Condo Crash Meets Housing Crisis

How a crash in the Toronto and Vancouver condo markets intersect with a national housing crisis.

Meredith Martin

Mike Moffatt

, and

Sabrina Maddeaux

Jun 04, 2025

In this episode of the Missing Middle podcast, mortgage broker Ron Butler sits down with conservative pundit Sabrina Maddeaux and economist Mike Moffatt to discuss the current crisis in the Toronto condo market.

Ron outlines the vast scope of the problem stemming from pre-construction purchases made during a speculative boom. He explains how investors face significant losses as property values decline, while addressing the broader implications of poor development choices and the lack of low-rise housing options. The conversation explores the role of government in addressing these issues and the potential for positive change in the housing market.

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Below is an AI-generated transcript of the Missing Middle podcast, which has been lightly edited.

Sabrina Maddeaux: Hey, Ron, thanks so much for joining us today. I want to dive right into it. The headlines are full of news of the condo market collapse in Toronto, but I think it would be really helpful for our audience who aren't necessarily up on all the news to understand what the scope of the problem is. Can you tell us what exactly is happening in the Toronto condo market?

Ron Butler: Sure. The scope of the problem is vast. Like, it's absolutely vast. So, you have to go back five or six years because that's when the problem started. It's about people buying pre-construction condos. And 2019, 2020, and part of 21 was an enormous moment in time when people were buying pre-construction condos.

So, the way a condo works is you buy it six years before it's finished. You put 20% down, and you sign a contract to pay that price. Now, for some reason, the prices that people signed up for in 2019, particularly 2020 and 21, were absurdly higher than the prices were in, say, 2015. They were double or two and a half times what the price of the condo was at the time. By the way, people were signing up for prices that were 50% higher than what a condo was selling for at that moment. So, in other words, it was just a profound pricing error based on two completely false assumptions.

The assumption was that you could easily sell the condo by assignment before actually having to get a mortgage and close on the condo. And the other completely false assumption was, well, rents are going to go up 100% or something equally bizarre in the next six years. But I would tell you that the former was more of a reason than the latter.

Because people who bought in 2015, a tremendous number of them, sold condos by assignment and put $100,000 to $125,000 in their pockets and walked away. They never had to take possession. So, it became known as a very successful trade. A very profitable trade. I mean, what's more profitable than making money and never taking possession of the condo? It's fabulous.

But everything changed. And today, we are looking at people being asked to close on condos, pre-construction condos, because they're finished now. It's 2025. The stuff bought in 2019 is finished. Some of the stuff bought in 2020 is finished. They're being asked to close: ‘Hey, come on, get a mortgage, buy your condo.’ And they're discovering that they paid $1,150 a square foot for a condo that is currently across the street, a building that's two years older, the precise same condo as theirs is not selling at $875 a square foot.

So, they've immediately lost hundreds of thousands of dollars. So, the choice becomes, do I close or do I not close and face litigation?

And that's the essence of the pre-construction condo story today.

Mike Moffatt: First of all, thank you, Ron. It sounds like an absolute mess. From what my friends out in the Lower Mainland, BC, tell me, it’s equally problematic out there. Is this isolated, as far as you know, to those two pockets, or are we seeing this in other places as well?

Ron Butler: Well, I think if you're patient and you give Calgary another year or 18 months, you may see something similar to Calgary.

Yes, that's possible. Yes.

It's not true in Montreal for some reason. I mean, building has been much slower there. Prices have not increased radically. There are a ton of reasons. But if you were to buy a condo five years ago in Montreal, it was probably about half the price or 40% less than the condo that you were buying in Toronto. So, their pricing is much more rational. And even though there's been a bit of an uptick in building there, it doesn't seem like they're going to face the same problem.

Sabrina Maddeaux: Now, for many years, investors were paying more for a condo in Toronto and burning essentially like a few hundred dollars a month because what they could charge in rent was less than what they had to pay in mortgage, condo fees, property tax, etc. But the growth of the value was such that it made it so investors were willing to be cash flow negative. If you go back and read real estate investing books from the 1980s, one of the first rules was never go for cash flow negative. When did we see Toronto investors start to break that rule? And when did they start to stop? And why is that?

Ron Butler: In 2021, prices of condos probably went up 16-18%. So, you can afford to have negative cash flow when you're seeing that kind of capital appreciation. You are correct though; it is still not sensible. It is not sensible to have a rental property that you consistently lose money on all the time, when the property taxes and the monthly maintenance fees are going up every year. I mean, it's really not sensible.

