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A crisis of regional imbalance

Last week’s general election in the UK was yet another example of the urban-rural divide that we are all seeing emerge around the world. Taking a look at this chart from the Centre for Towns, it’s pretty clear that the type of community someone lives in (i.e. how urban), says a lot about the way in which they probably voted. In big cities, the vote share was 49% Labour. And in villages, communities, and small towns, the vote share was about 48-58% Conservative.

But what does this stem from? According to John Burns Murdoch of the Financial Times, the biggest predictor (for constituencies) of a swing vote over to the Conservatives during this last election was the share of the population in a blue collar job. Here is a graph from John’s article. Circles with a black outline are constituencies that changed hands last week. Note Great Grimsby, which I wrote about here, in the top right corner.

These facts probably aren’t all that surprising to most of you. But it is an important reminder of how concentrated the new economy is becoming in big — or perhaps I should say, certain — cities. The Brookings Institution recently referred to this as “a crisis of regional imbalance.” Because it’s not just a case of urban vs. rural. Brookings found that from 2005 to 2017, more than 90% of innovation sector growth in the US could be traced back to just five metro areas. (You’ll be able to guess most of the five. Only one stood out for me.)

This is the world we live in.

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Zoning in Silicon Valley, New Haven, and Austin

Robert C. Ellickson’s recent paper, titled Zoning and the Cost of Housing: Evidence from Silicon Valley, Greater New Haven, and Greater Austin, really holds back when it comes to the shortcomings of zoning ordinances. Here’s an excerpt:

Zoning, as practiced in much of the nation, gravely misallocates resources. Some distortions are micro, such as the mediocre siting of Anton Menlo housing [a project by Facebook], and the lack of walkable neighborhoods in New Haven suburbs. Others are macro. If Silicon Valley were more populous, it would be a world tech center even more attractive to IT workers. The misuse of zoning squanders land, adds to the nation’s carbon footprint, warps interstate migrants’ choices about where to reside, and helps price poor households out of wealthier neighborhoods that would offer better life prospects for their children.

The paper focuses on three metropolitan areas: Austin, Silicon Valley, and New Haven. Of these three, Austin is the most permissive in terms of allowing new and denser housing. Silicon Valley and New Haven, by contrast, have done a great deal to limit intensification by adopting exclusionary policies.

In 1970, home prices in Silicon Valley were only slightly above the national average. Today, they are by far the highest in the United States, which is, of course, partially a result of high demand (tech salaries) and low supply (zoning ordinances). Ellickson’s paper examines the effects of the latter.

If you’d like to download a copy, click here.

Photo by Carlos Delgado on Unsplash

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Missing middle on Toronto's collector roads

This recent Spacing article by Geoff Turnbull and Laurence Holland makes a compelling case for “missing middle” type development along Toronto’s collector roads. The idea being that we are already focusing on (and have policies for) infill along our Avenues and within our single family neighborhoods, but we have yet to pay attention to the scale of street that sits somewhere in between the two. Streets such as Hallam that were once commercial spines, but lost their economic purpose for a variety of reasons.

Here’s a map, from the article, of Toronto’s collector roads:

There are almost 800 kilometers of collector roads in the city. As the name starts to imply, these streets are designed to collect vehicles and funnel them toward arterial roads and “Avenues.” But this scale difference changes things and creates a kind of in-between condition. They’re less desirable from a residential standpoint (because they’re not as quiet and secluded), but they’re also not designed to become strong retail/commercial streets (despite the odd retail remnant). In fact, retail is probably prohibited on most. Which is why I like the idea of thinking of these streets differently.

Of course, we have work to do in order to make this scale of development economically feasible, and the authors do acknowledge that. But the more we continue to talk about the future of our low-rise neighborhoods, the more that intensification starts to feel inevitable.

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Protocols, not platforms

Yesterday, Jack Dorsey published the below tweetstorm about Twitter’s efforts to create a decentralized internet protocol for social media. What does this mean? Think along the lines of the Simple Mail Transfer Protocol (or SMTP). Some, or many, of you may not know what this is, but you almost certainly use it every day. It is fundamental to modern email communication. It is how emails get sent.

I would encourage you to click through to the entire thread. It all feels very topical. We are living in a world of recommendation algorithms and content designed to “spark controversy and outrage.” Arguably, this is the result of social media companies being platforms (i.e. proprietary systems), as opposed to being based around open protocols. Twitter is trying to change that by funding a team. And that feels like a great — and timely — idea.

