Month: June 2023

• The future of Toronto’s neighborhoods

  

  

  Yesterday evening I visited the future of Toronto’s neighborhoods. It is located at 367 Howland Avenue. And it takes the form of 10 homes on a lot that previously used to house only 1. Developed by Green Street Flats and designed by Craig Race Architecture, it is a near perfect example of what Toronto hopes to achieve with its new multiplex policies. As Craig put it last night, “we found the missing middle!”

  Now to be fair, this is a double lot, measuring about 10m wide in total. And so this is twice the size of what the new policies now allow on a single lot — a fourplex plus a laneway suite or garden suite (4+1). But it is still generally consistent with what you could do today if you had two contiguous lots.

  That said, this project predates the new multiplex policies, meaning it required a long list of zoning variances and it led to an inevitable fight with the neighbors. This small project required an 8-day contested hearing before it was granted approval! Start to finish, Howland took over 3 years.

  That is ridiculous and so I think all of us should view the new multiplex policies as meaningful progress in our city. What was once contentious and a huge pain is now permissible as-of-right. Isn’t it funny how rules and perspectives change? “No, you can’t do this! Okay, now you can. Please do a lot of it.” So for the purposes of this post, let’s talk about Howland as if it were built on an as-of-right basis and you could do the same on your own lot if you were so inclined.

  From a design perspective, the homes are organized as follows:

  

  There’s a full-floor basement suite, a full-floor suite on the main level, two back-to-back two-storey upper suites, and then a laneway suite at the back. One reason for this configuration is that it means you never have to walk up more than one flight of stairs to get to your main living space. This was one of the design criteria and I think it works very well. Here’s an example of what this looks like (this is a suite #3):

  

  For this particular site, the entrance to suite #4 is at the back of the fourplex and accessed via an adjacent laneway. But for the “inboard” fourplex, each suite is accessed via the main street. Once again, I think this all works very well. I just wonder if there could be an opportunity to shave additional costs by moving some of the circulation outside (kind of like this). I guess it would depend on the width of the lot.

  

  Of course, the big question remains: Do projects of this scale actually make any money? Because if they don’t, then people aren’t going to continue building them. Though, I would say there are two ways to think about underwriting a project like this.

  The first is from a 100% investment standpoint: build 5 homes, rent 5 homes, and then collect a reasonable risk-adjusted return. The second is a hybrid approach. Maybe it’s build 5 homes, rent 4 homes, and live in the other one. In this case, the math is likely a bit different. It could just be about subsidizing your living expenses as opposed to generating a commensurate return.

  But in both cases, we know that these are very skinny projects. You need to be extra careful with your costs. And from what I gleaned last night, 6 or more suites is a better underwriting starting point (compared to 5). We also know that these projects only pencil with CMHC financing. Period. Full stop. If CMHC financing were to go away or meaningfully change, so to do these missing middle projects.

  So as we look toward the future of housing in Toronto’s neighborhoods, we need to keep in mind that these projects happen very much on the margin (as does all development, but it’s an even thinner line here). Meaning it remains to be seen whether these will happen at scale across the city, which is now the hope. It’ll also be interesting to see if developers like Green Street don’t scale up over time. I suspect they will.

  Congratulations to Green Street Flats, Craig Race Architecture, and the rest of the team on helping to pioneer this new housing typology. It’s a glimpse of the future and, judging by the turnout at last night’s open house, Toronto is ready for it.

  2023.06.30

• Canada’s tech talent strategy

  This past week at Collision Toronto, Canada unveiled a new “Tech Talent Strategy” that includes a number of initiatives designed to attract more human capital across the science, technology, engineering, and math sectors. (Sidebar: The STEM sectors are great, but I’m really a fan of STEAM.)

  At a high level, these measures are intended to continue to grow Canada as a hub for global tech talent. So they cover things like promoting Canada as a destination for digital nomads, improving the Start-up Visa Program, and dunking on US immigration policies by creating an open work permit stream for H-1B specialty occupation visa holders.

  Overall, it seems great.

  But there are people who are concerned about the pace of immigration in Canada. Over the past year (ending in Q2-2023), the country added about 1.2 million people. This is a record. And perhaps the greatest concern, is that we simply aren’t building enough housing and related infrastructure.

