If you have a long, painful, soul-crushing commute, Tesla has a solution for you: Full Self-Driving (their autonomous, but still supervised, self-driving technology). And it makes sense that Tesla would position its product in this way. A great deal of our built environment (the vast majority of it in some geographies) has been designed around the car. We are dependent. And this is an obvious solution to its negatives.
To be clear, I'm excited about autonomy, which is why it's a frequent topic on this blog. But the urbanist in me can't help but think that positioning it in this way is in some ways a solution to the wrong problem. Here's an alternative solution: live and work in a walkable, transit-oriented community.
Imagine, for instance, pitching this Tesla positioning to a Tokyoite. Tokyo is reported to have the highest railway modal split in the world. According to some measurements, only something like 12% of trips in the city are done by car. So if you said, "FSD is the solution to your long and boring commute. Now you can just sit, relax, read a book, do work, or play on your phone!" it wouldn't be a stretch to imagine Tokyoites saying that they already do this on a train.
Of course, Tokyo is a unique place, and there are lots of car-dependent cities where there is simply no other practical option. I also recognize that housing attainability is a major driver of sprawl. In these cases, FSD represents a meaningful quality-of-life upgrade.
Again, I support this happening, but at the same time, I worry about it placating us into thinking that we've solved one of the major negatives of urban sprawl. Yes, you have to sit in a car for two hours each day, but now you're not actually driving. Isn't that, like, so much better? In a best-case scenario, we maintain the status quo when it comes to our built environment. And in the worst-case scenario, it leads to even more sprawl.
This is an open question that we have on this blog: To what extent will self-driving cars increase our willingness to commute? Historically, new mobility technologies have promoted urban sprawl because they allowed us to travel greater distances in the same amount of time. Consider streetcar suburbs and then our car-oriented suburbs.
A big part of the AV argument is not that they will solve traffic congestion (they won't); it's that they will make your commute suck a lot less, and in an even rosier scenario, become a kind of "third space" where people work, relax, or whatever. This, in turn, will make sprawl more widely palatable.
But the more I think about this, the less I believe it. Marchetti's Constant tells us that humans have generally maintained a consistent "time budget" for commuting irrespective of the technology being used. Will this time really be different?
On the flip side, there are many who would argue that urban sprawl is a natural market outcome. Not everyone wants the "utopian, socially-engineered dream" that urbanists and YIMBYs like me want. And this is a fair response. I believe in individual freedoms. Give people housing options (we're very bad at this) and let them choose where they want to live.
But we should acknowledge the tradeoffs. Traffic congestion is a clear byproduct of urban sprawl and land-use patterns that leave no other practical option for getting around. Complaining about traffic is complaining about sprawl. One more lane or cars that drive themselves have not been shown to change this relationship.
Sprawl also contributes to greater loneliness and declines in happiness. In 2000, Robert Putnam argued in his book, Bowling Alone: The Collapse and Revival of American Community, that, roughly speaking, every 10 minutes of additional travel time leads to a 10% reduction in social connections. We spend less time with our families, friends, and communities.
There's little doubt that self-driving cars will make commutes more tolerable. But perhaps that's not ambitious enough.
My predictions for 2026
From the Toronto condo turning point to the bursting of the AI bubble
The best part about making predictions for a year ahead is that at the end of the year you get to look back with humility on what you were thinking at the time and realize how much you missed and how different things turned out.
So, what might happen in 2026?
Condominium development in Toronto: I think 2026 will be an important turning point year. If I keep saying this, at some point I'll be right, right? 2026 is the first year where we will start to see new condominium completions from the last cycle fall off significantly. Last year (2025), we were projecting nearly 32,000 condominium home completions. This year, it's projected to drop to ~17,487, with 2027 falling off even further as we head to almost no new supply (based on the current pipeline). What I think this means is that the first half of 2026 will still be painful as the market absorbs new inventory and the inventory from 2025 (including unsold units, units in default, and other scenarios), but that things will start to stabilize and feel better toward the end of 2026 and into 2027. New supply will now be delivering below the 10-year average for the first time in many years.
Purpose-built rental development in Toronto: The story since the condominium market turned in 2022 has been the flip to rental. But not all developers and sites can make this switch and, as I have argued before, the numbers suggest that it won't be enough to offset our dwindling new condominium supply. That said, I think rental rates will remain soft throughout 2026. The supply crunch we're headed toward will need a bit more time to be felt by the market. In the meantime, we will see the highly-amenitized purpose-built rental model fail. The strategy of using over-the-top amenities to drive high rents will finally fall apart in the current market environment. In its place will be a flight to value: boring rental models that offer a quality housing experience at reasonable prices.
Boutique end-user projects: In markets like Toronto and Vancouver, where the development landscape remains unfavourable, we will see a continued focus on smaller projects and projects catering exclusively to end-users. This demand segment is the most resilient and this re-orientation will help the next development cycle start on more solid footing.