However, there was a burst in rental increases. Mike is very well aware that rents went through the roof in 2022-23 and part of 2024. As Canada imported 1.3 million people a year, you will see some effect of that even though not all those people are moving into Toronto and Vancouver condos. It's still a massive increase in population.

Now, population growth has probably gone to zero. In other words, people are leaving and converting from temporary worker or some kind of student visa to PR, but they're already here, so, the actual inflow of new humans into Canada has probably gone to zero. And in fact, it might be, in some regions, slightly negative. So, all of that rent froth has disappeared completely. It's just another issue in the perfect storm of Toronto and Vancouver condo disaster.

Mike Moffatt: Yeah, and I think this perfect storm is hard for people to understand who don't live and breathe this stuff like we do here. Our audience and the general public hear about the collapse of the condo market, and they can't wrap their heads around it because we're always, at The Missing Middle, talking about a lack of adequate housing. Obviously, that has been corrected at least somewhat with the immigration changes, but there are still housing needs. And we hear the province talk about needing to double home starts, the federal government talking about needing to double home starts, 500,000 -or whatever number they're talking about these days - so, can you walk our viewers and listeners through how we can simultaneously have a shortage of housing, but at the same time have a glut of condo inventory?

Ron Butler: Well, your show is called The Missing Middle, and that's a really meaningful part of this thing.

So, your theme has been consistently talking about how you can't expect to have families in Canada if you don't build any kind of product for families. If you don't build a two-bedroom, you don't build a three-bedroom, if you don't build something that families feel comfortable in, then A, you're not going to have any families and B, those people are going to have to reject the fact that they're not getting what they want.

So, one of the things about the complete disaster in BC and Toronto condos is the proliferation of micro-condos. My favourite catchphrase, the dog crate condo, okay? The building of a condo that's sub-500, sub-550 square feet with horrible layouts, [they are] terrible places to live, and they proliferated enormously.

Now, we have to go back in time a little bit in some of this stuff because in 2019, Airbnb wasn't under the pressure they're under today. So, we've got all kinds of provinces and municipalities that've said, we are going to root out Airbnb, but that wasn't true in 2019. So, the idea of…a condo developer saying, ‘Let's build a lot of 500 square foot dog crates because they'll just be Airbnb, they'll be for tourists, they'll be for people to…’

Sabrina Maddeaux: They're hotel rooms, not homes.

Ron Butler: Yeah, they're hotel rooms. Exactly. They're illegal hotel rooms. That's right. So, that became very popular.

Fast forward six years, you can't do it anymore. I mean, in Toronto, for instance, for six months of the year, they have to be occupied by a single person. Like, you cannot do Airbnb anymore in the way it was done in 2019. And in British Columbia, I think it's almost totally outlawed.

So, you've got bad assumptions about what kind of product to build, and we can't just give developers a free pass on this. Like, why are they cheerfully building a condominium building that's 65% units that they would never, ever dream of even letting their kids live in if they were going to university, okay?

Like, if you're building this outrageously bad product…so you open the door of your dog crate condo, and you open the door to the bedroom! Like, seriously, you're walking past the bed in a large open space, which you've got to question the idea that…wait a second, we're not going to have doors on bedrooms anymore!?! Like, that's gone now? And then finally, you walk into your lavish kitchen, which is eight feet of counter space, and you have to eat standing up at it, okay? The whole unit resembles a slightly wider bowling lane than anything else. So, you have to lay it at the feet of building extraordinarily bad products.

Now, I know developers all get mad as hell at me when I talk about this stuff, but like, it's just there. I mean, if you want to go on TikTok today, there will be Toronto realtors walking you through these hellaciously awful layouts of these dog crate condos. And even the realtor will say, ‘This is awful.’

We're also talking about incredibly bad maintenance because the condo corp, which is mainly controlled by people who are owners of rentals, don't want to spend a dime because they're losing money already. So, when I say it was like a perfect storm of disaster, it really is. Like, every wrong thing that could happen has happened.

Now, this isn't every building. I'm not suggesting it's every building. There are some very well-run condos, buildings. There's some good layouts done by good developers, but there's too many of the other thing. And, you know, it's come to the point where the chickens have come home to roost. If you can't turn that into an illegal hotel room with an Airbnb, nobody wants to live there on a long-term basis. Not even a single person wants to live there. It's too bad. It's too awful. And the rents are too high. So, this is something that's going to require a major correction. And we're probably just at the beginning of the correction now.