  But I don’t get this logic. Canada is a relatively small country. Attracting smart and ambitious people from around the world is good for us. And there are simple ways to address these concerns: build more housing and related infrastructure. I’m pretty sure that we can figure out how to do that.

  2023.06.29

• A canyon as mid-block connection

  

  Tishman Speyer, the San Francisco Giants, and MVRDV have just completed a new residential building in San Francisco called “The Canyon.”

  The first phase of the larger Mission Rock masterplan (which also includes a project by Studio Gang), the complex got its name because of a walkway that cuts through the plinth of the building and that, well, looks like a canyon. You can see it in the above image if you look closely. There are even stairs that take you up as you walk through it.

  But what is most interesting about this walkway is not its geological reference. It would be how it performs at the ground floor and for the homes that face into it. It’s a way of creating a narrow mid-block connection (and we like narrow streets), while at the same time allowing more light into the center of the block.

  So I’d be curious to see/experience what it’s like in the middle of this canyon. Hopefully it’s interesting.

  Photo: Jason O’Rear

  2023.06.28

• Exactly how gentle does gentle density need to be?

  

  This proposal by Dubbeldam Architecture + Design, called Incremental Density, is both an obvious step in the right direction and a problem. It is directionally right because it is exactly the kind of “gentle density” that we need and that many of us hope to see in our cities.

  Four to six storeys, prototypically built on an as-of-right basis all across city, possibly by small-scale owner/developers. In fact, this approach is one of the things that Toronto’s new mayor, Olivia Chow, has been speaking about on her first day in the office:

  Further, Chow said she wants to make it “easy and fast” for those who want to “build up” their single-family, often detached, homes to address what is known as the “missing middle” due to a history of “red tape” around zoning.

  “What I’m saying is ‘build, build, build, build,’ up to four storeys if you want to have four units,” she said. “You can rent out three of them and some money right. Then you are creating more housing, and you’re earning some extra dollars,” she continued.

  “So I want to unleash the power of the homeowner and say to them, ‘go build it,’ because we need housing right here now.”

  Here’s the problem, though. I’m going to go out on a limb and assume that at least a few people will not want 6 storeys beside them and their backyard. I mean, I struggled with a 2.5 storey laneway house for many years. (11 to be exact.)

  

  So how do we get from where we are today to what you see above? It’s going to take some finessing. Maybe it’s only in specific areas and on certain sites to start, or maybe we need to gradually increase the massing over time. Either way, I too am ready to “build, build, build, build.”

  What do you all think of this proposal?

  Images: Dubbeldam

  2023.06.27

• We should waive the HST on purpose-built rentals

  We have spoken recently about the reset taking place in the development industry right now. It is difficult to underwrite new projects.

  But even before this current environment, it was challenging to make new rental housing pencil. Condominium projects almost always look more attractive (at least here in Toronto) and generally speaking, the spectrum for rental housing feasibility goes from “no, this doesn’t work” to “yeah, maybe this will work if we trend rents over a long enough time horizon.”

  The problem with this is that we know more rental housing would be a positive thing for our cities. So how do we address this? Here are some common solutions that get thrown around:

  • Make condominium projects less attractive to build. If fewer developers want to build condominiums and if fewer investors want to buy them, then maybe new purpose-built rentals will become more enticing to build. On some level, this makes sense. It should create downward pressure on land values. But this doesn’t help rental housing supply if it isn’t feasible to begin with. And why limit overall housing supply? (Related post, here.)
  • Make rental housing projects less attractive to build. I know this sounds counterintuitive when I say it this way, but we do do this. Rent controls, to give just one example, generally make it harder to build new rental housing. Yes, it can help those who are already housed, but it can disincentivize proper building maintenance, it can lead to more people being over-housed, and it absolutely hurts new supply. So there are trade-offs.
  • Make rental housing projects more attractive to build.

  I find this last one intriguing, and so here’s one specific idea that I have raised before. Though this time, I’m quoting Benjamin Tal of CIBC:

  But, by far, the most pragmatic step to take in the immediate future would be to waive or defer HST payments on purpose-built rental projects from first occupancy to the sale of the building, while keeping the same valuation methodology as the current regime.

  It’s the most realistic option since it’s relatively easy to implement, and Ottawa will have a willing partner in the Ontario government. Buried in page 84 of the recent Ontario budget was the following sentence, “we call on the federal government to come to the table on potential Goods and Services Tax/Harmonized Sales Tax (GST/HST) relief, including rebates, exemptions, zero-rating or deferrals”.

