Author: Brandon Graham Donnelly

• Don’t screw it up, New York

  New York City is set to become the first in the US to implement a congestion charge (a form of road pricing). I first wrote about this back in 2018, and then again in 2019, but now it is looking more and more like it may actually happen sometime next year.

  I think all urbanists agree that this is an important step in the right direction. But some are now worried that New York isn’t going about it in the right way. Here is an excerpt from a recent Vice article by Aaron Gordon:

  With all these plans, you could be excused for thinking New York is doing congestion pricing—a potentially transformative policy that would be a first in the nation—right by not only charging drivers to access some of the densest, most valuable land in the world, but also giving them alternatives. Unfortunately, New York isn’t doing that, and in fact looks set to completely screw up congestion pricing so badly it may discredit the policy in a way that makes it harder for other cities to adopt it. Rather than approaching it as a lynchpin to a wide-ranging effort to reshape Manhattan’s relationship to the private car, congestion pricing has become solely about money—specifically, paying off enough of the credit-card bill New York has run up with a variety of ill-conceived and poorly-executed projects that it can get more credit cards.

  You can rightly say that this is decades in the making. Mayor Bloomberg first proposed the idea back in 2007, and I’m sure there were others before him with a similar idea.

  So Gordon raises a valid point: It’s important that NYC gets this right. Otherwise, it’s going to be that much more difficult for other North American cities to even think about implementing road pricing.

  For the full Vice article, click here.

  2023.09.19

• Paris in August 🇫🇷

  We’re no longer in Paris. We’ve been back in Toronto for about 3 weeks now. But the pictures live on and I finally got around to processing all of the ones that I took on my Fujifilm X-T3 (23mm f/2).

  

  

  

  

  

  

  

  

  

  

  

  

  

  2023.09.18

• Canadian views on housing

  At the beginning of this month, between Sep 2 and Sep 4, the research company Nanos conducted a random survey asking Canadians about their views on housing. The survey reached 1,044 adults and you may find the results interesting:

  • Nationally, three in five Canadians “support” or “somewhat support” decreasing the number of immigrants coming into Canada until housing becomes more affordable. (The feds plan to welcome 500,000 immigrants per year by 2025.)
  • The provinces that are the most in support of reduced immigration are the Prairies (65%), and the province with the lowest support is BC (52%).
  • 82% of Canadians are “opposed” or “somewhat opposed” to building new housing on land currently set aside as green space. Of this group, 64% responded with “opposed”.
  • 55% of Canadians “support” or “somewhat support” giving tax incentives to private developers to build new rental housing. The highest support for this is in BC (61%), Quebec (60%), and among Canadians 55 or older (55%).
  • However, this support flips when Canadians are asked about giving tax incentives to private developers to build for-sale housing. 58% of Canadians are “opposed” or “somewhat opposed” to doing this.

  These last two points took me a second to decipher, because the wording in the article is “new rental units” and “new homes.” Naturally, I initially read these two things as being the same thing. New rentals are new homes. So what are they trying to say here?

  My assumption (in the above) is that it’s a housing bias coming through and that a “new home” equals a for-sale low-rise house. Hmm. We really need to be more mindful of the semantics in our housing vocabulary.

  2023.09.17

• Why is housing viewed so differently?

  Here is a study by three researchers out of California that asked Americans to predict the impact of a supply shock on various things, such as durable goods, commodities, labor, trade, and yes, housing.

  For basically all of these items, people tended to answer correctly. Usually by a factor of at least two to one. In other words, when asked what reducing the supply of new cars would do to the prices of used cars, the majority of people responded saying that it would lead to an increase in prices.

  However, when asked about the impact of a 10% increase in housing supply, about 40% said that it would cause prices and rents to rise. Only about a third believed they would fall (the correct answer). This is fascinating because it shows that housing seems to be an outlier. Most people don’t have the same intuitive sense.

  

  Why is this? Well, one commonly held belief is that building market-rate housing leads to gentrification, and that this ultimately leads to the displacement of existing residents. This might have been why some people responded saying that new housing will cause an increase in prices and rents. It’ll lead to all housing going up.

  However, there’s research to support that this isn’t the case. The problem isn’t outward displacement following new market-rate housing. The greatest driver of gentrification is actually “exclusionary displacement”, which is the inability of people to move into areas because of a lack of housing. (This study was based on 2010-2014 housing data from the UK.)

  The thing about housing supply is that it relieves pressure across the entire market. Instead of a high-income person buying an old home to renovate (and causing outward displacement), they can instead choose to buy a new home (and not cause any outward displacement).

