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Rent control and inclusionary zoning

I received an email from a reader over the weekend saying that my comments around rent control have been too critical, and that they are not doing proper justice to the challenges that renters face in today’s cities. I thought this was a fair comment and so I’d like to respond to it publicly on the blog.

But before I get into that, it’s worth saying that housing issues are incredibly complex. And I am certainly not professing to have all of the answers. In fact, part of the reason I write this blog is so that I can think critically about these topics and hear what other people have to say.

It is obvious that wages have not kept pace with home prices in many cities around the world. This is a problem. And so we can all agree that we need more economic opportunities, we need more housing, and we need more attainable housing. The question is how best to go about this.

Mechanisms like rent control and inclusionary zoning might seem like obvious solutions. Just cap rents and force developers to build affordable housing. Problem solved at no cost to anyone, right? It’s not that simple. Every intervention creates distortions in the market.

To give just one example, studies suggest that rent controls end up creating a misallocation of housing. Because if you are living in a rent controlled home and your rent is well below market, you are now heavily incentivized never to move. Even if you have an empty nest with 5 bedrooms, why would you?

Of course, there are other possible repercussions. Residential contracts are typically gross leases (though some utilities might be sub-metered and paid for by the tenant). This is in contrast to commercial leases where net leases are common and most, if not all, of the operating costs are passed through to the tenant.

Why this matters is that if your rents are capped but your utility costs, taxes, and other operating expenses are continuing to rise, you may run into a situation as a landlord where you can no longer afford to upkeep your building. And you’re certainly not going to invest in any new improvements if this is your situation.

Rent controls could also impact the supply of new housing by making it no longer feasible to build. This is similar to what we have seen with policies like inclusionary zoning. Just last month San Francisco went on the record saying that it’s going to rethink its inclusionary zoning policies because of a view that it is now choking off new housing supply.

And so herein lies one of our great housing challenges. We want more housing and we want more affordable housing. But depending on how we approach the latter, it could hurt the former, which ends up creating a viscous cycle.

Building new rental housing is very challenging in Toronto (and elsewhere). Typically the way the process goes for a developer is that you start by preparing a detailed development pro forma. This pro forma will then tell you that your new rental development is infeasible. And so you go back, convert it to a condominium development, and then it magically becomes feasible.

I am exaggerating, but only slightly. The point is that there are lots of developers out there who would love to build more rental housing — they just can’t make the math worth.

My goal with this post was to explain where I have been coming from with some of my past comments. I also used the opportunity to link to a number of my related posts. But I haven’t really put forward any possible solutions. I plan to do that in a follow-up post, and I think I’m going to call it “the definitive but crazy guide to creating more affordable housing.”

So if any of you have any crazy ideas, please send them over.

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Google Maps for the Roman Empire

Okay, this is neat. Stanford has created what is effectively Google Maps for the Roman Empire.

What it shows you is the principal routes of the Roman World: the road network, the main navigable rivers, and the hundreds of sea routes that crossed the Mediterranean, the Black Sea, and the coastal Atlantic.

The tool then attaches both time and expense to these routes (which would have been used for the transportation of goods and people, but also for general communication across the Roman Empire).

So if, for example, you are curious about how many days and how many denarii it would have cost you to deliver an important dinner invitation from Roma to Alexandria during the summer months of antiquity, you now have an online tool. It’s about 14 days.

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Finally — garden suites are now permitted in Toronto

Some of you might remember that Toronto City Council approved new garden suite policies earlier this year. Garden suites (also known as accessory dwelling units) are kind of like laneway suites but without the adjacent lane.

Unfortunately, these new policies were subsequently appealed by a group of Resident’s Associations, and so they haven’t been in force. Thankfully, the Ontario Land Tribunal has just dismissed this appeal:

What this means is that, as of today, you’re now free to build a garden suite in the City of Toronto. So hire an architect and file for a building permit — it’s go time. If you need any referrals, please feel free to reach out.

The Ontario Land Tribunal is often criticized for its ability to overrule local communities on land use matters such as these. But this is a good example of why it is needed and why it is important to have some kind of neutral arbitral.