  Such a move alone would shave close to $60K from the unit cost of that 400-unit project in Toronto, resulting in a meaningful reduction in rent, while at the same time unlocking tens of thousands of rental units across the country in short order — clearly a step in the right direction.

  We should do this.

  P.S. Sam, thanks for sharing Tal’s article with me.

  2023.06.26

• A line vs. a circle — which is the optimal urban form?

  So I guess I was wrong. I thought “The Line” in Saudia Arabia was never going to be built — at least not in its current incarnation. But apparently it is now under construction, and it is still planned to be 170 km long and house some 9 million people when it’s complete. I suppose something could happen between now and when all 170 km are complete, but I’m happy to accept that, for the time being, I was wrong.

  Now it’s time to ask ourselves what a 170 km long city would even be like. To answer that, here is a fascinating article from npc Urban Sustainability describing how mobility and urban interactions are likely to work in this kind of a linear city. And it turns out that a line is actually an optimal urban form if you’re trying to both maximize commute times and maximize the average distance between inhabitants:

  One of the most critical aspects related to The Line is distance. If its 9 million inhabitants are homogeneously distributed in the city, each km will have roughly 53,000 people. If we randomly pick two people from the city, they will be, on average, 57 km apart. Although The Line occupies only 2% of the surface of Johannesburg, if we pick two random people in Johannesburg, they are only 33 km apart. Keeping the surface fixed, a line is the contiguous urban form that maximises the distance between its inhabitants. In The Line, people are as far away from others as possible. Considering that a walkable distance is 1.0 km, in The Line, only 1.2% of the population is at walking distance from others. Active mobility is not viable in The Line since distances are too long. The plan for The Line has no cars but also gets rid of most active mobility. Although in The Line, basic needs could be satisfied within 5 min, most journeys to school, work, leisure or visiting other people will depend on public transport.

  So what would be better? Well if you’re trying to minimize the average distance between people and increase urban interactions, then the optimal form is generally the one that cities have been using ever since they were first created:

  We can think of a city called The Circle, where we take the same tall buildings as in The Line but put them next to each other, forming a circular shape. A circle that occupies the same surface as The Line (34 km²) has a radius of only 3.3 km. In The Circle, the expected distance between two random people is only 2.9 km. In The Circle, a person is at a walking distance of 24% of the population (and within 2 km, they could reach 66% of the destinations), so most of their mobility could be active. In The Circle, a high-speed rail system is unnecessary since people could walk or cycle to most places, and buses could supply the rest of the journeys. The Circle occupies roughly the same surface as Pisa, Italy, but has 50 times its population. A round urban form is the most desirable since it reduces commuting distances and the energy required for transport.

  This is one of the challenges with building large scale cities from scratch. It’s easy to become enamoured with a particular plan or symbol; whereas in reality, cities don’t care about these kinds of visual representations. They don’t care that, in plan, the city may look like an eagle (see “Helicopter Urbanism“, a term that was supposedly coined by Jan Gehl). What matters is how interactions between humans play out at street level.

  2023.06.25

• How to create narrow European-style streets

  If you’re a regular reader of this blog, you’ll know that I have a thing for narrow streets. Which is why when I travel I sometimes (okay, oftentimes) bring a laser distance measuring device with me. I like measuring things so that I have dimensions that I can feed back into our own development projects. But perhaps most importantly, it allows me to appear as nerdy as humanly possible while traveling. Walking around with just a camera in hand isn’t enough. You need to try harder than that. And so far the narrowest street that I have come across was in Noto, Sicily at just over 1.3m wide.

  If you also like to fawn over narrow European streets, you may enjoy this recent video by City Beautiful. In it, Dave Amos compares European cities, like Rome, to US cities, like Salt Lake City and Philadelphia, and then asks: Can the US build European-style street networks? His immediate answer is, “probably not.” And this is something that we have talked about before on the blog. Street networks tend to be really sticky. They’re hard to change. However, there is another possible solution: create new smaller mid-block streets. And that’s the focus of Dave’s video:

  But if you think about it, this condition already exists in a number of cities. Here in Toronto, we have somewhere around 300 kilometers of laneways, which tend to range in width from 4 to 6m. These are European-scaled streets and amazingly they’re already in place! The only difference is that, today, they mostly serve a back-of-house function. They provide access to garages. However, that is quickly changing with the introduction of laneway suites. And so over a long enough time horizon, our laneways are going to inevitably flip from back-of-house to primarily residential.

