Earlier this week I stumbled upon this entertaining article from the Guardian talking about how expensive housing is in London. The author’s tongue-in-cheek suggestion was to setup a new miniature London in the middle of nowhere where everyone could flock for affordable housing, but where many of London’s attributes could be exported: “We can all refuse to wear socks and sell each other overpriced cocktails in jam jars.”

All joking aside, the article is yet another reminder that big global cities are expensive places to live. And in these cities, one of the most precious commodities is, quite simply, personal space. That’s why a garage in London can sell for £550,000 and why a 35 square foot storage cage in New York can sell for $75,000. 

But affordable housing is not the reason why people want to live in places like London and New York. If it were, they wouldn’t be coming. Instead, they come for lifestyle, wealth creation, and the dating market – among other things. However, at a certain point, usually when they form families and start to need/want more space, they start looking around.

Here’s an infographic via the Atlantic showing how relationship status impacts where people tend to live in London. The purple areas indicate an “above average concentration” of a particular relationship status. As you can see, single people tend to live in the core of the city, and when they get married, they move out to the periphery. Intuitively, this probably makes sense to you.

However, I’m always curious as to whether this trend happens more because of consumer preference (people don’t want to raise kids downtown) or because of economic necessity (they can’t afford anything beyond a shoe box apartment). Because if it is largely out of economic necessity (and the Guardian article would suggest it is), then we’re not creating the inclusive cities and neighborhoods that all city builders like to talk about.

So how do we get better at this?

In my view, and I’ve argued this before, the first step should be about improving supply. That is: get more housing built. And the way to start doing that is to make land available and improve the approvals process for new developments. In a recent McKinsey report, they referred to my first point as “unlocking land.”

“Land cost often is the single biggest factor in improving the economics of affordable housing development. It is not uncommon for land costs to exceed 40 percent of total property prices, and in some large cities, land can be as much as 80 percent of property cost.”

The reason this is important is because most big cities operate with massive supply deficits. There simply isn’t enough housing. And so if you can address that at a fundamental level, you can actually do a lot to start improving affordability.

Poll: How much do you think this home is or will be worth? Respond in the comment section below. I’ll be giving away one free ATC t-shirt. (Comments)

A few weeks ago a good friend of mine – who is a builder – called me up and told me that I had to come and see a house under construction in Etobicoke (west end of Toronto). He told me that the owner was doing everything from geothermal to a car elevator, and that he was doing it all, not with the intent of ever being able to sell it, but because he just wanted to build something really cool.

I thought: Amazing. I need to see this.

So this past Saturday afternoon, I drove out to 37 Canerouth Drive in Etobicoke to take a look. Situated near Centennial Park, the house is at the end of an unassuming cul-de-sac filled with post-war bungalows that you could probably pickup for anywhere between $800,000 to $1M, fully renovated. This house, on the other hand, has had many multiples of that sunk into it.

But before I get into the house, let me start from the beginning.

The owner actually used to live next door on Canerouth Drive. He lived in a nice, newly renovated bungalow, but he wanted something else. Something cooler. Something he could create from scratch. Being a car collector, one of the driving forces behind a new build was to create a place for all his cars. At one point he had around 7 or 8 of them. So he had decided that it was time to do a knock-down and start again.

But before he could demolish his house, his neighbors – whose bungalow hadn’t been renovated, but which had a slightly bigger and better lot – said to him: “You’ve got to be crazy. Your place is fully renovated.”

Somehow that comment led to the two neighbors actually switching houses. (I think this is fascinating, because I wonder how many of these types of transactions would be possible under the right circumstances.) The neighbors got a newly renovated house, and he got a better lot to build his dream home. It was a huge win for the neighbors, but it also meant one less neighbor to oppose him at the Committee of Adjustment when he went in for his variances.

The biggest variance was apparently density. The house is almost 6,000 square feet. It has somewhere around 4 bedrooms, but also includes a few studio and study areas, a spa area, 2 walk-in closets the size of the bedroom in my condo, and even a “meditation hallway”. The master bedroom and main living areas are all on one floor so that as the couple ages the home remains functional. (There’s also an elevator just in case.)

Being at the end of a cul-de-sac, the lot is pie shaped and the architecture of the house mimics it. The front is concave and the rear is convex – opening up the main living areas and master bedroom to the ravine at the back (see above photo). The owner was absolutely firm in his belief that these curves were central to the architecture. Without them, the house simply wasn’t worth doing, he said.

The initial intent was to build a completely passive solar house, but he found that it was extremely difficult to do so within the confines of our building code. Still, the house contains a significant amount of thermal mass, which is one of the principles of passive solar design. The home uses precast hollow core slabs with 3" of poured concrete on top and in-floor radiant heating and cooling. All of the floors will be polished concrete – love it.

