Daily insights for city builders, delivered every morning at 6 AM ET. I’m Brandon Donnelly — a Toronto-based real estate developer and founder of Globizen. I’ve been writing here since 2013.
Street networks tend to be pretty sticky. Meaning, they tend not to change very much, or at all, over time. We have spoken about this before, over the years.
A good example of this is Broadway in Manhattan. Broadway is a world-famous street. And it’s perhaps no coincidence that it’s also the only street that runs the full length of Manhattan and breaks across the city’s regular street grid.
The exact reasons for this are somewhat nuanced. And for a more fulsome backstory, I recommend you watch Daniel Steiner’s recent video on the topic (embedded above).
It is alleged that Broadway started out as the Wickquasgeck trail. Meaning it pre-dates the arrival of Europeans to the island. But regardless, we know that it came before New York’s famed Commissioners’ Plan of 1811, which is the plan that gave the city its grid.
So it would appear that, sometimes, even the most rational of plans can be no match for something even stronger: a street that already exists.
When the market is hot, it becomes more difficult to buy real estate. You end up with more buyers than sellers. And because of this, there’s a natural tendency to look further afield for opportunities. You don’t want to overpay for the obvious assets, and so you start to pioneer.
This can work out just fine, particularly if the market remains strong. But oftentimes, when the market does turn, it is the peripheral stuff that gets hit the hardest. There is a flight to quality and pioneering gets quickly viewed as too risky.
Here in Toronto, I am consistently being told that there are peripheral development sites that have seen their value drop to 20-25 cents on the dollar compared to the peak, and that’s if you can actually find a buyer. In many cases, the sites are now unsellable.
This, to me, is our periodic reminder that while it’s important to search for overlooked opportunities and buy cheap, you can’t forget to also buy quality.
Point access blocks, which are also known as single-stair buildings, are getting a lot more attention here in Canada. And B.C. looks like it might be one of the first provinces to relax its building code. Here’s an excerpt from a recent Globe and Mail article:
Canada’s building code, which provinces have generally gone along with, has required two staircases per apartment building since 1941. But B.C.’s Ministry of Housing last week published a research report outlining the optimal conditions for single staircases.
“We are definitely moving forward with this,” said Ravi Kahlon, the Housing Minister, who hopes to introduce the legislation allowing the change in the fall.
Mr. Kahlon said that the option of “single-egress” buildings, as they’re also called, will be confined to areas where there is professional fire services (as opposed to rural-style volunteer departments) and good water supply, as is the case in Seattle. That city has allowed single-stair buildings since 1974.
In this case, the proposed change is expected to be limited to six storey buildings that have no more than four apartments per floor. That still feels fairly limiting, but it’s at least a step in the right direction.
I have been spending some time looking at the feasibility of small six-storey apartments (here in Toronto), and I can tell you that it’s not easy to make the math work. You need to optimize, everything. Minor assumption changes can really blow up the model.
I don’t think that this change will magically fix that. But it’s still meaningful progress. And if we keep chipping away at this housing problem, we might actually get there.
As some of you may have gleaned from this recent RENX article, I have moved on from my development position at Slate Asset Management to focus exclusively on Globizen. After 8 very productive and exciting years at the company, it was time.
I joined Slate in 2016 to help start the development group. Here is the post that I wrote back then. And it all came about because of a coffee meeting at Starbucks at the corner of Yonge & King.
At the time, Lucas Manuel was looking to hire someone, and so our mutual friend, Kieran Boyd, connected us with the expectation that I would make some industry introductions. But at the end of our meeting, Lucas was quick to say, “actually, I think you should come join Slate.”
And obviously, that’s what I did.
Fast forward to today, and Slate has grown into a global investment and asset management company with $13 billion of assets under management across Canada, the US, and Europe. And within this platform is a supremely talented development group with an awesome portfolio of sites and projects.
Thankfully though, this is not a goodbye. Myself and the Globizen team will still be working very closely with Slate on a handful of development projects, including One Delisle and Corktown. And the intent is that we will continue to work on new projects together in the future.
I learned a lot during my time at Slate, and I have so much respect for Blair and Brady Welch and the rest of the partners. They have built an incredible global company and assembled some of the most creative, entrepreneurial, and smartest people I have ever worked with.
Thank you for everything over the last 8 years.
