Brandon Donnelly

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.

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Author: Brandon Graham Donnelly

  • Housing follows money

    One argument that you might be able to make is that home prices follow urban density. New York City, for example, is dense. And homes in New York City tend to be more expensive than those in, oh I don’t know, rural Canada. So with this, you might conclude that development and density are bad — it makes housing more expensive. But then there’s places like San Jose, California. It’s not very dense, and yet it has some of if not the most expensive housing in the US.

    Well, it turns out that housing density and median housing values don’t actually exhibit a particularly strong correlation. A better and much stronger relationship can be found in what Kasey Klimes explains, here, in this excellent post, which is that home prices more accurately follow incomes. In other words, the more high paying jobs that exist in a market, the more likely that housing will be expensive.

    Here is what that looks like for US metros over 1 million people:

    The above chart compares median home value to aggregate income per unit of housing. And here, Kasey discovers an r-value of 0.9, which suggests that “over 81% of median home values in large metros can be attributed to aggregate income per unit of housing.” This explains why San Jose, and San Francisco, are such outliers. They have very high incomes for every unit of available housing, despite the former being not all that dense.

    Okay, so now that we know this, how do we make housing more affordable? One option is to just make people poorer. If you reduce incomes per unit of housing, then home prices will, almost certainly, go down. And this is why poorer cities tend to have more affordable housing. But this is obviously suboptimal. The better option is to keep people wealthy and simply increase the denominator in “aggregate income per unit of housing.”

    Meaning: build more housing!

    Chart: Kasey Klimes

  • Lisbon Hotel

    My friend David Wex recently opened up a new bar called Lisbon Hotel, and this evening I went to check it out with him. It’s not in Lisbon. And it’s not a hotel. But it is deliberately designed to feel like a hotel lobby bar, and it is a great place for drinks and snacks. I recommend both of the dishes pictured above — especially the cucumber and dill one.

    It’s also housed in the River City community, which his firm Urban Capital developed. And I think that’s something. Developers are often criticized when they put in boring (yet profitable) uses in the ground floors of their buildings. And this is not that (though hopefully it’s still profitable). This is him and his partners wanting to do something cool and help create a “place.”

    Who said new ideas need old buildings? Rhetorical question. It was Jane Jacobs who said this.

    For more on Lisbon Hotel, check out this profile in Toronto Life.

  • Les chambres de bonne

    This evening in French class we discussed a Parisian apartment type called the chambre de bonne. The direct translation is “maid’s room”, and it’s exactly what it sounds like. A small one-room apartment that is found on the top floor of bourgeoisie apartment buildings. Indeed, nearly one-third of Paris’ entire supply of chambres de bonne are in the wealthy 16th arrondissement.

    Their original function was to house servants. The reason they were on the penthouse floor is because, when they emerged in Paris in the 1830s, the elevator hadn’t yet been invented. And so this was the least desirable floor. The people staying in these rooms typically worked for the people living on the lowest floors in the same building. That’s where you wanted to be. Fewer stairs.

    Fast forward to today, and it is estimated that Paris has somewhere around 114,000 chambres be bonne (also known as chambres de service). They are also occupied by a broad cross section of different people:

    But it means living small. The smallest allowable size for an apartment in Paris is 9 m2 (area) or 20 m3 (volume). Meaning, even if the surface area is under the 9 m2 threshold, it might still be able to pass as livable if the ceilings are tall enough. But under these figures, and the place can’t be rented. And supposedly, about half of Paris’ chambres de bonne do not meet these minimum thresholds.

    These requirements are immediately interesting to me — not only because they’re much smaller than what we allow in Toronto — but because most people don’t think of real estate in terms of volumes. Ceiling heights, yes. But when have you ever seen or measured the volume of an apartment? It’s clearly appropriate in this instance given that many of these apartments sit under sloping rooflines.

    But the most interesting question, I think, is whether this housing type is functionally obsolete. On the one hand, Paris is an expensive city, and these apartments represent what is likely the most affordable housing option. Go on YouTube and you’ll find lots of students giving tours of their compact room-apartments. On the other hand, census data shows that occupancy within his housing type has been steadily declining since at least the 1960s:

    Based on these figures from 2011, only about 17,300 chambres de bonne are occupied as a principal residence. This doesn’t seem like a lot for a big city like Paris. (It’s around 1.25% of its entire housing supply based on my rough math.) The rest of these apartments appear to be vacant, ineligible for renting, or serving as a secondary space for owners in the same building.

    This represents an ~85% vacancy rate, which begs the question: Is there something more productive that Paris could be doing with all of this under-utilized penthouse space? Though perhaps it’s helpful to start with: would you live in 9 square meters or 97 square feet? This is smaller than the minimum size of a parking space in Toronto.