  By doing this, they also leave behind a home that can then be absorbed by lower earners. One US study found that for every 100 new market-rate homes that are built, somewhere between 45 and 70 people move out of a below-median income neighborhood.

  

  It is for reasons like these that, time and time again, increased housing supply has been shown to moderate home prices and rents (see above regarding Minneapolis and the Midwest as a whole). So if you’re worried about the cost of housing, the answer is to build more. And if you’re worried about gentrification, the answer is also to build more.

  Our intuitions are telling us that this is true for most things. But for whatever reason, housing feels different. It’s not, though.

  Source: The charts and studies in this post are from this great FT article by John Burn-Murdoch.

  2023.09.16

• Claude Cormier (1960-2023)

  

  Today, one of the top landscape architects in Canada — Claude Cormier — died from complications associated with something known as Li-Fraumeni Syndrome. He was only 63.

  Claude, and the firm he founded CCxA, have been responsible for some of the most beautiful, whimsical, and critically acclaimed public spaces in Canada.

  Those of you familiar with Toronto will know Berczy Park, Sugar Beach (pictured above), the new Love Park, and others. These are easily some of the most successful public spaces in the city, and for good reason.

  CCxA is also the landscape firm behind our 100 Lombard project, where we have been similarly working to create a new and whimsical public space in downtown Toronto.

  We’re all sorry to see you go, Claude. Canada is a better — and more fun place — because of your work.

  Photo by Filip Mroz on Unsplash

  2023.09.15

• No more sales tax on new rental housing

  Big news today in development land. The federal government just announced that it has removed sales tax (GST/HST) from new rental housing effective immediately. This is a significant step in the right direction, and something that we have spoken about many times before on the blog.

  Here’s how things used to work:

  In the case of a newly constructed or substantially renovated multiple-unit residential complex or addition to a multiple-unit residential complex, the builder must generally self-assess GST/HST on the fair market value of the whole of the substantially completed multiple-unit residential complex or addition when possession of the first unit is given under a lease, licence or similar arrangement as a place of residence of an individual.

  What this is saying is that if you build new rental housing, and even if you plan to continue owning it forever, you need to determine the fair market value of the property and then pay HST on that amount. In Ontario, the HST rate is 13%. However, the effective rate was a bit lower because of new rental rebates. Let’s say it was somewhere around 11%.

  Now that this no longer needs to be paid, a lot of rental projects that were flirting at the margin should suddenly make economic sense. Which is why I tweeted earlier today that every housing developer in Canada is right now dusting off their “what if we built rental” development pro forma. It didn’t work yesterday, but maybe it does today!

  Today is a good day for new rental housing supply in Canada.

  Update: This announcement only relates to the federal portion of the HST. The feds are now calling on provinces to follow suit.

  2023.09.14

• Venice announces new “entrance fee”

  

  Over the weekend, we spoke about using road pricing as a way to correct supply and demand imbalances on city roads and highways. Because it turns out that when roads, or anything else for that matter, are free, people tend to use them a lot more. It’s why when you suddenly submeter utilities in an apartment building, consumption tends to drop off significantly. Now it’s no longer “free”.

  It’s for this exact reason that Venice — a city that has been complaining about too many tourists for many years — has decided to implement a new entrance fee. Starting spring 2024, day trippers will have to pay €5 to enter the “old city” of Venice.

  If you own a home there, you’re exempt because presumably you’re already paying property taxes. And if you’re staying overnight, you’re also exempt, because presumably you’re going to be paying whatever hotel taxes the city levies. But if you’re just coming in for the day, you’re going to need to pay.

  Now, I don’t know if €5, structured in this way, is going to fully address the city’s overtourism concerns. Maybe it needs to be a lot more. But it is a step in the right direction. If you have too much demand for a certain amount of supply, you can generally lower demand by increasing the price. Perhaps the only exception is a Birkin bag. Apparently you can charge any price for these.

  Photo by Martin Katler on Unsplash

  2023.09.13

• Beyond visual line of sight

  Drone delivery is one of those things that has always sounded really cool, but has yet to see a lot of adoption. As of May of this year, Amazon Prime Air has only made about 100 drone deliveries in California and Texas (the two states where it operates). This is compared to their initial target of 10,000 deliveries before the end of 2023.

  That said, last week, the Federal Aviation Administration (FAA) approved UPS (as well as other companies) to fly drones “beyond visual line of sight.” This seems like a pretty important approval, because I don’t know how you deliver anything meaningful if somebody needs to keep the drone within their line of sight.