Foreign buyer ban: The Canadian federal government will relax the foreign buyer ban (which is set to expire on January 1, 2027) and allow foreigners to buy pre-construction homes. There are already rumblings about this so I acknowledge this isn't that bold a prediction. But beyond just relaxing the ban, I think government will start actively courting foreign capital to help solve our housing needs.
AI bubble: 2026 will be the year that the AI bubble bursts. Not because AI isn't powerful tech that will continue to change the world, but because we are, in the words of investor Howard Marks, in an "inflection bubble." This is different from a fake bubble like Tulip Mania where there was ultimately no underlying reason for tulips to be valued so highly. An inflection bubble is where we get the direction right (AI is a big deal), but the magnitude wrong (shit, we overspent on CapEx). Not every AI company can and will survive. There will only be a select few once the dust settles. And since AI seems to be what's driving the market these days, I think the market will close the end of this year down (measured as the performance of the S&P 500).
Continued AI adoption: That said, AI will continue to change the way we all live and work. While this is going to put some people out of a job, my bias is an optimistic one in that new technologies tend to create new opportunities and generally grow the overall economy. However, I think that at least two enormous internet-type shifts are underway. One, AI is creating a massive productivity leverage for the people and firms that know how to harness it and, two, the backend of the global financial market is moving "onchain." These are profound shifts that I, unfortunately, think will lead to even more social and political division in the short term. A government somewhere in the world will respond with a universal basic income.
AI bubble impact on real estate: An AI bubble bursting will generally help the real estate market as investors look for returns somewhere else, with the exception of the data center market. It will also create downward pressure on interest rates (which, in the US, remain the highest they have been since the Great Recession in 2008). As we know, lower rates help boost the values of highly-levered assets like real estate.
AR/VR/AI for design and construction coordination: I was blown away the first time I tried Apple Vision Pro. It's a magical experience. But it has failed as a consumer product and who knows what Apple will launch next. Regardless, this year we will see clear use cases emerge for AR, VR, and smart glasses. I'd like to see the problems of design and construction coordination get immediately solved because they're massive and costly and they have yet to be solved.
Mainstream tokenization: In yesterday's post, I spoke about the lack of a breakout consumer-facing web3 app in 2025 (with honourable mention going to the Base app). But perhaps one of the big stories of last year was stablecoins entering the mainstream. Most people now agree they have achieved product-market fit. This is crypto solving real problems (cheap/fast cross-border remittances, payments, etc) with users not needing to think or care about the underlying blockchain technology. In 2026, we will see a noteworthy office building or apartment building get tokenized on the Ethereum blockchain.
Autonomous vehicles: Last year, I predicted that autonomous vehicles were going to have a year, and it certainly felt that way. This year will be the first year that I ride in one. I came close on a layover in San Francisco in December. I considered leaving the airport and taking one to Apple Park. But I would have been cutting it too close. In 2026, we will see an insurer refuse to cover a human driver for the first time, marking a clear global shift toward autonomy. Already, none of us should be driving cars anymore looking at current safety data.
Polycentric world: Some have argued that 2025 marked the end of globalization. I'm not sure that is accurate. I think it marked the end of the US-led post-war world order and the acceleration of a more polycentric world order. It was the start of greater US insularity. In 2026, Canada will start to see the benefits of this shift. What it is doing is shaking us out of complacency and forcing us to look east to Europe and west to Asia, as opposed to just south to the US.
What are your predictions for the year ahead?
We've been talking a lot about autonomous vehicles, and in particular Waymo, on this blog. In my opinion, the safety records — which Waymo has published after driving more than 100 million driverless miles — already suggest that none of us should be driving cars anymore. Some or many of you will disagree with this statement, but there's a reason why car crashes are the number two cause of death for children and young adults in the US.
So not only is this a tech breakthrough and a profound city-building shift, but it's also a public health breakthrough. Here's a recent opinion piece published in the New York Times by Dr. Jonathan Slotkin, the vice chair of neurosurgery at the Geisinger Health System in Pennsylvania. I found this statement particularly interesting:
In medical research, there’s a practice of ending a study early when the results are too striking to ignore. We stop when there is unexpected harm. We also stop for overwhelming benefit, when a treatment is working so well that it would be unethical to continue giving anyone a placebo. When an intervention works this clearly, you change what you do.
Now the imperative:
There’s a public health imperative to quickly expand the adoption of autonomous vehicles. More than 39,000 Americans died in motor vehicle crashes last year, more than homicide, plane crashes and natural disasters combined. Crashes are the No. 2 cause of death for children and young adults. But death is only part of the story. These crashes are also the leading cause of spinal cord injury. We surgeons see the aftermath of the 10,000 crash victims who come to emergency rooms every day. The combined economic and quality-of-life toll exceeds $1 trillion annually, more than the entire U.S. military or Medicare budget.
Dr. Slotkin goes on to talk about some of the cities that are pushing back against AV adoption, or simply erecting barriers, namely Washington, D.C. and Boston. That's too bad. This is a decision that can be easily guided by data: Which is the safest option for the greatest number of people? Just do that. Dr. Slotkin gets it right: "policymakers need to stop fighting this transformation and start planning for it."