    Photo by Matt Boitor on Unsplash; Charts: Atelier Parisien d’Urbanisme

  • Work, untethered

    On Monday morning, I flew on Delta from Salt Lake City to Toronto, which in this direction takes just over 3 hours. And it was my first time ever experiencing reasonably reliable wi-fi on a flight. Maybe this is already common for the people who fly in the front of planes, but for me, I’ve never had the wi-fi work so well.

    Usually it goes like this: I try and connect, everything is painfully slow, and so I get frustrated and move on. But this time around, I was able to check all of my emails, download fairly large PDFs, mark them up on my iPad, and write yesterday’s blog post. It was pretty great, and it allowed me to land in Toronto with far less anxiety around my work backlog.

    But it also got me thinking about what this means for travel and work. If you’re a regular reader of this blog, you’ll know that I greatly prefer working in an office with my team. I think proximity matters.

    At the same time, I recognize that technology is empowering new kinds of remote work, that we are all becoming more globally connected, and that, in the future, most of us are likely to travel more, rather than less. This will be for both work and for fun.

    While solid in-flight wi-fi may not seem like that big of a deal, in my mind it’s a game changer. People will become more mobile if they can sit on flights and actually be productive (and maybe Apple Vision Pro helps with this). It is another step in what feels like an ongoing untethering of work.

  • Dangerously positive precedents

    This is the battle that is now playing out across Toronto — and many other cities — as we look to intensify our existing communities; even in the ones sitting on higher-order transit. Cities rightly want to see it happen. But local ratepayers do not.

    From the Globe and Mail:

    “This project is in no way gentle intensification,” said the architect Terry Montgomery, representing the powerful local group the Annex Residents Association. “It will set a dangerous precedent for all areas in the city which currently [are zoned for] low-scale residential-buildings.”

    It’s not clear whether that legal argument is true. At the meeting, City of Toronto planning manager David Driedger and director Oren Tamir – who, to their great credit, were supporting the development – said it would not set a precedent.

    But if it did, why would that be “dangerous”? It is commonsensical. The Lowther site has two subway stations within an eight-minute walk. Toronto’s Line 1 and Line 2 intersect right here. This is one of the best-located, best-connected places in all of Canada.

    Alex Bozikovic is, of course, right. This is commonsensical. 

    If our goals are to create more homes, improve housing affordability, reduce traffic congestion, and make us overall a more sustainable city, then there’s no better place to build than on top of transit within our already built-up areas.

  • Last run of the season

    Shot on iPhone and a Fujifilm X-T3

  • How the ski industry price discriminates

    Snowboarding in Europe, of course, sounds really fancy. And don’t get me wrong, it can be fancy if you want it to be. But the reality is that it’s also a cheaper option. And that’s because the price of a single day lift ticket at most resorts in America is now many multiples of what it costs in Europe. Think $250 vs. €50.

    North America has become the expensive destination.

    According to a recent Economist article titled “the economics of skiing in America,” resorts in Europe are often owned by local or national governments. This is not the case in America, and it’s why the lift tickets in Europe seem, by comparison, cheap. But this price differential is also the result of an evolving business model.

    Historically, owning a ski resort has never been a stable business in the US. And this makes sense. Most resorts make their money on lift ticket sales. However, sales are dependent on snowfall. If you get a lot of snow, then you make a lot of money. If the planet starts warming up and you don’t get a lot of snow, then you don’t make a lot of money. Vail has since changed this.

    What they have done is made it so punitive to buy a single day lift ticket in North America, that even if you’re an occasional skier, the only sensible thing to do is buy a subscription-like pass in the spring — well before the next season starts.

    This is what I have started doing and it gives you unlimited skiing for less than the price of a few days. It also gives Vail a source of revenue that isn’t so dependent snowfall. Season passes now make up about 61% of their lift-ticket revenue, according to The Economist. At the same time, it is a model that relies on being able to price discriminate against single-day, non-pass users:

    In basic economic theory, excessive market power reduces the efficiency of an industry. Firms reduce output so as to be able to charge more. There is, however, an exception: if a monopolistic firm can charge different prices to different customers, it need not reduce output to increase its profit. The skiing industry shows the truth of this. As the industry has consolidated, daily prices have soared, extracting more cash from price-insensitive skiers.

    But this isn’t the only way to do it. There’s also the whole real estate thing. Last year, Reed Hastings, cofounder of Netflix, became the majority owner of Powder Mountain. And here, they’re trying out a different business model:

    This December, Powder Mountain in Utah announced that it would be moving to a model where only local property-owners are allowed to ski certain chairlifts. The idea is to profit from real-estate sales, by offering private skiing without the crowds. “To stay independent and uncrowded, we needed to change,” says Reed Hastings, the firm’s boss.