Sabrina Maddeaux: So, you say it's a perfect storm, but who's taking the biggest hit and at the most risk right now in the condo market? Is it developers? Is it the pre-construction investors? Is it those who actually took possession at the top of the market and are now underwater? Who's really suffering here?

Ron Butler: The pre-construction investor is being eviscerated. They're taking multiple $100,000 losses if they close, and then they're taking running $1,100 to $1,800 a month losses if they try to rent it. So, they are simply being crushed. For that very reason, we've watched the number of refusals to close steadily increase. When we go back a year and a half ago, it was about 5% or 10% of the buyers who refused to close for various reasons. Now, it's reached a steady 20% to 30% of buyers are refusing to close.

We have captured some data kind of surreptitiously from one building. The data is, the commission salesperson who sold the condo five or six years ago, are they getting paid or are they not getting paid? Because they don't get paid until the last... they get a tiny chunk in the beginning, and then they don't get paid until the end. We've gotten to about a 30% claim of non-payment of commission from some buildings. So, when I say it was like a perfect storm of disaster, it really is.

We think that by the late fall, there will be a building that goes past 50% refusals to close, and they simply won't be able to form the condo corporation. And then, it's really going to hit the media in a massive way.

Mike Moffatt: Wow, that's scary. So, let's talk about these investors a little bit. Both the pre-construction investors and then those who either bought existing units or just continued to hold on to them and rented them out. I don't think there's a lot of sympathy out there for this group, either way, who have seen astronomical gains over the last 20 years. But is there a risk here that we're just never going to, at least in the GTA, never going to be able to finance condos again? And in which case, not much is going to get built?

Ron Butler: Well, if we go back to 1989, 1990, and that real estate downturn collapse in Ontario, there wasn't a new condo start for 10 years after 1990. So, I think it's reasonable to assume we're going to be looking at something like that. Maybe not quite the same because condos weren't that popular in 1990.

The mix of buildings before that was about 90% low-rise, 10% condo. So, that's changed. As you know, Mike, in Southern Ontario, it's been 80% high-rise since about 2018. It's 80% high-rise, 20% low-rise. The product category is so big now, I don't think it's going to be a 10-year lull. But I can absolutely see a five to six-year lull where there's not a, apart from a very specific kind of luxury condo or a condo that's really exclusively designed for families, I don't think we're going to see a new project start for a number of years.

Oh, if you want more aspects of the perfect storm, and Mike, you're well aware of this, there's been a spectacular growth in purpose-built rentals in Southern Ontario for the last four years. Purpose-built rentals almost didn't exist seven years ago. And, you know, CMHC developed a more supportive program, and it started to pick up, and now it's picked up quite a bit. And really interestingly, some developers who realized they could not get any launch out of their condo project, a few of them converted to purpose-built rentals. So now we have a spectacular growth of purpose-built rentals coming on stream in the next two and three years, at exactly the same time as we've got overpriced, unsellable dog crate condos coming on stream over the next two years. The list of things that have gone wrong for this product category in these regions, like Vancouver and Toronto, is massive.

But in things that you guys cover extensively on this podcast, there's still no building of reasonably sized townhouses for families. I mean, that is just absolutely dead in both provinces, in both Ontario and British Columbia. And those chickens will come home to roost as well in a couple of years.

So the housing crisis has been put on pause for a product category, which is tiny condos. But the housing crisis is probably when immigration starts to settle out and we start to get brand new Canadians coming here again, which is probably somewhere in the next 18 months to two years, we'll be right back in the soup, if not even worse.

And we will discover that our fertility rates even continue to fall off a cliff because there's no way that young families can buy a house. When Gregor Robertson, the housing minister, talks about affordability, what he's talking about is subsidized rentals. Affordability is government code for subsidized rentals, which you will never own. Ever. It's just sweeping under the rug, something that's gonna get worse in the next three or four years.

Mike Moffatt: So on that, if high-rise condos are dead, are we gonna see any pickup whatsoever of low-rise? One of my concerns is that we're not gonna see anything built in that design for owner-occupiers, right? If condos are dead and we've had this 20-year secular decline in low-rise, particularly in the GTA, is there any hope for young families who'd like to own a home?

Ron Butler: Not really. I mean, the only rational answer is not really.

And you can lay that disaster at the foot of the Greenbelt, you can lay that disaster at the foot of provincial and municipal governments being ridiculously bad at motivating themselves to release land.

