Month: March 2014

• What do venture capitalists have to do with cities?

  This morning I woke up to a tweet from somebody asking me why–despite my obvious love of cities and real estate–do I seem more influenced by venture capitalists on my blog. He wondered if it was because of a lack of public/online real estate thought leaders.

  I responded by saying yes; that’s part of the reason. I honestly can’t think of one real estate developer that hosts a personal and regular blog. (If you know of any, please pass them along.) Whereas I can’t think of a major VC who doesn’t blog.

  Sure there are other real estate professionals who blog, but a lot of those sites just feel like giant lead generation tools and those aren’t enjoyable to read. I’m trying not to create that kind of blog. The trust of readers is more important to me than trying to promote my businesses.

  But the other reason I often cite venture capitalists and “tech” centric topics is because I believe in cross pollinating industries. I don’t believe the world operates neatly under silos and neither should our minds and businesses. I’ve also argued many times before that with software eating the world, nobody should be ignoring technology.

  At the same time, the consumer web feels to me like this profound social force changing the way people live and interact with each, which, if you think about it, is what cities have always been about. And so I see all kinds of interesting overlaps.

  Of course, I also look to planners, designers and other urbanists for inspiration. But I don’t like to do so exclusively. Industries, like anything else, can quickly become insular–whether tech or urban planning. My interest–and the focus of this blog–is cities. And I will continue to incorporate ideas and viewpoints from any discipline that I think touches them.

  2014.03.31

• What makes midrise development difficult?

  A reader recently suggested that I do a post explaining why we aren’t seeing more midrise buildings going up in Toronto. Specifically, why are midrise buildings considered to be “too risky” for developers and what could be done to improve the situation? So today I’d like to focus on that topic.

  But first, let me say that I think Toronto is already in the midst of its midrise development era. The push for intensification first brought about towers, but we’ve come to realize that the tower isn’t necessarily going to serve everybody’s needs.

  Here’s what John Bentley Mays recently wrote in the Globe and Mail regarding midrise developments:

  With Duke, SQ, Nest and similar structures, we may be seeing the start of a promising design trend in Toronto’s multifamily housing market.

  And given that our Chief Planner, Jennifer Keesmaat, has been a vocal supporter of midrise, I think there’s no question that we’ll only see more and more of this type of development. Nonetheless, there are challenges. Here are a few that come to mind.

  1. Fragmented sites

  Because midrise developments typically target established main streets with smaller lot sizes, developers often have to contend with fragmented ownership in order to assemble a site. So instead of talking to one owner (say the owner of a large parking lot downtown), a developer may have to contend with a dozen owners who all need to get on board for the development to happen.

  2. Scale is too small

  Developers have a lot of fixed costs that don’t materially change whether you’re putting up a 50 storey tower or an 8 storey midrise building. Some costs are certainly variable, but there are overall economies to scale to having more units in which to distribute costs over.

  3. Community opposition

  The whole point of midrise intensification is to increase the housing supply in established neighborhoods. But along with this comes greater risk for community opposition. You may have a neighbor who’s been living for 30 years adjacent to where you want to build. And when you come along and try and build a 10 storey midrise building, they can get grouchy.

  4. Strict guidelines 

  To try and counteract community opposition (and promote good urbanism), the city has developed a number of design guidelines for midrise buildings. And while they’re well intentioned, they can be onerous for developers and designers. For example, the requirement to terrace down towards adjacent residential neighborhoods produces a lot of inefficiencies (though it does create spectacular terraces). Oftentimes you’ll end up with more unit types than you would in a large tower.

  All this said, I’m a big believer in the midrise building typology. At TAS, I’m involved in two such projects–DUKE and Kingston&Co. Both are exciting projects and both, I think, are at the forefront of a new development era for Toronto. Vancouver pioneered the podium + point tower typology. Toronto is about to do the same with midrise buildings.

  2014.03.30

• Ed Hung

  This morning I’m going to a memorial service for a close family friend. His name was Ed Hung. You may have read about him in the Toronto Star, because on March 16th, 2014 at 11:00AM Central European Time he died by way of an assisted suicide. He was in Switzerland.

  And the reason he was in Switzerland was because, in Canada, you’re not allowed to do what he did. You’re not allowed to seek help and decide when it’s your time to go. That’s supposed to be left up to some greater being.

  But what if you’re like Ed? What if you have Lou Gehrig’s Disease and your body noticeably deteriorates within the span of a few months? What if you’ve just lost the ability to do what you love most: play the guitar?

  Ed was a lawyer. And a successful one at that. But he loved music. The first time I met him was at my mother’s house one Christmas where he was playing the guitar and singing songs all night. He had a band and that’s what he loved to do.

  Sometimes I think it’s a shame that people often don’t get the chance to just do what they love; they have to do other things in order to make enough money. But I suppose that’s life.

  Nonetheless, it is somebody’s life. And I agree with Ed in that quality of life is a subjective concept. If you’ve just lost all ability to move your left hand, then it’s you who are going to have to deal with that new reality—not anybody else.

  Which is why I fully support Ed’s decision. I didn’t know him as well as I would have liked, but I have a lot of respect for what he did. He took matters into his own hands and did it his way—as he beautifully expressed in his farewell YouTube video.

