Can I afford a condo with high maintenance fees?

With average detached house prices in Toronto well above $1-million, the vast majority of first-time homebuyers have been priced out of the market. As a result, condos have become the starter home for most. When determining the price range of condo you can reasonably afford you also need to factor in the unit’s condo fees.

In addition to being the more affordable option, condo living has a lot of other benefits to offer young buyers. For one, many are clustered in the downtown core, within easy walking, biking, or transit distance to work. New condo developments also create an instant community of young, urban professionals you can socialize with. To some, the best part is rather than having to worry about mowing the lawn or shovelling the snow, their biggest concern is if the party room is booked or there’s a queue for the rooftop barbecue.

It’s the latter two items that can impact your monthly condo fees (also known as strata fees). Condo fees cover some utilities (typically water and hydro), property maintenance such as landscaping and snow removal in common areas, garbage disposal, and the all-important reserve fund, which sets aside a collection of savings for future major capital cost expenses, such as replacing the windows, roof, or other aging infrastructure.

Condo fees are based on the square footage of each unit and, in Toronto, range from about $0.50 per square foot to more than $1 a square foot. New buildings with little in the way of communal amenities tend to have the lowest fees, while high-end condos with fully equipped gyms, party rooms with full kitchens, short-term rental apartments for guests, and other perks cost the most. Older buildings tend to have higher fees compared to new because, like inflation, they almost always go up over time.

So if you’re in the market for a condo, rather than just asking yourself, “How much mortgage can I afford?” you need to look at your entire suite of ongoing monthly expenses, including condo fees. A mortgage affordability calculator is a great place to start.

Special assessments

With concerns that high condo fees can negatively impact resale value, some boards keep the reserve fund portion of the monthly fees low. As a result, if something major does need repair down the road—say, a leaky pool or water damage in the below-ground parking garage—the board may be forced to issue a special assessment, a one-time, project specific lump-sum fee that each owner is required to pay. These can run into the thousands of dollars.

If you’re concerned about rapidly escalating condo fees pushing you past the point of affordability, you should probably steer clear of buildings with lots of pricey amenities such as a pool and gym.

And if you’re really concerned, once you do buy, make sure you attend your condo’s regular board meetings, and maybe even get yourself elected to the board so you can have a bigger say in how things are run.

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