Why is YOUR MONEY Bailing out Developers?

There are a lot of questions – and issues – around the Prime Minister’s announcement that the government will buy up unsold condos in the Vancouver market – and convert million dollar condos into “affordable housing”.

Let’s be realistic. These condos aren’t selling because they are overpriced. People can’t afford them. The right answer is to let the price come down, but that means developers might take a haircut.

Instead, the government intends to buy million dollar condos from developers (presumably at close to the full asking price so that developers don’t bear a significant loss), and then subsidize their operation for years to come (condo fees, maintenance, property taxes, interest on money borrowed to buy and maintain the units) because these will be allocated on a “rent-to-own” basis.

That means the government continues to be the owner of the units until the occupants eventually pay off the cost of the unit, which will take many years for a condo valued at a million dollars. These purchases today, and then the long term subsidies, keep the costs affordable for lower income people, and ensure developers don’t take a loss – but the price tag for Canadians is very high.

All this so that developers don’t have to absorb the losses from their poor investment decision to build thousands of highly priced (and many are just 500 sq. ft) condos that people don’t want to buy. Some people call that “privatizing profits but socializing losses”.

The question you should ask this government is: “why are you bailing out developers with Canadians’ money?”

For Further Background

Globe and Mail editorial: Ottawa Should Bail on its Plan to Bail Out Condo Developers

National Post: ‘Socializing losses’: Critics pan federal plan to acquire unsold condos from developers in B.C.