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Houses with large yards and where you have to drive to places

The National Association of Realtors in the US has a “Community and Transportation Preference Survey” that it conducts usually every two years. Last year (2020), wasn’t supposed to be a survey year, but given the pandemic, they decided to run it in June and see if people’s preferences had changed at all during that time.

Last June feels like eons ago to me and I bet that if you asked people how they were feeling today it may be slightly different. Nonetheless, the survey asked 2,000 adults from the fifty-largest metro areas a bunch of questions about where and how they live and where and how they might want to live in the future.

The topline results can be found over here. But for a bit of context, 58% of respondents were people who lived in a single-family detached house; 26% of respondents were people who lived in a building with two or more apartments and condos; and the rest of the respondents were split across townhouses, rowhouses, mobile homes, trailers, and other. (I’m kind of curious about the 2% who answered with other.)

One of the questions that I thought might be interesting to this audience is this one here about housing preferences going forward:

The question asks the respondents to imagine that they are moving into another home. It then asks about priorities and, more specifically, about their preferred trade-off between amenities and walkability versus a large detached house with a big yard.

Overall the split in preferences has remained close to 50/50 over the last three surveys. But there appears to be a small uptick toward large homes and less amenities. I wouldn’t be surprised if the pandemic contributed to this thinking last summer. But who knows if this will persist. At the same time, actions speak louder than words.

My response to the above question would be less space, greater walkability, and more amenities. I have no desire to live in a low-rise grade-related house, especially one that is disconnected from the city. I like urbanity. What about you?

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There is no such thing as a free lunch

Inclusionary zoning has been on my mind this week and so I thought I would revisit some of my old posts on the topic. I wrote about it here, here, here, here, here, and probably in a bunch of other places that I am forgetting right now. A number of these posts go as far back as 2015-2016.

As well-intended as inclusionary zoning may be, I have never been able to get my head around it. There are lots of cities with inclusionary zoning polices in place and what history generally tells us is that it tends to reduce overall housing supply and increase market rents/prices.

This makes intuitive sense when you consider that inclusionary zoning is in effect a tax on new development. And one of the only things I remember from my economics classes is that it’s generally good practice to tax the things we want less of. You know, things like cigarettes and carbon.

This is why I have also been a strong supporter of road pricing over the years on this blog. Traffic congestion is bad (demand also happens to be relatively inelastic). So tax it and redirect the funds toward transit.

Housing supply, on the other hand, isn’t bad. It’s pretty good and fairly useful. So in my simple mind, I don’t know why we would want to apply a tax to it instead of figuring out way to simultaneously encourage and incent the supply of new affordable housing. Here’s one idea.

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Cities in the 2020s

Since the beginning of this year, the London School of Economics has been running a debate series called, Cities in the 2020s: How are cities responding to profound global change? The next event is about localizing transport and it’s scheduled for May 20, 2021. If you’d like to attend, click here. It’s free and open to all. The one thing I would add is that I am getting the strong sense right now — as cities, other than Toronto, begin to reopen — that people are starting to remember just how much more fruitful in-person interactions are compared to being on screen. There’s no comparison. In fact, earlier today I had in-person work interaction that resulted in a positive outcome that I am certain would not have happened otherwise. And as an ENTJ (business school made me take these personality tests), I find that I derive a lot of my energy from being around other people. As long as these sorts of things remain true, I believe that we will stay tethered to our cities and reliant on things like mass transit.

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Visionary vs. operational

Fred Wilson wrote a great post last month about leadership. In it, he compares what he calls visionary leadership to operational leadership. Here’s a snippet:

I like to keep things simple and in my simple mind, leadership comes in two flavors, visionary leadership and operational leadership. Founders are almost always visionaries (if they aren’t, run in the opposite direction) and hired CEOs are almost always operators.

The post goes on to explain the dynamics between these two types of leadership. Vision, he argues, needs to come from the top. You need someone setting direction at a high level. Operational leadership doesn’t have to be this way, and often isn’t. You can hire for it.

In some special cases, you have leaders who are both. Another snippet:

Leaders who can provide both operational and visionary leadership are a rare but special breed. When you find one, get on their bus and stay on it for as long as you can. It will be an incredible trip.

I have seen all of this play out in the real estate development space.