Because these sorts of decisions should not be based on what any one individual or group thinks; these decisions should be based on what makes for good planning and what makes the most sense for the broader city and region.

Invariably, this is going to piss some people off. But in my mind, it’s kind of like that asshole teacher you used to have. Sure, you hated him/her at the time, but in retrospect you end up appreciating what they were trying to do to help.

This could be a bad analogy.

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Toronto’s downtown streets broke over the weekend

Canada Day weekend was a lot of fun in Toronto. This city was alive and it felt like people had come far and wide to visit downtown. But it was a good reminder that even if all of our cars were electric and even if they were all able to drive themselves, we would still have this problem:

I was in an Uber on Saturday afternoon heading over to the west side of downtown and we had no choice but to declare bankruptcy and hop out in the middle of Bay Street. We thought about waiting for the Ontario Line to be ready, but that seemed a bit far out.

So we rented bikes instead and rode along the waterfront, which was a considerably better experience. But then we couldn’t find any docks with available slots, so we had to ride up into Liberty Village, drop our bikes off there, and then walk back down to Ontario Place.

Of course, this was still the better option. I’m fairly certain that we’d still be in that Uber had we stuck it out. And maybe not finding a bike dock is just part of life in the big city on a beautiful long weekend in the summer.

Still, it was frustrating. So I’ll use this opportunity to once again ask our city leaders to reconsider their ban on dockless electric scooters. Toronto clearly needs all the mobility support it can get.

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San Francisco is kind of on the verge of abolishing single-family zoning

The headline sounds pretty promising: San Francisco is on the verge of abolishing single-family zoning, and will soon allow 4-plexes across the city and up to 6 units on corner lots. It is also clear recognition that, “hey, we have a housing problem and should probably figure out a way to increase overall supply.”

Unfortunately, when you look at the policy details, you’ll see that this is likely to be more symbolic than effective. What is being proposed is to take the 40% of San Francisco’s land area that is zoned exclusively for single-family houses and upzone it to allow for duplexes on an as-of-right basis.

And then, if you happen to have owned the property for at least 5 years — or inherited it from a family member that did — you can apply for a special “density exception” from the city. This would allow you to build 6 units on corner lots and 4 units on all remaining mid-block lots.

But here’s the other thing: if you are granted this density exception, the additional units (beyond your as-of-right two) will be subject to rent control. So the important question here is about whether or not anyone will end up building more than luxury duplexes and, if they do, will there be enough scale to produce a meaningful impact.

I’m not familiar with development cost structures in San Francisco and I’m not sure if there will be any incentives/subsidies for delivering these additional rent controlled units, but the above feels like far too many barriers if the goal is more housing.

But it remains a step in the right direction. Symbolism certainly has its merits.

For other posts on infill housing, click here.

Photo by Braden Collum on Unsplash

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Why traffic fatalities are lower in Canada than in the US

We’ve talked about this before. If you live in New York City, you’re probably about a third as likely to die from a transportation-related accident as compared to the average American. And if you live in Paris, you’re probably about a third as likely to die from a transportation-related accident as compared to the average New Yorker.

These stats might feel a bit intuitive to you. Both New York and Paris are big and dense metros with high public transit ridership. And that usually translates into less car accidents. As for the divide between these two cities, Paris is in Europe. It’s old. Most of its streets were built before the car had been invented. And all of these things are generally good for pedestrians. Makes sense.

But David Zipper asked a good question today: So what’s going on with Canada? Canada is not in Europe (though some might argue that it sits culturally somewhere between the US and Europe). It’s not that old. And it generally has a car-oriented landscape just like the US. So why is it that in 2020, Americans were 2.5x more likely than Canadians to die in a car crash? The trend lines are also diverging between these two countries. Between 2010 to 2020, US road deaths increased 19% on a per capita basis, whereas Canada’s rate declined by about the same rate, according to David.

Ultimately, we are probably going to need Malcolm Gladwell to write a book about this so that we can really figure out what’s going on. But in the interim, David does propose a few possible explanations ranging from Canadians buying slightly smaller vehicles to Canadians being slightly more law-abiding than Americans and so less likely to run people over. But one of the most persuasive explanations for me is that maybe our urban landscapes aren’t actually the same.