Mike, we have something here in Toronto. Sabrina, you're familiar with this; it’s called the Downsview Airport. There was a military airport that shifted away from being an airport, and that is right in the middle of the city. That's right in 416. This whole great swath of land is right in 416. And the city of Toronto has failed so miserably at developing that land that right now, they have built a temporary concert venue on that land, right in the middle of the city, that is absolutely ideal for dense, low-rise townhouse development. Okay, it's perfect for it. But no, we can't do it, because nobody can agree on anything. The expenses are too high, the development fees are too high, the ability to get the zoning that you need and to get the city and the province motivated to release all the land and do it in a forceful, intelligent way is completely absent.

You can't make a bigger case for the failure of government than you're building a concert venue on land that's ideal for multiple-family density.

Sabrina Maddeaux: Now, Ron, I've lived in Toronto for a long time. And as long as I can remember, people have been telling me that the condo market bubble is about to pop. And for about 15 years now, it still hasn't. Is this the actual moment?

Ron Butler: Oh yeah, for condos, particularly for micro condos - my favourite phrase of dog crate condos - it is absolutely the moment. The moment is here. We will see substantial price reductions in that product category for the next one, two or three years. 100% it's here.

Sabrina Maddeaux: And does it go beyond that dog crate condo to being two or three-bedroom condos? Is there any hope for someone like me to be able to own one of those where I can raise a family?

Ron Butler: To own a low-rise home in Toronto at a rational price? The correct answer is probably not. The reality is we stopped building low-rise homes in Southern Ontario in a meaningful way years ago. We've created scarcity.

If you go to 416, central 416, the core of the city, those single-family and semis have come off in price, maybe 1%. There's a disaster going on in Durham County right now. There's a disaster going on in parts of Peel. There's a disaster going on in the Northern part of the 905. Those prices have come down 20, 22, 23% from the peak in 2021. Those people are feeling it who bought at that time. But no, in 416 itself, very little reduction in price.

In fact, if you have a semi in the central core 416, you'll probably sell it in a week. I mean, it takes no time at all. This is the horror show of all this. This is the fact that we've not built low-rise homes. We haven't built low-rise homes for years. And we've created artificial scarcity in a province that's bigger than almost every state of the union. So, how do you fix that?

You have just done bad land use, bad development fees, 100 grand on a condo, 300 grand on a single-family house. You've done a terrible allocation of raw land. You've created a regulatory environment where you need 26 reports before you can apply to do a subdivision in Ontario. You've got to do an environmental report, and if somebody wants to complain that you're gonna harm the habitat of the redheaded woodpecker, you're probably put off for another year. So we have this enormous regulatory burden in Ontario that is making the construction of these homes extremely difficult. Single-family low-rise has fallen off a cliff.

We built the wrong size of low-rise. We built the wrong size of single-family [homes. We bought 3,800 square foot monster homes. It was all that we built when we were building it in the last seven years. And it's unaffordable.

There is a potential to really build a lot of quality townhouses in a dense way that people will be comfortable with, but we're just not taking the proper advantage of that opportunity.

So the long-winded answer to your question is, I don't know whether there's gonna be an opportunity for people to buy a comfortable three-bedroom low-rise dwelling in Southern Ontario at a rational price in the immediate future. I don't know if that will be true.

Sabrina Maddeaux: And I suppose without that low-rise inventory and the townhouse inventory, then that will also help sustain the prices of larger condos that might be, even if they're in a high-rise two-bedroom, two-plus-den. Do you see those being a bit safer in this environment?

Ron Butler: There is a chance for a more rational correction on good-sized owner-occupied condos, but it has to get even worse before that eventuality presents itself. Because the price of development land in 416 has dropped by 60%. I mean, if you wanna buy a parking lot today to build a condo, the price is down by 60% or more. And it's probably gonna go down some more. But unfortunately, because of the regulatory burden to build these units, the complexity to build these units and the $93,000 development fees to build these units…well, in the case of a three-bedroom, you got about 900 square feet. So that's more like $ 150,000 in development fees. You are burdened to try to develop that product. But, by the way, that product will work. That product will absolutely work.

If you build the stuff that you guys talk about all the time- mass timber buildings and single stairways - that is a very, very viable product. But I think all of us on the program know they aren't building any of them to any great extent today. So, unless we can turn that around, I don't know whether people are gonna find comfortable dwellings for themselves in 416.