There are people who are great at identifying new sites (land) and coming up with fresh and innovative ideas, but it is clear that they need an operator or two around them. There’s nothing wrong with this pairing.

Development is also a very long and slow game and you need people who can operate — deeply in the weeds — over extended periods of time. Persistence and tenacity are crucial. Patience I guess, too.

If this topic is of interest to you, I recommend you check out the rest of Fred’s post.

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What if versus should be city planning

Witold Rybczynski makes an interesting comparison between military and civilian (city) planning in a recent blog post called, “The Fog of Life.” Here’s an excerpt:

Good military planning, as I understand it, is based on preparing for “what if,” that is, developing different scenarios. What if this happens, or that happens? City planning is different, more like advocacy, that is, what should happen. This advocacy is based on certainties: open space is good, density is good—or bad, depending. The problem is that what planners think should happen—separation of pedestrians and cars, superblocks, megastructures—often runs into trouble when it hits the fog of life.

These are two very different perspectives. “What if” planning responses assume that a thing has already happened. You’re not working to affect a particular outcome, you’re responding to one that already exists. Does this necessarily make this approach more reactive than proactive?

Either way, what should happen implies that the thing isn’t currently happening, but that it should — presumably because the thing is nice and desirable. It could also imply that the thing is sort of happening, but just isn’t happening quite enough.

Let’s use the example of 3-bedroom condominiums and apartments, which is a topic of discussion that has been circling in Toronto for as long as I’ve been in the business. Developers here, are generally encouraged or mandated to build a certain number of larger family-sized suites in every new housing project. Oftentimes this number is 10% of the total unit count.

The reasoning behind this is sound. Cities should be inclusive and they should work for the young, the old, the single, and for families, among others. The problem is that, for a variety of reasons, the market, when left to do its own thing, tends to build more small units than large units. At least that’s the case here in Toronto. (I’ve talked about some of the reasons why in previous posts.)

There is a view that if only developers built more large units that more families would choose to live in apartments. It’s an issue of supply and availability, and also a question of design. You need to design for families too. This you could say is a “what if” approach. Families want to live in multi-family buildings; so let’s build more and better family-sized housing.

But is this really the case or is there some advocacy going on here? All things being equal, does the market want low-rise or does it prefer higher density? It’s a fascinating set of questions, but unfortunately all things aren’t equal. It’s not just a question of availability and design, it’s also a question of economics. Large family-sized units cost money.

I suppose this is the fog of life.

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New condo sales totaled 5,385 units last quarter

Urbanation released its Q1-2021 quarterly condo market update for the Greater Toronto Area at the end of last month. And there’s some good stuff in it. New condo sales totaled 5,385 units in the first quarter of this year, which is higher than the 10-year average of 4,924 units and only slightly below sales from a year ago (Q1-2020). By and large, the numbers are starting to feel a bit pre-pandemic-like.

If you remember what happened back in the second quarter of last year, there was a quick shift in demand toward the suburbs and outskirts of Toronto. Part of this was driven by affordability. But I guess part of this was also driven by the fact that some people seemed to think that our cities had never before experienced a health crisis and were going to somehow die. Or perhaps it was because Zoom is so much fun (and not at all exhausting) and that this time was destined to be different. Either way, I never understood this.

Fast forward a year and the core is not surprisingly coming back. The oldest part of the city (former City of Toronto) saw 2,886 new condo sales in the first quarter of this year. This is actually higher than sales in Q1-2020. New condo openings in downtown Toronto sold for an average price of $1,419 per square foot. And overall absorption was about 76% in the quarter, which is the highest it has been since 2017.

Some of you may be looking at these numbers and thinking WTF. But when developers look at the costs in their pro forma, as well as what’s on the horizon — ahem, inclusionary zoning — it’s usually that same feeling. So it’s hard to imagine average prices and rents going anywhere but up.

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Plastic surgery, LA mega-mansions, and digital NFT art

Price is what you pay. Value is what you get.” -Warren Buffet

According to the Wall Street Journal, there is a real estate trend underway in Los Angeles: Celebrity plastic surgeons are piling into the business of building over-the-top spec homes. (Spec means that they are built speculatively, without a buyer in place, and sold — hopefully — upon completion.)

