6.13 now versus a little over $4 a few months ago. Ouch!

I think you get the message. So, what does this have to do with Condo Life?

Condo Boards Take Note… A potential double-whammy!

There is a possible two-way collision here. First and foremost, condo dwellers are not immune to inflation. Everything they buy is going up in price. Let’s look.


Interest rates have risen by at least 2.5%. So, what does this mean for a person with a $400,000. mortgage? The RBC mortgage calculator indicates that if you were at say 3.04% before rates started to climb and you must renew at 5.54%, your monthly payments are $549.68 more. (This calculation based on fixed rates with 25 year amortization. Rates can vary daily.)

This should be a heads-up to directors for the potential of resident owners possibly struggling……….. late fee payments? If so, have you considered your policies regarding this eventuality.

If your building/community is more senior/retiree oriented, their incomes if somewhat fixed will be under even greater pressure from the rising prices.

Here is the other side of the two-way collision. The Condo Corporation’s own monthly expenses will be affected.… ditto for any major replacement projects under way. Think here in terms of paving projects, roofing projects; both products based on petroleum.

Yes, major projects can be delayed but if you have read the CAO’s best practice** bulletin on “Reserve Funds” delaying only makes things worse and more expensive.

What to do?

Additional meetings devoted to brainstorming the issues are certainly called for. Run some “cash-flow” scenarios against the Reserve Fund to update projections contained in “the updated Reserve Study.” By updated we mean that costing for major projects should be brought into line with inflation percentages. Consult with your accountant/auditor for his/her input. Doing nothing or “riding out the storm” pretending the wind isn’t blowing is not a solution.

You are elected to “manage the affairs of the corporation.”

Flying the Aircraft

I was once grounded in “Deer Lake” Newfoundland during a windstorm. In the little coffee shop was the pilot and crew and I asked him how flying differed good weather to bad. He said this. “In good weather the plane basically flies itself. In bad, like what we are having now, we basically wrestle the machine onto the landing strip.”

Well, the current inflationary spiral can be likened to bad weather and the job of the board is to study possible ways to make for a soft landing.

A big decision for boards

What about annual fee levels? If you are favoring fee increases of less than inflation…… you may be mortgaging the future. This means that if inflation is at 8.1% and you only increase by 5%, it may not be appropriate.

The only way to figure this out is to run some of the afore-mentioned cash-flow scenarios. It is true that some of the services/products you contract for may not be reaching the 8.1% levels. Some may be more, and some may be less.

Very often though if a service or two is maintaining price levels because of a contract agreement in place they will have to make up for it at the next contract. Service levels may drop in the interim because of difficulty in hiring staff.

Every industry right now is trying to hire. I am told even the banks are not immune… .they too have people turning over to better paying jobs or stepping away from the workforce for a while.

You may ask will prices go back down after inflation abates? Probably not. A recession (if we have one) usually provides opportunities for lower prices however if a contractor or product provider has fallen behind, I think it is more likely they will backfill rates to catch up.

The Economy is like Climbing a ladder

A former teacher of mine (can’t remember which one) always used the ladder example. His/her point was that like climbing a ladder where you need to pause and catch your breath, the economy behaves the same way. It pauses to re-establish itself without inflation. It also pauses to let debt levels go down. Will it get better? Of course, it always does just like the stock market.

The best question I have heard about the current inflationary spiral came from Tom Keane on Bloomberg Surveillance. His question to a European financial analyst was “what is the character of inflation in Europe?”

They went on to discuss how inflation or the causes of, can vary continent to continent. To be sure our situation probably has some unique characteristics. Think about it this way. Germany for example may worry about whether they will be able to heat their houses this winter.

We on the other hand have greater distances to drive (using gas) to get to work or shopping (than in Europe) so our costs for those activities may be challenging.

The fascinating part of all this

Ian McGuigan, in the Globe and Mail of June 25th 2022, points out that Daniel Tarullo an appointee to the Federal Reserve in the US, upon stepping down after 8 years, wrote an essay on “Monetary Policy without a working theory of inflation.”*** You can read the essay on the internet but basically, Mr Tarullo says that the dynamics of inflation are not necessarily understood. What I take from this is that what causes inflation today, may be far different from former inflationary times.

So, all this talk about governments being slow to react might be true but it may be difficult to see the train coming and to know what remedies will stop it, short, of course, of the right monetary policy.

We live in a time period when housing prices are and have been through the roof. This can often mean that mortgages are a very high percentage of the price of the home/condo. It is said that in today’s economy there are multiple mortgages on many homes. The point here is even if governments can see the inflation train coming, they are often reticent to slam on the brakes too quickly for fear of putting folks out of their homes. In fact, in 2008 and 2009 in the USA that exact thing happened.

I’m old enough to remember wage and price controls of the late 70’s and early 80’s. At that time interest rates rose to 19% and 24%. Central Banks have learned a lot since then and those extremes will not be needed again. Still, in that time period, we as manufacturers needed to apply to Ottawa if we needed to raise prices…… same for increases in wages.

Now, slowing down demand by increasing interest rates seems to work if caught reasonably early in the cycle.

Directors and Residents...

Do your homework and proceed collectively towards what you think will serve your community best. Sticking your head in the sand and hoping everything will look after itself will not likely work well.

We have probably worn out our plea to Condo Boards to establish committees. Here is a great opportunity to reach out to some residents experienced in business and finance. I bet you have some people like that in your residency. You may be surprised at some of the ideas that emerge from discussions.

*Statistics Canada Website, Consumer Price Index

** Condominium Authority of Ontario; “Guide to Ensuring Healthy Reserve Funds”

*** Daniel Tarullo; Monetary Policy without a Working Theory of Inflation.

Heather Scoffield, “Playing Chicken with Inflation” June 24th 2022, Toronto Star

Ian McGugan, “It might be time to admit we just don’t know that much about Inflation” Toronto Star June 25th 2022.

BNN Bloomberg, Bloomberg Surveilance

RBC Mortgage Calculator

Dave Williams is a graduate of York University and retired corporate executive. We would like to hear your comments about this or any of our articles. Please address them to


This is solely a curation of materials. Not all of this information is created, provided or vetted by CCI. Some of the information is only applicable to certain provinces. CCI does not make any warranties about the reliability or accuracy of any information found in the materials on this website. The information is not updated to reflect changes in legislation or case law and therefore may not always be current and up-to-date. We suggest you seek professional advice with respect to your specific issues or regarding any questions that arise out of the material. We will not be liable for any losses or damages in connection with the use of any of the material found on the website.

Back to Results Back to Overview

© 2024 CCI National