  I know that my family will miss Ed dearly, but he’s left us with something important to think about. Before he passed he wrote a letter called Approaching Death. You can read it here. And in that letter, he delivers a powerful set of lines about the laws in our country:

  “…my pride as a Canadian has somewhat diminished after having been on my knees begging to die in another country. This is not fair and I certainly do not wish it upon any of my fellow Canadians.”

  I know that this may not sit well with some of you, but I believe in a country built on personal freedoms. And this, to me, is a case of personal freedom. I’m not sure what I would do if I were in Ed’s position, but I know with certainty that I would want the ability to do whatever I decide.

  2014.03.29

• Rome wasn’t built in a day

  

  Last night I attended the kick off party for a new loft / laneway / condo development called Lanehouse. It’s in the Bloor and Dufferin area of Toronto, which is an area I know quite well as I used to hang out there when I was living off St Clair West. I used to go to 3 Speed, Bar Neon, Tall Boys and Bassline.

  The project is located at 50 Bartlett Avenue. It’s a renovation of an existing 2-storey laneway structure, as well as the addition of a new building fronting onto Bartlett. In total there will be 16 units. For the 13 “loft houses” going into the existing building, a third floor will be added containing indoor space and a terrace. I’m not exactly sure what the balance of the other units will be like.

  It’s a really neat project. But what I’m also excited about is that it’s a type of laneway housing. As many of you will know, I’m a big fan of laneway housing–however difficult they may be to achieve in our great city. But one of the ways you can often build them, is if there’s an existing laneway structure in place–which is the case at 50 Bartlett.

  It’s also helpful to have frontage onto a street with a proper name. Otherwise you have a “house behind a house” condition. Most laneways aren’t named and the city doesn’t consider them to be a real street. They’ll ask: what would your address be? So even though you may be able to access them from a laneway, the city would view those houses as having no real frontage.

  There are of course many other obstacles, but those are some big ones.

  While I would love to see the city actually jump on board with laneway housing (and develop proper policy around them), I’ll take this project as evidence that we’re headed in the right direction–towards a city where laneways have been rebranded, repurposed and entirely reimagined. That’ll be an exciting time.

  2014.03.28

• 50% of apartments in New York are under a form of rent control

  A friend of mine who lives in New York recently sent me this interesting article: “The Perverse Effects of Rent Regulation.” And he sent it to me, because he wanted me to take note of this stat:

  There are, effectively, two rental markets in Manhattan. Roughly half the apartments are under rent regulation, public housing or some other government program. That leaves everyone else to compete for the half with rents determined by the market.

  50% is a big number. I would never have guessed that the New York rental market would be split in such a way. But it is split because it’s fairly clear what would happen if it weren’t: 

  “Poor people would be priced out of Manhattan,” he says. “Period.”

  This, as the article argues, could threaten the diversity that has made New York the economic and cultural hub that it is today. But at the same time, there are a number of important questions: Is 50% the right split? And are the control mechanisms in place the right kind of mechanisms? Should rent controls be attached to people as opposed to apartments, which is how it’s typically done today?

  Diversity is hugely important and there will always be a portion of any city’s population that cannot afford market rents. But intuitively, and I could be wrong, 50% seems high. It seems high because these types of rent regulations achieve the exact opposite for the balance of the market that has to pay market rents: their apartments become more expensive.

  I’ve been having a lot of discussions lately about affordable housing and rent control always comes up. I think that in a lot of cities there needs to be some sort of intervention in the market to keep them from becoming homogenous playgrounds for the rich. But I also believe that many policies–which may sound great in theory–can have unintended market consequences. These need to be seriously looked at.

  2014.03.27

• Moving people instead of cars

  As of this week, Architect This City is now being syndicated on MobilityLab. Here’s the first post. MobilityLab is a US-based think tank focused on “transportation demand management”, which is just a fancy way of saying that their focus is on optimizing for the movement of people, instead of cars.

  Not every post from ATC will get syndicated on MobilityLab, but hopefully many of the ones focused on mobility will be. But really this post this just to tell you that if you’re interested in transportation, mobility and sustainability, you should check out MobilityLab. 

  To get you started, here are their top 10 stories from 2013.

  2014.03.26

• The high cost of transacting

  This past Sunday I was over at my father’s place for dinner and we were talking about the high transaction costs associated with buying and selling homes. That is, we weren’t talking about the high price of homes in Toronto, we were only talking about transaction costs and barriers to market liquidity.

  For example, let’s say for the sake of simplicity that you own a home that’s worth $1 million and you’d like to sell it and buy a different home that also happens to be worth $1 million. In this case, you’d be making an entirely lateral move. You’re not down sizing or up sizing, you just want a different home–perhaps because you’d prefer a different neighborhood.

  In order to do this, you’re going to be faced with a number of costs. But the 2 most significant are real estate commissions and Land Transfer Taxes (both provincial and municipal). You only pay Land Transfer Taxes in Toronto when you buy (take title) of a new property, but they’re unavoidable, unless you’re a first time buyer, in which case you’d qualify for a bit of a rebate.