Mike Moffatt: And we're in this situation right now where it feels like the likely scenario is the worst case scenario. Where nothing gets built in the condo market, low-rise continues with a secular decline, so high prices and lack of affordability. Anyone who wants a purpose-built rental might be okay. But even there, we're starting to see the occasional decline. Is there any, I don't even wanna call it a good case scenario or best case scenario, maybe a non-awful scenario. Like, if the three of us are talking five years from now, is there a case where we say: ‘Actually, it wasn't as bad as we thought it would be?’ Is there any reason at all that there could have a positive outcome, or at least a non-horrible outcome here?

Ron Butler: Sure, I mean, we still don't know what the outcome of Carneyville modular yurts will be. I mean, that's still an unknown, okay?

Sabrina Maddeaux: That's amazing.

Mike Moffatt: We just don't know what that's gonna look like. Yeah, there could be a better outcome. There could be a resolution in provincial governments to say: ‘Well, we've got to open up a ton more land adjacent to the GTA. We've got to approve another satellite city similar to Milton or something of that nature to really take the pressure off. But that's an incredibly big political shift, like a massive political shift. However, it could work. I mean, a tremendous reduction in the regulatory burden of reports and analysis and studies could turn that around. And releasing some land.

I mean, I take a drive up to North Brampton, and on one side of the street, there are these reasonably dense, but still perfectly livable, townhouses. The other side of the street is not a farm. It's just a field. Because that part is in the Greenbelt. But it's ridiculous. That's ridiculous. I mean, it's just the other side of the street.

So if we could manage to change our approach to how this is done, there's obviously a solution there. It's not that complicated.

In 1978, I think they built 270,000 units that were almost exclusively low-rise in Ontario - sorry, in Canada. And by the way, all those houses are still here. They weren't badly built. They weren't bad products. They weren't the most perfect energy-efficient machine that people want today, but they didn't flood. They didn't all collapse. I mean, people are living in them right now. So I've really got to question why we've done what we've done to the whole industry over the last 30 years.

Sabrina Maddeaux: Well, and that leads me into my next question, which in this worst-case scenario for everyone, is there a role for the government in fixing it? And if yes, what would good policy look like in your opinion?

Ron Butler: Oh, there's definitely a role. There's massive deregulation and a massive abandonment of development fees. Because, as Mike's pointed this out many times, when part of the development fees are going to support a soccer field for World Cup training that is not the ideal purpose of development fees.

I mean, we've got to question how our governments have approached spending. Which, by the way, we don't even seem reasonable about. We've had two municipalities, Mississauga and Vaughan, that have reduced development fees by 80% because they realized absolutely nothing was getting built. So at that point, they appealed to the federal government to give them 80% of the development fees back.

And yet we also know that in some municipalities, development fees have gone up 1000% in 20 years. So if that's true, you're saying you can't survive without these development fees, like at these astronomical levels?

So if we can straighten out the way municipalities spend - get the development fees down permanently by 80%, reduce regulation radically, and open up some of the green belt in Ontario, we could see some sort of solution. But that's a lot of ifs, and I'm not sure that we're actually gonna see it happen.

Mike Moffatt: Yeah, no, I couldn't agree more, particularly on the development charge fees. I get a little bit frustrated with political officials and others who defend the status quo and say, well, there's no way that we can build all of this infrastructure without that. And what I point out is: we've got 10 provinces in Canada, we've got 50 states in the United States. So you've got 60 provinces and states. Development charges in Ontario are twice the next highest of the next 60.

So I look at this, I'm like, 59 states and provinces have figured this out, right? Like, we are the outlier here, but we have this kind of center of the universe thinking that nowhere else exists, and we can't possibly look at what's happening in Edmonton or Halifax or Chicago or Denver or Dallas.

So I'm really glad to hear you say that, because I couldn't agree more that there are best practices out there, there are cities, states, provinces doing this well. Let's look towards that rather than what we're saying now, which is just so much resistance to change and so much resistance to even the idea that we could have a system that looks different than the one we currently got.

Sabrina Maddeaux: What really gets me, and both of you touched on it, is that often the answer to what the government can do to help with housing is that they can get out of the way. We actually need less government. Whether that's development charges, regulations, or zoning. Let housing be a proper, healthy, free market. A lot of this interference has actually skewed the market.

With that, though, Ron, thank you so much for coming on the show today. You've been great as always, and thank you to our audience for watching and listening, and to our producer, Meredith Martin.

Mike Moffatt: Yeah, thanks, Ron.

Ron Butler: That was awesome. Thanks very much, folks. Thanks so much.

Mike Moffatt: And to our audience, if you have any thoughts or questions about bowling alley-shaped condos, please send us an email to [email protected]. And we'll see you all next time.