So what’s the plan for Globizen? This will be the topic of a follow-up post.
Here’s an interesting, though not shocking, chart from a recent Globe and Mail article talking about “Canada’s dysfunctional housing market.” What is noteworthy is that Toronto is dead last when it comes to the number of new 3+ bedroom homes built between 2016 and 2011.
Peterborough, for example, is a census metropolitan area with somewhere around 130,000 people. And yet, based on this data, it is building more family-sized homes than Toronto.
Why this is not surprising is that the vast majority of new homes now built in Toronto are high-density and built out of reinforced concrete. This means that they are relatively expensive on a per square foot basis.
In fact, you could argue that mid-rise housing — the exact high-density type that is supposed to be most attractive to families — is the most expensive to build. What this means is that if you’re building a 3+ bedroom home in this way, it’s not going to be affordable to most.
It also means that people are going to go shopping elsewhere: Ottawa, York, Simcoe, Durham, and so on. The expected market outcome is decentralization. But in my mind, this raises an important question: Is this what people really want?
This is a great debate. And many will argue that grade-related suburban housing is exactly what people want. What we are seeing is a result of raw consumer preference.
However, the costs are so skewed in favor of low-rise housing, that I think it’s hard to say with absolute certainty the degree in which this is true. What if higher-density 3+ bedroom homes were the cheaper option? My bet is that we would see a lot more centralization.
The development charge rate for a 2+ bedroom apartment in the City of Toronto is currently $80,690 per unit (effective June 6, 2024). As development charges work, this is supposed to pay for the growth-related impacts of adding a 2+ bedroom apartment in the city.
However, the above chart suggests that there are also impacts to not building that 2 or 3 bedroom apartment in an already developed area next to existing infrastructure. It means the home goes somewhere else (further away) or doesn’t get built at all.
This past week, Toronto City Council approved the launch of a new affordable housing initiative called the Rental Housing Supply Program. Here’s the agenda item if you’d like to dive into the details and read some of the supporting reports. There are a number of components to the program, and one of them is a subsidy that will be administered by way of a forgivable interest-free loan:
Subject to the adoption of the Rental Housing Supply Program, the City will continue to support RGI and affordable rental homes through the allocation of up to $260,000 per eligible affordable rental and RGI home. This is the maximum allowable funding allocation under the Rental Housing Supply Program. Actual funding per project will be determined based on the evaluation of applications on a site-by-site basis, in consultation with the Chief Financial Officer & Treasurer, and based on project parameters and additional sources of funding that can be leveraged to support the project’s financial viability. These funds will be provided as interest free forgivable loans to eligible and approved projects and will be tied to milestones and requirements in agreements with housing providers.
Total funding for the program is $351 million. And the intent is that these funds will be distributed in the near term to 18 affordable housing projects in the city, all of which are expected to start construction sometime between now and the end of 2025. In total, this is anticipated to create about 6,000 new affordable rental homes. That’s a good thing.
Now, I don’t know anything about these projects. I don’t know if $260k is the right figure. And I don’t know if a forgivable interest-free loan is the exact right mechanism to deliver these funds. But what the program does do is recognize this: Deeply affordable housing cannot be built without some form of subsidy.
Developers are often criticized for only building expensive housing. But the reality is that developers are, for the most part, takers of market pricing. In other words, we can’t just decide to build for less. We can reduce build and finish quality to get costs down, but at a certain point, the cost to build is the cost to build.
And if that cost to build isn’t what the market would view as affordable, then you’re not going to get there without a subsidy. No developer is going to build if their expected revenues are less than their costs. Directionally, that’s what this new program appears to recognize.
I hate driving (specifically in the city), but I am fascinated by the next generation of Apple’s CarPlay, which I recently wrote about, here.
One of the reasons why I’m fascinated is because so much of our built environment is built around the car. And since the built environment tends to be very sticky, I think one can safely assume that — for better or for worse, it’s actually worse — we’re going to need a lot of cars for the foreseeable future.
According to Apple, 98% of new cars in the US come with CarPlay already installed. So, all cars. And the obvious reason for this is that many or most people want it. According to this survey, about 1/3 of new car buyers say that they wouldn’t buy a new car if it didn’t have Apple CarPlay or Android Auto.