    Even still, neither of these approaches is making snowboarding and skiing more accessible. Which is why it’s not uncommon to come across stickers and t-shirts at local ski shops that say, “Vail — ruining ski towns since 1966.” People are missing the old days when lift tickets were cheap and the lines on powder days weren’t so long.

    What skiing needs is in fact much of what the economy more generally needs: supply-side reform, and especially the construction of new housing and transport in the most popular spots. Though there are more skiers than ever, there are in fact fewer resorts than there were a few decades ago.

    This sounds familiar.

    All quotes are from The Economist.

  • Choosing speed over perfection

    This morning, I was on site at Parkview Mountain House reviewing construction progress and finalizing some finishes with our contractor. And during that time, he said two things to me that I was frankly happy to hear.

    The first is that we are his only client — ever — where they didn’t need to touch the construction contingency line item. (Knock on wood. We are about 2 months out from completion at this point.) And the second is that he loves working with us because we are also his most decisive client.

    Now to be fair, both of these things are easier to do when you’re not building your own home, or something else for yourself. The process becomes less emotional and more just about business.

    Even still, this is generally the aspiration with all construction projects. As an owner, you want to leave your contingency untouched. You want to minimize changes. And you want to make decisions as fast as humanly possible.

    In fact, this is a prime example of the mantra that “any decision is better than no decision.” And that’s because poor decision making is the kiss of death for construction projects. You need to keep things moving.

    I also find that decisions tend to seem more daunting in the moment. When you’re staring at 37 different shades of white paint and being asked to pick just one, it can be easy to get analysis paralysis. Is a yellow white with a subtle green undertone really the right one?

    But more often than not, when the project is done, you’re probably not going to remember the other 36 shades of white you didn’t select. Or least that’s been my experience. So choosing speed over perfection is typically your safest bet.

  • 25 years of transit-oriented development

    When we build next to transit, we often call this transit-oriented development. 

    What’s interesting about this moniker is that it implies we’re doing something a little special — something out of the ordinary. And I guess that makes sense because, in many cities, it is often out of the ordinary. 

    That’s why you don’t hear people at real estate conferences saying, “check out this new cutting edge car-oriented development that our firm is developing.” That doesn’t need to be specified.

    But at the end of the day, I’m not sure how special transit-oriented development really is; it’s basically just urban development. Meaning, you put density on top of and next to transit stations and then more people take transit. That’s how this works.

    On that note, here is an interesting study from the School of Cities that looked at Toronto’s transit network and how the populations around each station have changed (or not changed) between 1996 and 2021 (census data). 

    If you look at the various transit lines, you’ll see that, in some cases, like downtown, we have added a lot of new transit-oriented development. This is good. Populations increased. 

    But in many/most other cases, populations remained flat; or worse, they declined. This is a serious problem, and it shows how land use restrictions are forcing us to underutilize our existing transit assets.

    Maybe what we need to do is stop thinking about transit-oriented development as something special, and instead remind ourselves that this is standard operating procedure. It’s just what you do next to transit.

    Thanks to Sam Kulendran for sharing the above study with me.

  • When does vandalism become art?

    “I think that street art is illegal and it has to stay illegal.” –Invader

    I was in an Uber on the Don Valley Parkway today and, for some reason, all of the graffiti on its sound barriers caught my attention in a way that it hasn’t before. Maybe it’s because I don’t travel enough by car or maybe the highway people haven’t yet done their spring cleaning. Either way, I caught myself thinking, “Hey, a lot of this looks pretty cool. Here are boring and utilitarian sound barriers that have been covered with colorful things.”

    Of course, street art is a tricky thing. Because, at the end of the day, it is, as French artist Invader says, illegal. It is an act of vandalism. And so there is a fine line between street art and criminal behaviour. When I leave my home in the morning and I discover that someone has spray painted nonsense on one of its exterior walls, it absolutely pisses me off. How about I come spray paint your home?

    But what if it wasn’t nonsense? What if Invader had decided to “invade” Toronto and I instead found a pixelated neon green Pac-Man outside of my lobby? It would still be illegal and it would still be vandalism, but I would frankly feel excited that Invader had decided to come and bestow my home with one of his art pieces. I would then proceed to take a picture and send it to all of my family and friends.

    Now, obviously it makes a difference when it’s a known artist. Context matters. But Invader had to start his illegal pursuits somewhere. And I find it interesting to think about the line where something is able to pass, in our minds, from being an illegal nuisance to a desirable art piece. I experienced moments of that along the Don Valley Parkway today.