Here’s the main stairwell (check out the support stringers):

Here’s the view from the kitchen looking towards the living room and out to the backyard (the far wall will be outfitted with custom millwork for his pottery collection):

Here’s a shot of the through-fireplace that will connect the living room area to the main stairwell area shown above:

And here’s the meditation hallway:

The most over the top part of the house though, is probably the underground parking garage. This shouldn’t come as a surprise to you given that he’s passionate about cars and it was one of the main reasons he wanted a new house in the first place. At the front of the house (shown in the first image above) is a single car garage, which conceals a parking elevator he sourced from the US.

It looks like this from the basement:

And it leads into this below grade parking area:

There’s enough room for all of his cars and it’ll be fully equipped so that he can work and tinker on them.

But what stood out to me most from my visit – more so than the scale of this project or all the fancy bells and whistles – was his attention to detail and his passion for design. Here is a guy who is worrying about baseboard details and the design of the space down to the centimeter.

Here’s his door detail:

In fact, he gave me a number of examples where a couple of inches here and there were having a profound impact on the experience of the space and he forced the trades to change it. He even spoke about how the 3" concrete floor topping had changed his experience of the outside (for the better). These are subtleties that most people don’t even notice, or care about.

But he sure does.

Of course, in some ways, this is the difference between building for yourself and building strictly for profit. When it’s a passion project, you do things that you love, but that other people will tell you don’t make economic sense. But sometime it’s good to be crazy. I mean, what do those other people know? 

So today, I thought we would play a little game on ATC where you try and guess what you think this home will be worth upon completion? Take a guess. There’s no wrong answer here. I’ll also randomly select somebody from the comments to receive a free ATC t-shirt.

I have a rough idea of the costs in my head, but I’d like to see what you come up with on your own first. I’ll also be forwarding this post to the owner, so make sure you respond in the comment section below as opposed to via email or on social media. I’m sure he’d love to see your numbers :)

To add one last piece to this story, I discovered midway through our tour that the owner of this house used to be my family’s veterinarian before he retired sometime in the mid 2000s. What a small world. He was an excellent veterinarian (my mom told me to tell him that), but that clearly wasn’t his only passion.

Depending on who you ask, the current condo boom in Toronto might be viewed as either a good thing or a bad thing (most will have an opinion). Some people think we’re simply building too many condos. And that too many of them are small, crappy, and geared towards investors – as opposed to end-users.

While I do agree that we could be doing more to create complete communities – that is communities which serve everyone from young singles to families with 3 kids – I think there are also a lot of positives associated with Toronto’s condo obsession (full disclosure: I’m a real estate developer). It has made us more sustainable, more reliant on alternate forms of (non-car) transport, and it has made us a generally more exciting place to live.

But that doesn’t mean we can’t do better.

Lately I’ve been wondering about how other cities do it. Specifically, those European cities that somehow seem to always be able to build awesome housing projects. So today I thought I would pick one and profile it. What I really wish I had was a financial pro forma to share with you all, but in the absence of that, I’ll try and back into some of the numbers on my own.

Shown above is the 9-storey Charlotte Apartments in Berlin. It was developed by WI Concept and designed by Michels Architecture Office. I chose this building because I think it’s an attractive one and because it's of the (mid-rise) scale that Toronto is trying to promote along its many avenues. Here are the stats I was able to find online:

• Site area: 347 square meters / 3,735 square feet

• Building area: 3,000 square meters / 32,291 square feet (says gross floor area, but I don't know if that means the same thing as it does here)

• Construction costs: €3.6 million / C$5,065,691 (as of today’s rate)

• Units: 28 (sold within 1 week of launch)

• Market: ~70% of buyers in Berlin are believed to be foreign investors

Now, if we were actually building a development pro forma, we’d want to get a lot more granular in our calculations than what I’m about to do. We’d want to know gross construction area, net saleable areas, and so on. But for the purposes of this post (and because I have very little information), I’m going to simplify and do a back of the napkin set of calculations.

Based on above, the FSI (or density) is about 8.65 (32,291 sf / 3,735 sf). That’s roughly in line with many of the residential developments we’re seeing in downtown Toronto. The average unit size works out to be about 1,153 sf (32,291 sf / 28 units), but in reality it would be less if that 32,291 number is truly the gross floor area. You would need to subtract the corridors and other non-saleable areas from it before doing this calc. Either way, that is big compared to most downtown Toronto condos, but small for Berlin standards according to this ArchDaily article. Finally, if we look at construction costs, we get $157 per square foot in Canadian dollars ($5.065M / 32,291 sf). That’s low. I wonder what the land costs were.

Again, these numbers are rough rough. But I wanted to try and dissect a European development project and compare it to Toronto. The most surprising figure seems to be the low construction costs. If you have any additional insights, I would love to hear from you in the comment section below.

Images: Werner Huthmacher