What is clear from this phenomenon is that there appears to be a bit of money to be made in the world of LA plastic surgery. What is also clear is that the market value for a 21,000 square foot mega-mansion in Los Angeles is basically who-the-hell-knows:

The rush of new contemporary spec homes built in the Los Angeles area has put downward pressure on prices. While Dr. Nassif says he’s had significant interest in his home since listing it earlier this year, Dr. Kanodia recently slashed the asking price of his home to $99 million from $180 million. Developers like Nile Niami, known widely as the king of Los Angeles spec homes, handed the keys over to his lenders on at least one project and is facing default on others, The Wall Street Journal has reported.

Is the market price $180 million? Is it $99 million? Or is it much less? Probably depends on which way the winds are blowing that day. At this snack bracket, you’re looking to harpoon a whale and there are only so many of those. But ultimately, the market price is whatever someone is willing to pay.

One thing that is interesting to see in some of these homes — besides hidden DJ platforms on hydraulic lifts — is that NFT art displays are now starting to get incorporated into these new builds. Assuming that digital NFT art does continue to take off, which is still TBD, there is going to be an explosion of different display/gallery solutions.

Perhaps these mega-mansions are a leading indicator for that trend.

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The new AirTags and Apple’s global mesh network

Apple recently released a new tracking device called AirTag. It is similar to the small Tile devices that have been in circulation for many years in that they help you find misplaced items like your keys or a bag. They locate your stuff and work like this. I pre-ordered a 4-pack of them last month but they aren’t scheduled to arrive until June. Maybe it’s because I got custom engravings on the back of them.

Perhaps the most obvious use case for these new AirTags is to place one inside of your checked bag(s) when you travel. There’s nothing worse than an airline losing your luggage and you not knowing where it is. So I can see myself using one of these every time I travel. Hopefully that will be very soon.

But the other really interesting thing about these devices is that they run on Apple’s “Find My” network, which is the same network that allows you to find your other iOS devices if you happen to misplace them. This is essentially a decentralized mesh network that is powered by all of Apple’s devices around the world, as opposed to some big telco network.

According to Wikipedia, there is believed to be about 1 billion Apple devices around the world that are capable of transmitting anonymous signals. Your phone may be doing it right now. What this means is that these new AirTags are being located not by way of a cell network, but by way of some dude with an iPhone standing nearby to your AirTag.

Why I find this so interesting is that the internet has way of decentralizing things and also cutting out intermediaries. We’ve seen that happen with travel agents and we are now seeing it take place with cryptocurrencies and blockchains. These new AirTags feels like a microcosm of that trend. They are running on a giant global network that has been created one device at a time.

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Below grade at Yonge & Eglinton

I often hear people lamenting about all of the construction that is taking place right now at Yonge & Eglinton in midtown Toronto. But that’s kind of what happens when you build a new subway line (okay, a partially buried light rail transit line). Above is a recent drone video that Metrolinx released showing the progress at Eglinton Station (I think I would have gone with a little Booka Shade for the soundtrack instead). I bet that most of you will be surprised to see how much is happening beneath street level. If you can’t see the above video, click here.

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One big tower split into two

The OMA-designed Greenpoint Landing Towers in northern Brooklyn recently topped out. Photos and announcement over here. If you aren’t familiar with the project, it’s very OMA. What I mean by that is that there’s a kind of simple rationality to it. (I just made up this architecture speak.) Big bold moves with a certain logic behind it. Here’s the story and thinking behind Greenpoint Landing:

Supposedly this project is in a part of Brooklyn that stipulates a maximum tower floor plate size of 11,000 square feet. Following this rule, you get a two-tower design that looks something like image number one in the top left hand corner of the above diagram. The resulting tower separation would be 40 feet, or just over 12 meters. (Are you seeing these numbers, Toronto?)

What OMA did was taper one tower (diagram image #2) and then create an inverted ziggurat form for the second tower (diagram image #3). The effect is two towers that look like they were almost one giant tower that had been simply pulled apart. The resulting tower separation distance in this final scenario is 60 feet, or just over 18 meters.

I am assuming that there’s some area loss in this design because of the increased tower separation, though maybe the larger podium makes it up. Either way, from what I can tell, there are two main benefits to this design: (1) you get a tower with stepbacks facing the water (so places for outdoor spaces) and (2) it breaks up the visual monotony of two equally extruded towers.

If any of you are more familiar with this project, I would welcome your thoughts in the comment section below.

Image: OMA