This past weekend we went to check out Fashion Art Toronto.

I'll be honest and say that I had never heard of it before we bought tickets. Even though technically, it is the longest running fashion week in the city because of Toronto Fashion Week getting briefly cancelled in 2016, when its corporate sponsor pulled out. I also had no idea that Peter Freed, of Freed Developments, ended up purchasing the TFW brand later that year. I have been told he talks about it on this episode of Toronto Under Construction, but I haven't had a chance to listen to it just yet.

Getting back to FAT (the acronym is deliberate), it was a cool event. There were of course various runway shows throughout the day and evening, but there were also a few art installations and a retail area for local designers (see below). Tricon Residential and Kronenbourg 1664 Blanc were major sponsors, and were giving out popcorn and beer. And in general, the crowd was dressed in ways that made me feel both old and stuffy. It was a lot of fun.

It was also in a warehouse in the Junction. Well, technically I think the neighborhood is called Harwood. But if you're even remotely close to the Junction nowadays, it is vital that you just assimilate. That's how this stuff works. As soon as a neighborhood has a successful brand, its boundaries get invariably stretched in every way possible. I suppose this is the Darwinian world of urban neighborhoods. There is always a chance that you may not make it and you might just get absorbed by a neighboring faction.

I would also add that a lot of creative uses in need of space -- whether it's a fashion show or a DJ event -- seem to be gravitating towards this northern part of the Junction. If you see an event location that says "undisclosed warehouse", chances are it will be here. This is, of course, another naturally occurring urban phenomenon. It is the whole "new ideas require old buildings" thing, which really just means that new ideas require cheaper rents. And generally, it is a good positive leading indicator for an area.

Having said all this, I do think there's a lot of room for Toronto to step up its commitment to fashion and the arts. This is not a world that I live in, and I am not criticizing the good work of Fashion Art Toronto or Toronto Fashion Week. I just think that for a global city of our size and influence, we should be much better. I saw some of this city's ambition, talent, and diversity in a warehouse in the Junction this past weekend. It's just too bad that it's not on stage for the rest of the world to see.

There are lots of ideas out there for how to improve the supply of new rental housing. But it is important to remember, at least here in our market, that the playing field is not level between new condominiums and new rental homes. We have spoken about this before, over here, where I compared the (per square foot) revenue generated from your average new condo against that generated by your average new rental home. Of course, since I wrote that post in 2020, we have seen upward pressure on cap rates (meaning downward pressure on values). So feasibility has gotten even more challenging.

The important thing to remember is that developers do not have some philosophical aversion to building more rental housing; it is that the math is challenging. You generally need economies of scale (really big projects), patient long-term capital, and a belief that rents will continue to exhibit meaningful positive growth. If you want to negatively impact new supply, cap rental growth. But if you want to encourage new supply, somebody needs to pull out a development pro forma and make the call to improve the cost structure for new rental housing.

In my opinion, two obvious line items to focus on are development charges (as well as the other government levies) and HST (our harmonized sales tax). The point of development charges, as we always talk about, is for growth to pay for growth. They are intended to pay for municipal services like roads, transit, water and sewer, and so on. In the other words, they're supposed to capture of the cost impacts of new housing. But what about the impact of not building enough new rental housing? Are we thinking about this the right way? Especially if you consider the possibility of more new rental housing in our existing transit nodes.

The HST charged on new rental housing is also significant. There is a new residential rental property rebate available to builders (not tax advice!), but the thresholds have not been indexed and so it's grossly out of date compared to where values sit today. In any event, if the goal is more homes, why not make new rental homes exempt? Developers are simple. If the math works, they will build. If the math doesn't work, they will not build. And these two line items, alone, would go a long way to helping the former.

Photo by Pierre Châtel-Innocenti on Unsplash

Like everyone else, I have started playing around with Midjourney to create AI-generated images. Here are two that I created last night using the prompt: "A silver Land Rover Defender driving through a snowstorm in the mountains of Utah."

Now, you can tell that these are AI-produced images, but it's still wildly impressive that something like this can be easily generated in a matter of a few seconds. And that's the thing about AI: it's easier to get, especially compared to crypto. It's immediately useful and it's immediately clear what this can and will disrupt.

Levis, for example, just announced that it will start using AI-generated photography in lieu of actual fashion photoshoots. This is obviously suboptimal for photographers, models, makeup artists, and so on, but a hell of a lot easier for Levis. I would also imagine that the same thing will happen to real estate renderings and many other things beyond just imagery.

Ben Myers and Steven Cameron recently speculated on their podcast -- Toronto Under Construction -- that AI could be used for reviewing development applications. Imagine how much this would speed up reviews and the delivery of new housing! So there are very good reasons for why the hype cycle has moved over to AI from crypto and NFTs.

However, I'd like to go on the record saying that my gut tells me that this will only make what crypto offers even more important. Permissionless public databases (as opposed to databases controlled by individuals/companies) and the ability to demonstrate authenticity/ownership, feel like two important things to me in a world where computers are constantly generating a flood of new content and nobody knows what is "real" anymore.

It's certainly a lot less tangible than, "hey, check out this badass Defender driving through the snow." But I feel strongly that these two innovations will end up working together.