Apple believes this number is much higher at 79% of US buyers. I don’t know what the right number is, but I do believe the number is substantial and probably closer to Apple’s than the 1/3 figure. I certainly wouldn’t buy a new car without CarPlay.
The result is a suboptimal situation for carmakers. Apple is still going to do whatever it takes to make carmakers want to use CarPlay. My recent post was largely about the design efforts that they have undertaken. But in the end, I’m not sure the auto industry has much of a choice.
There’s likely no way they’re going to be able to compete with Apple (and Alphabet) from a software perspective and, in the end, consumers are going to want whatever pairs perfectly with their existing phone, since that’s where their entire life already lives.
No wonder Apple killed their car project. They can just use everyone else’s cars. Even if this is a departure from their typical approach of controlling both the hardware and software.
This afternoon, the team, including the Town of Lincoln, hosted a community open house for Project Bench. This is our upcoming development project in the Niagara Benchlands.
This was a follow-up to the pre-application community meeting that we held last November, and it is a precursor to the statutory public meeting that will be held in two weeks on July 8th at 6 PM.
If any of you would like to attend, this upcoming meeting will be held in the Council Chambers of the Town of Lincoln at 4800 South Service Road in Beamsville, Ontario.
Overall, the team feels that today went very well. We’re looking forward to continuing the dialogue with the community and further refining our development application.
Community meetings are a critical part of the development process and, over the years, I have come to learn the following:
Open houses, like the one that was held today, are a good format for encouraging dialogue. The typical setup includes presentation boards, representatives walking the floor, and some sort of mechanism for people to provide feedback (post-it notes on a site plan can work well).
Part of why this is a good format (compared to a straight presentation followed by a Q&A) is that it humanizes the team and it gives the community an opportunity to ask all of their questions. A lot of concerns can be addressed through clear explanations.
The most common concerns are usually (1) height, (2) density, and (3) traffic. There are obviously others, but this is a good high-level list.
Many/most people tend to conflate height and density. But as we have talked about many times before on this blog, they are not one and the same. Density tends to be harder to grasp, which is why you’ll often hear people criticize tall buildings, but not cities like Paris and Barcelona, despite being two of the densest cities in the world.
A developer’s job is to be creative. You have to manage a myriad of competing interests and then thread the needle as best you can. Community meetings are about listening, learning, and then trying to figure out where the needle might go.
The objective should be to make as many people as possible excited about the development. In other words, do great work.
I would rather take a train to the office than drive. And given reasonable options, I would rather take a train than get on a plane. I like trains. So by default, it means that I’m interested in Christopher Beanland’s new book, Station. In it, he profiles some of the best railway architecture from the 20th and 21st centuries. Places like Union Station in Los Angeles, Hauptbanhof in Berlin, and Byappanahalli in Bengaluru. But as cool as these places are on their own, I think it’s important to keep in mind that trains exist as part of a network. And like all transport, they promote time-space convergence. This is part of what makes these spaces so interesting — they’re like a portal to somewhere else.
According to this report (2023) from the Centre for Cities, the UK has a backlog of about 4.3 million homes. This is in comparison to other Western European countries for the period from 1955 to 2015.
Said differently, these 4.3 million homes are effectively missing from the UK’s national housing market because it failed to build and deliver at the same rate as some other rich countries.
The report also argues that this housing shortage started not at the end of the post-war period, but at the beginning of it in the 1940s.
Increase housing supply where new homes are needed. More homes are built in Wakefield than Oxford. Building in places with fewer jobs won’t fix prosperous cities’ housing crises.
Planning reform to introduce a new flexible zoning system that would allow builders to build if they follow the rules, while maintaining special protections for National Parks, Conservation Areas etc.
Zoning of land in walkable distances around train stations in the green belt for suburban living and with protected green space, which would provide 1.8 to 2.1 million homes.
Increase the use of permitted development rights to cut the red tape that makes it hard to build upward extensions or infill developments.
Stop subsidising home ownership. Despite Right to Buy, home ownership as a share of private housing has fallen in every city since 1981. The Government should stop subsidising ownership, tax housing wealth increases by abolishing the Capital Gains Tax exemption for primary residences and treat owning and renting equally.
None of these proposed solutions should come as a surprise. We know that housing follows money/jobs. And we know that if we want more of it, we need to remove the barriers to building it, especially around higher-order transit.
