How Has Inflation Impacted Reserve Fund Studies Since 2020?

Welcome back to another episode of Coffee Chat with Steve. In this one, we're diving into a big question that's been weighing on condo boards and strata councils across the country: how has inflation impacted Reserve Fund Studies since 2020? The short answer: a lot more than you think.

Most reserve fund studies are based on the wrong assumptions

A Reserve Fund Study is your condo corporation's 30-year capital budget. It estimates future repair and replacement costs, and outlines a funding plan to make sure there's enough money to cover them — ideally without needing special assessments. But there's a problem.

Since 2020, most Reserve Fund Studies have assumed a fairly standard inflation rate of 3 to 4% per year when projecting future costs. That assumption used to be fine. Then COVID hit. Between 2020 and 2024, actual inflation spiked globally. Year-over-year consumer inflation in Canada peaked at around 6 to 7%, but that's nothing compared to what happened in the multifamily construction sector. The cost of capital projects — roofs, windows, elevators, HVAC systems, and more — rose a staggering 60% over five years. That's about 12% per year on average.

What that means for your building

If your last Reserve Fund Study was done in 2020 or earlier, chances are it was built on outdated cost assumptions. Even if it was updated more recently, many firms are still using conservative inflation estimates that don't reflect reality. This creates a funding gap. The reserve fund contributions your corporation has been collecting might only cover half of what capital projects will actually cost in today's dollars. The result?

• Large increases in condo fees
• Special assessments to make up the difference
• Potential borrowing to finance critical repairs

Even well-funded buildings are not immune. This is a global issue, affecting condo corporations everywhere. The assumptions were the same, and now the consequences are starting to show.

What can you do about it?

The first step is to get a new Reserve Fund Study that reflects current construction costs and updated inflation forecasts. Yes, the results may be hard to swallow. Your next study might reveal a 50% funding gap and recommend significantly higher contributions going forward. But facing that reality now is better than being blindsided by a six-figure special assessment later.

How Stelor can help

StelorPM makes it easy to understand, plan, and adapt. Once your updated Reserve Fund Study is complete, you can use Stelor to run what-if scenarios with adjusted inflation rates, visualize the long-term impact of underfunding, communicate clearly with board members and owners, and track funding progress against actual expenses. In short, Stelor gives you the tools to manage inflation risk proactively, instead of reacting to financial shortfalls after it's too late.