  Real estate commissions are technically optional, but 70-90% of the market in North America still uses a a real estate agent to sell their home (based on the estimates I’ve found). Typically a seller pays around 5% of the sale price. So in this example, you the homeowner would be paying around $50,000 in real estate commissions.

  Land Transfer Taxes would be roughly $32,000, and so you’re looking at a total somewhere around $82,000 in order to make this lateral move. This, of course, does not include legal fees or any other moving costs you might incur. It’s a hell of a lot of money and it’s a significant barrier to transacting.

  But my hunch is that we’ll eventually see real estate commissions come down. No real estate agent wants to hear this, but I think it’s almost inevitable. The internet, as a disruptive force, is bound to make it happen.

  2014.03.25

• Improving urban mobility

  If you’ve ever ridden a busy Toronto streetcar, you’ll know this story:

  You’re waiting outside in the cold for a streetcar. When one–actually 4–finally arrive all bunched up together, they’re so packed with people that you’re not actually able to get on. You try one anyways and the driver makes an announcement for everyone to “move back” so that more people can onboard via the front door. After a few minutes of people shuffling to try and get further back, you’re finally able to squeeze on–even if you are virtually sitting on the driver’s lap. You then travel about 2 blocks before the streetcar stops and the same thing repeats. The result is an absolutely infuriating mobility experience that usually makes walking the preferred choice. Who said that downtown already has enough subways?

  Over the weekend, I was watching this TED talk with Charlie Rose interviewing Larry Page of Google. One question that Rose asks Page is about why he’s so fascinated with transportation and mobility. That is, why is Google so committed to driverless cars? Page then talks about his experience of waiting for buses when he was a student at the University of Michigan and how he would think about all the inefficiencies in the system. He also talks about how half of the urban fabric of Los Angeles is made up of roads and parking lots and that this is a terrible outcome of the mobility choices made in that city.

  I’ve said before that transportation is one of the biggest challenges facing Toronto today. And I truly believe that. But that’s probably the case in most, if not all big cities. Getting people around a city efficiently is such a fundamental need. It stimulates economic growth and it improves quality of life. And those are typically the reasons why people choose to live in cities: to make money and to have a better life. 

  Now, I’m a big proponent of public transportation, but I’m also excited by the advances being made outside of mass transit. With driverless cars, electric cars, networks such as Uber and Hailo, and the emergence of the sharing economy, you could easily imagine a bunch of different ways in which mobility could be improved in our cities. Take, for my example, my own driving patterns. I probably drive my car 2, maybe 3 hours per week these days. That translates into a weekly utilization rate of roughly 1.2%! (2 hours / 168 hours week). That’s terribly inefficient. We can do better. And I think we will.

  2014.03.24

• Is Chicago’s zoning code broken?

  This may sound crazy, but I’ve never been to Chicago. It’s on my list, but I just haven’t gotten around to it and I’ve never had a specific reason to go. Hopefully I can make it this summer.

  Lately though, I’ve found myself reading more and more about the city. Given that it’s also a Great Lakes city and it’s of comparable size, Chicago is an interesting case study for Toronto. But one thing that seems to keep coming up, is the need for zoning reform.

  About a month ago I wrote a post called “The tale of 2 Chicagos”, which was inspired by the blogging of Aaron Renn (The Urbanophile) and Daniel Hertz (City Notes). The discussion was around the prevalence of single-family zoning in most parts of Chicago and how it’s creating a supply constrained market (driving up prices).

  But there’s another outcome. Here’s what Daniel Hertz recently argued:

  When places in and around downtown become more desirable, developers build more housing, and more people get to live there. But when non-downtown neighborhoods become more desirable, developers can’t build more housing: it’s against the law. So instead, they profit by tearing down old two-flats and building mansions in their place. And as a result, fewer people get to live in those neighborhoods, even as more and more people want to.

  Effectively, his argument is that gentrification leads to a loss of housing units. Developers can’t build more housing, so they replace housing. And it all stems from a restrictive zoning code that aims to maintain the character and scale of established neighborhoods. I get that, but you could easily argue that it exacerbates the negatives of gentrification.

  It strikes me that Toronto and Chicago are in somewhat similar places in terms of their growth. Without any real natural barriers, both cities had the luxury of being able to develop through horizontal sprawl when they were younger.

  But with people now returning to city centers, we’re faced with a series of difficult decisions: How do we balance preservation and growth? How do we balance low-density with high-density? How do we maintain the character of what people love while still creating an inclusive city?

  It absolutely can be done, but it’s going to mean embracing a certain amount of change. And that’s not always an easy sell. 

  2014.03.23

• This Built America: Shinola

  

  If you’ve been reading this blog since last year, you’ll know that I’m hugely interested in Detroit. I went for a visit last fall and I hope to go back sometime this summer. I think the city has tremendous potential and I would love to see it come back. I’m rooting for it.

  Between people like Dan Gilbert and consumer brands such as Shinola, there’s a palatable sense of momentum developing in the city. Here’s a short video of the Shinola story from This Built America–which is a project focused on the people and companies that are rebuilding America and its manufacturing base.

  2014.03.22