Can condos help people find reasonably-priced housing and achieve homeownership? Maybe but viewing them more as investment properties for years means there may now be less demand for condos in Canada:

It didn’t take long to figure out why there were so many empty units on the market: it turns out nobody wants to rent a condo, and nobody wants to buy one either. Condo rents have dropped over the past two years, and according to a recent report from the Canada Mortgage and Housing Corporation, or CMHC, condo sales have fallen by 75 percent in the Greater Toronto Area and 37 percent in the Vancouver area since 2022. The market has become so dire that buyers of pre-construction condos are having difficulty closing their purchases. Banks lend money depending on the present value of the property, and some condos are worth less now than they were when the buyers made their first deposit. As a result, developers have been cancelling construction projects. Some experts say we should have seen this coming…

The simple answer is that many condos built between the late 2010s and early 2020s were constructed not for living but for investment. Since 2000, there has been a steady increase in the proportion of condos used as investment properties. To my surprise, most of the investors were not faceless corporations or foreign investors. Research done by Statistics Canada shows that the typical condo owner is a middle-aged, middle-class Canadian couple. The reigning logic for the middle class was that buying a condo, renting it out to pay for the mortgage, and eventually selling the unit was a solid way to make money. This was especially true in the late 2010s, a period of low interest rates and weak rent control policies. Steady demand for housing, partially caused by increasing immigration, made real estate seem like a sure bet.

Developers knew that most pre-construction buyers were investors rather than people looking to live in the apartments themselves. As a result, they focused on quantity over quality. Vishakh Alex, an architectural designer working in Toronto, said that the directive from developers in the late 2010s was to squeeze in as many units as possible. It is telling that between 1971 and 1990, the median condo in the city was approximately 1,000 square feet, but between 2016 and 2020, the number dropped to roughly 650 square feet…

Yet, as city populations continue to grow, there’s nowhere to build but up. It hardly bears repeating that there is a housing crisis in Canada. Young middle-class people looking to buy their first homes can rarely afford the kinds of houses that they might have grown up in—a cute triplex on a tree-lined street in Trinity-Bellwoods, Toronto, for example, or a townhouse in Kitsilano, Vancouver, with a view of the ocean. And so it is to the condos we must go.

But it is also true that condo living does not have to be, and perhaps should not be, defined by the biggest developers looking to squeeze every drop of profit from mom-and-pop investors and homebuyers.

This shift toward investor properties sounds similar to what has happened in the United States in recent decades with homeowners increasingly viewing their properties as investments and expecting certain returns.

One difference here is that more of these condos might have been second homes. In Privileging Place: How Second Homeowners Transform Communities and Themselves, sociologist Meaghan Stiman explains how only a second home influenced how property owners viewed places and themselves with consequences for communities where these second owners were sometimes present.

If people in cities in Canada and the United States have concerns about investors buying too many properties, whether investors from other countries or institutional investors, what do they make of middle- to upper-class residents buying condos for investments? As the author notes above, these cities clearly need housing. American cities and metropolitan regions need housing. Should certain kinds of investors have limits or should developers be limited in how many investment properties they can construct?

One upside could be that the glut of investment condos does provide some attainable housing. The prices might not fall too far given their initial cost but what if investment condos and homes start becoming options for residents for whom they were not originally intended?