More than a third of Canadians live in our three biggest cities: Toronto, Montreal, and Vancouver. And this number would be even higher if you looked at the full urban catchment areas of each. Either way, this is a significantly higher concentration than in the US, where about 13% of Americans live in the metro areas of New York City, Los Angeles, and Chicago.

Part of this difference is because the US has almost 9x more people and has many more big cities to choose from. But it doesn’t change the fact that, despite our reputed love for things like forests and beavers, Canadians are actually quite urban. And as we have discovered, that’s a good thing for pedestrians.

Photo by Jamshed Khedri on Unsplash

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Renewable power now accounts for about 13% of global electricity generation

This is an interesting chart from Nathaniel Bullard over at Bloomberg Green. In 1985 (the start of this chart), coal-fired power was responsible for about 38% of global electricity generation. This particular stat hasn’t changed all that much since then — the current figure is around 36% — but renewables have gone from 0.8% to 13% of global electricity. That is something. Since 2010, renewables are adding about 0.8% market share each year, and presumably this rate will only increase going forward. (Here, renewable power is defined as wind, solar, geothermal, biomass, and small hydropower.)

Chart: Bloomberg Green

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[Video] City building to achieve our carbon emission targets

Today was the SvNSpeaks event that I blogged about last week. As a reminder, the conversation was about how best to remove overly prescriptive and rigid development policies in order to better achieve our climate change goals. John Lorinc and I ended up agreeing on a lot of points, so maybe that suggests there’s a relatively clear path here. Now it’s just a matter of taking action.

It was a recorded event on LinkedIn, so if you’d like to have a listen, you can do that over here.

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What should Toronto do with its major streets?

The City of Toronto’s Official Plan directs growth to areas of the city that it refers to as Centres, Avenues, Employment Areas, and the Downtown. In other words, these are the areas where most new development is intended to take place. So if you own land in one of these areas, it is probably worth more than if it were outside of them, all other things being equal.

Avenues are what you might expect. They are major streets that run throughout the city (pink ones in the above map). But not all major streets are “Avenues.” There are lots of major streets that provide connectivity across the city but still feel like residential streets (tired ones I might add) and that have land use policies that only allow low-rise housing. I have always viewed this as a mismatch and I have long been critical of it on the blog.

But as part of the City’s Expanding Housing Options in Neighourhoods (EHON) initiative, this exact problem is being looked at. And I think it is one of the most important land use studies currently underway in the city. Because if we are truly serious about housing affordability and our low-carbon goals, we are going to need to blanket our city with a lot more transit-supportive density. And our major streets are great place to start.

I just hope that everyone involved will be as bold and visionary as possible. If you have any thoughts, please leave them in the comment selection below. And for the latest on this study, click here. It is an agenda item at next month’s Planning and Housing Committee meeting.

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Phoenix’s cool pavement pilot program

When I was in Phoenix this past spring I noticed a number of people carrying their big dogs around. At first I wasn’t sure what was going on. I thought maybe the dogs were injured and couldn’t walk. But then it dawned on me that maybe the ground was too hot for the dogs to walk on it. Phoenix is kind of hot sometimes and so this appears to be a thing.

In response to this kind of hot problem, the city has a pilot program underway where they’re testing out something that they are calling “cool pavement”, which is essentially a highly reflective coating that gets layered on top of your traditional asphalt streets. Here’s a video showing some of it getting applied:

The idea here is, of course, to lower the surface temperature during the day and also reduce the overall urban heat island. And after the first year of the pilot program, the results have been encouraging. Cool pavement had an average surface temperature that was 10.5 to 12 degrees Fahrenheit lower than traditional asphalt during the middle of the day.

But there have been some tradeoffs. Because of its higher reflectivity, mean radiant temperatures increased by about 5.5 degrees Fahrenheit during the day, which means that these streets feel warmer to humans when they’re around them. That’s obviously not ideal, but it could be a necessary trade-off to reduce surface temperatures across the city.

For more information on Phoenix’s cool pavement pilot program, click here.