Full disclosure: I own $TWTR.

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Glass curtains in Amsterdam

For the same reasons that I liked the Interlock in London, I am a big fan of this storefront in Amsterdam by UNStudio. It is contextual, but it also something entirely new. To me, it resembles a triptych of curtains being pulled to the side, which is probably a fitting metaphor for a high fashion street. The developer is Warenar and it looks like the space is still available. So if you’re in the market for a retail storefront on Amsterdam’s PC Hooftstraat, here you are.

Photos by Evabloem

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Live from the Junction

Today we setup our construction webcam for Junction House. Here is a screenshot from this afternoon:

As you can tell, Mitchell Demolition is now on site. They still have some work to do inside the existing buildings, but after that everything will be coming down.

If you’d like to take a look at the public live feed, click here. It will also be available (embedded) on junctionhouse.ca in the next week or so.

Thank you Notion for letting us setup on your rooftop. If you aren’t familiar with Notion, check them out here. They make custom apparel and other cool stuff right in the Junction.

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The most expensive city in the world in which to build

Using data from Turner & Townsend, Curbed recently reported that the most expensive city in the world in which to build is now San Francisco. On average, it costs USD 417 per square foot. San Francisco is followed by New York ($368 psf), London, Zurich, and Hong Kong. New York took the top spot last year, but San Francisco shot up this year because of, you know, tech.

This number was calculated using a blend of six different types of construction, everything from apartment high-rise and prestige office to general hospital and warehouse distribution centers.

Now, I’m not exactly sure what this number includes. But I’m assuming it is only direct construction costs and doesn’t include (contractor) general conditions, land, or any soft costs, which are all significant. Once you add in these other cost inputs, I am sure that you can start to see how things — including the cost of new housing — can quickly escalate.

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Algorithmic home buying expands to Los Angeles

Algorithmic home buying companies (or iBuyers) have now started to expand into Los Angeles. If you recall, most of these companies started in smaller markets where the homes are more homogenous, relatively inexpensive, and generally less liquid. Places like Phoenix.

By tackling the second largest housing market in the US (after New York City), the algorithms of Opendoor, Redfin, and Zillow will now need to content with an older housing stock, greater variability, and higher values.

All of these companies have increased their maximum offer price. The sweet spot for algorithmic home buying has typically been in the $150,000 to $300,000 range. Last year, two-thirds of all homes bought by iBuyers were in this range. I can’t imagine that gets you very much in LA.

I keep expecting these companies to scale into something more beyond just iBuying and flipping. Perhaps we will see that happen once they establish themselves in country’s biggest markets.

Photo by Josh Rose on Unsplash

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How coffee grew São Paulo

For all of us who are involved in the building of cities, it is important to remember that cities emerge and thrive as a result of economic purpose. Take, for example, Sao Paulo. Once one of the poorest of Portuguese colonies, it is today the largest city in the southern hemisphere and one of the largest and most diverse urban agglomerations in the world.

How did all of this happen? It was probably because of coffee.

Brazil is the largest producer of coffee in the world. And it has owned this title for some 150 years. The best areas to grow coffee (as a result of climate, I’m told) are in the southeast part of the country, in and around Sao Paulo and Rio de Janeiro. The inland state of Minas Gerais is the biggest producer.

But here’s the thing. Rio de Janeiro is along the coast and Sao Paulo is not, though as of 1869 it had been connected to the port of Santos by rail. This geographical feature made Sao Paulo a logical place for rail to converge as it made its way from the coffee plantations in the interior of the country to the coast, and then out to the rest of the world.

Coffee was the economic purpose. And it was facilitated by Brazil’s longstanding use of slave labor.

In 1888 that changed. Slavery was abolished, giving Brazil the dubious distinction of being the last country in the Western world to do so. The problem is that the coffee industry relied heavily on this labor. So to fill this void and keep the coffee industry happy, a deliberate effort was made to increase immigration.

From 1870 to 2010, about 2.3 million immigrants settled in the state of Sao Paulo, many from Italy and Japan. Today, about half of the city is thought to have at least some Italian ancestry. And it is generally believed that it was this significant influx of immigrants that helped the city to industrialize in the way that it did.

Big and diverse. And coffee probably had a lot to do with it.

Photo by ViniLowRaw on Unsplash