For years, Canadian developers, lenders and real-estate investors profited from a housing market in which almost any price could be justified—as long as somebody could qualify for the mortgage.
That was mistaken for value.
The ability to borrow enough money to purchase something does not establish its true value. It merely proves that a lender was prepared to finance the price.
Now the market is delivering its verdict. Thousands of newly built condominiums remain unsold because buyers either cannot—or will not—pay what developers are asking.
Instead of allowing prices to adjust, Ottawa and British Columbia have announced plans to use Build Canada Homes and BC Housing to turn more than 2,200 unsold condos into affordable housing.
The governments reject the word “bailout.” But until purchase prices and financing terms are published, taxpayers have every reason to be suspicious.
Where Was the Bailout for Ordinary Buyers?
Many Canadians bought condos near the top of the market. They supplied the down payments, qualified for enormous mortgages and accepted the risk.
Some are already underwater: their mortgages exceed the current value of their homes.
If one of those owners loses a job, falls behind on payments or must sell, government does not arrive with a cheque based on what theless what the owner originally paid. The homeowner absorbs the loss. The bank may foreclose. Years of savings can disappear.
Why should a developer holding 50 or 100 overpriced units receive different treatment?
The individual homeowner may lose the family home. The developer faces a commercial loss on a business venture. Yet it is the developer who may gain access to a massive taxpayer-financed buyer.
That is not equality. It is one set of market rules for ordinary Canadians and another for large corporate interests.
Profit Was Private—Will the Loss Be Public?
When condo prices were rising, developers kept the profits. Banks collected the interest. Investors enjoyed the gains. Governments collected taxes and development charges.
Nobody suggested sharing those profits with taxpayers.
Now demand has weakened, and the unsold units are revealing what buyers believe they are actually worth.
Developers remain free to keep them. They can rent them, reduce their prices, renegotiate their loans or continue paying the carrying costs. If they cannot meet their obligations, lenders can take losses and projects can enter receivership.
That is not government “forcing” anyone to sell. It is the normal consequence of taking a commercial risk.
Government is now proposing to put its thumb on the scale by becoming the buyer the market failed to produce.
The Market Is Discovering the Real Price
A condo listed at $700,000 is not necessarily worth $700,000. If informed buyers will pay only $500,000, then something close to $500,000 may be its actual market value.
The developer’s land cost, construction cost and expected profit do not determine what the finished unit is worth. Businesses make mistakes. Land can be purchased too dearly. Demand can be overestimated. The wrong type of units can be built.
Ordinary business owners are not guaranteed recovery of their costs. Why should condo developers be different?
If government pays $650,000 for a unit buyers value at $500,000, then resells it for $500,000 in the name of affordability, taxpayers have absorbed at least a $150,000 loss.
The home did not become affordable through greater efficiency. The unaffordable price was preserved, the developer was protected and the difference was transferred to the public.
Existing Owners Are Trapped Either Way
This situation is already painful for people who purchased comparable units at inflated prices.
If prices fall, their equity disappears and some become trapped in mortgages larger than their homes’ value.
But using public money to prevent a market correction does not make those owners whole. It merely freezes inflated prices, keeps future buyers locked out and forces existing taxpayers—including struggling homeowners—to help protect developers and lenders.
The homeowner can therefore lose twice: once through the declining value of the condo and again through the taxes needed to support the rescue.
Government cannot honestly claim to make housing broadly affordable while preventing prices from falling to levels buyers can afford.
If Government Buys, Publish Every Number
There may be a legitimate case for government buying completed homes if they can be obtained more cheaply and quickly than building equivalent public housing.
But the safeguards must be uncompromising.
Every purchase should disclose:
- The developer and beneficial owners
- The original asking price
- An independent distressed-market appraisal
- The government’s purchase price
- The mortgage or lender being repaid
- The final rent or sale price charged to the occupant
- The complete taxpayer subsidy
- All strata fees, repair risks and future liabilities
Purchases should be conducted through open competitive bidding, with government paying less than demonstrated market value—not enough to recover a developer’s costs or preserve an expected profit.
Affordable Housing—or Price Protection?
The real question is not whether these condominiums can provide homes. Of course they can.
The question is who absorbs the loss created by an overpriced market.
Will it be the developers who made the decisions, the investors who supplied the capital and the banks that approved the loans?
Or will it be taxpayers who had no part in those decisions and received none of the profits?
If government purchases distressed condos at true fire-sale prices, the public might receive value.
If it pays more than willing buyers would pay, it is interfering with price discovery, protecting lenders’ collateral and rescuing developers from the consequences of their own decisions.
Call it conversion. Call it innovative financing. Call it affordable housing.
If private profits are protected by transferring private losses to the public, it is a bailout.
And it stinks.
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