  The thing that I can’t get over in my mind, though, is how you deal with the noise population associated with lots of drones flying around. It’s one thing if you live in a low-density community and a lonely drone comes by once in a blue moon to say hello. But in the city, even just replacing every cubed-shaped Uber Eats backpack would equal a hell of a lot of drones.

  Presumably they would fly, at least some of the time, on top of our existing streets, just above the cars. Because the authorization is only for altitudes below 400 feet. So for tall buildings, you wouldn’t always be able to do deliveries from the roof. And I guess that would be fine so long as they stop sounding like giant insects.

  If that were to be the case, it’s interesting to think about what that would do to all the real estate that exists at that same elevation.

  2023.09.12

• How wide should a bike lane be?

  The Dutch now believe that the number is 230cm. This is an increase from a previous recommendation of 200cm. The thinking behind this number is roughly as follows. Apparently there are Dutch laws stipulating that bikes can’t be wider than 75cm. So this is the starting point.

  But since it’s impossible to always ride in a perfectly straight line, there seems to be a generally accepted rule that, at an absolute minimum, cyclists need about 100cm of width to themselves.

  If you now double this so that two people can ride side-by-side, you’re at 200cm. This is an important design criteria because the Dutch also seem to believe that (1) cycling is a social activity and (2) a child should be able to ride beside their parent. (Love this!)

  Finally, add in a bit of buffer so there’s room to pass slower cyclists and/or nobody feels like they’re going to crash into oncoming cyclists, and you get to 230cm as the ideal width of a single bike lane.

  I’m not sure I had given this much thought before, so I look forward to scrutinizing (and possibly measuring) every bike lane I ride in going forward.

  2023.09.11

• Toronto needs money

  For next year’s budget (2024), the City of Toronto is projecting a $1.5 – $1.7 billion budget shortfall. And over the next 10 years, this shortfall is expected to grow to nearly $47 billion if changes aren’t made. This is according to a recent report prepared by Ernst & Young and Strategy Corp. So right now, all of this is being looked at and debated by Council.

  Where are we going to get this money?

  One persistent debate is whether the city actually has a revenue problem, or whether it’s simply an expense/spending problem. I can’t say that I’ve scrutinized the city’s expenses at any length, so I’m not going to get into that level of detail today. For this post, I’d like to focus on two specific things. The first is property taxes.

  Here is a figure, from the report, showing residential property tax rates across southern Ontario:

  

  What you will see is that Toronto has the lowest rate of the 35 municipalities that they looked at. Now obviously there are some nuances to consider. The average home price in Toronto is higher than it is in, say, Sault St. Marie. Toronto also has a large commercial property tax base. But even still, historically speaking, Toronto has tended to increase its residential property taxes at or below the rate of inflation.

  This is a problem. And it is the exact same problem that we have talked about on this blog in regards to residential rent controls. If you own an apartment building where the rents are capped and your expenses are, therefore, growing faster than your revenue, you are (1) highly incentivized not to invest in the apartment (you can’t afford to) and (2) eventually going to hit a financial wall.

  Sound familiar? As far as I can tell, that is, at least partially, what is happening here.

  Secondly, one of the first things that I did when I opened the report was run a search for “road tolls” and “congestion charges”. Regular readers of this blog will know that this is something I feel strongly about. Here’s what I found:

  In 2017, when the City considered implementation of tolls for the Gardiner and the DVP, staff estimated that a $2-per-trip toll would generate $5.6 billion in 10 years. The province has refused several requests to consider these options, with the Minister of Transportation rejecting any discussion of uploading or tolling as recently as December 2022.

  This is also a problem. One of the general rules with taxes is that you should ideally tax the things you want less of. Hmm. So why not tax traffic congestion? There is no question that it works. There’s lots of evidence from all around the world. We just lack the political will to actually do it. Instead, we pay lip service with solutions that don’t work.

  At the same time, if we were to actually implement road pricing, I don’t believe that a flat toll is the way to go. $2 also seems low. The best practice is dynamic road pricing that fluctuates based on actual congestion levels. Meaning, if you’re driving at 5am, expect a low rate. And if you’re driving at 5pm, expect a high rate.

  Virtually overnight, we know this would do at least three things: (1) it would reduce/eliminate traffic congestion (congestion levels would become a function of pricing); (2) it would reduce overall carbon emissions in the city; and (3) it would take a meaningful chunk out of this $47 billion budget shortfall.

  2023.09.10