  Though maybe there’s even more we could do with this asset. European cities manage to fit retail, restaurants, patios, and more within 6m. Why not do the same with some of our narrowest streets?

  2023.06.24

• Read, write, own

  

  I have been following Chris Dixon for many years and, yesterday, I learned that he has written a new book called, Read Write Own: Building the Next Era of the Internet. It is a book about web3 (crypto things) and the title is based on thinking about the evolution of the internet in terms of these three phases:

  The first act, called the “read era”, circa 1990-2005, democratized information. Anyone could type a few words into a browser and read about almost any topic through websites.

  The second act, the “read-write era”, roughly 2006-2020, democratized publishing. Anyone could write and publish to mass audiences on social networks and other services through posts.

  The third act, the “read-write-own era”, 2020-present, is democratizing ownership. Anyone can become a stakeholder in a digital service or network, gaining power, governance rights, and economic upside previously reserved for only a small number of corporate affiliates, like stockholders and employees.

  The book won’t be out until March 2024, but if you’re interested, maybe you want to pre-order it or at least get it on your radar. I immediately put this in my queue and I’m looking forward to welcoming it to the pile of books next to my bed.

  Full disclosure: I don’t get anything if you pre-order this book. I’m only putting this out there because I have a high degree of conviction about this coming shift and because, in the future, I want to be able to look back at posts like this one here. I think they’ll age well.

  2023.06.23

• Land prices can be weird

  Jeremiah Shamess of Colliers made the claim this week that land values in some areas of the Toronto region are down 25%. He then shared a chart from Alan Leela showing how various factors have increased or decreased land values since 2020.

  Broadly speaking, a revenue increase and/or more development density should increase land values; whereas something like inclusionary zoning, which is a cost to the project, should decrease land values. Indeed, this is one of the arguments in favor of inclusionary zoning: “Don’t worry about the additional cost to the project because landowners will simply pay for it through reduced land prices.”

  In theory, all of this is correct.

  Land is (or should be) the residual claimant in a development pro forma. Start with your revenue, subtract your costs, and then see what is left over for the land. (Though keep in mind that what is left over for the land could be $0 or even a negative number.)

  But as I have argued before in the context of inclusionary zoning, I don’t think things always play out so neatly in the market. Put differently, if the cost impact of inclusionary zoning is something like $44 psf, I don’t think all landowners suddenly drop their prices accordingly — especially in a rising market where developers are competing fiercely for land.

  They don’t care about your residual value model. Many or most will just hang on to their number and wait for someone to pay it.

  So what I am saying with all of this is that, yeah, there are factors that put either downward or upward pressure on land values. But how it all actually plays out in the market tends to depend on the macro environment and what else is going on at the time. And right now we are at a point in the cycle where there is clearly downward pressure on land values.

  2023.06.22

• Most new condominiums are not owner-occupied — is that actually a bad thing?

  Here’s some data (via Jeremy Withers) explaining that a large portion — about 61% — of new condominiums built in Ontario between 2016 and 2021 were not owner-occupied. In the case of low-rise houses, the figure is lower — about 24%.

  Now, the premise of Jeremy’s tweet storm is that non-owner-occupied housing is bad and that the government should be doing more to discourage this. Simply taxing and restricting foreign buyers is not enough (and I agree that this is mostly symbolic).

  But is non-owner occupied really such a bad thing?

  First of all, non-owner occupied implies that somebody else is renting the place. I don’t think that a significant chunk of these homes are being left vacant. So isn’t the fact that somewhere around 61% of all new condominium apartments are becoming rental housing something that is potentially positive?

  One counter argument would be that these investors are bidding up new home prices and squeezing out end users. But that brings me to my second point: small-scale individual investors are a critical ingredient in the delivery of new condominium housing in Ontario.

  This point cannot be overstated.

  The lender requirement to pre-sell suites in order to obtain construction financing means that developers rely heavily on buyers who are willing to purchase many many years before occupancy. And this is generally a lot more challenging for end users, as we have talked about many times before.

  So if it weren’t for investors, I am certain that we would see a lot less new housing getting built. And in turn, that would mean a lot less new rental housing getting built.

  2023.06.21