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According to recent data from Altus, Toronto recorded 42 new condominium sales in the month of May. That's a 97% decrease since May 2021, for a city of over 3 million people (city proper, not the metro area). So for all intents and purposes, the market is shut off. And it has resulted in upwards of 12,000 construction sector jobs disappearing over the last 12 months in Ontario. Moreover, it has left the Toronto Area with an unemployment rate that is close to 10%.
But that's not all.
The Missing Middle Initiative estimates that this dramatic decline in new home sales (which is more of a leading indicator than housing starts) could conservatively result in all three levels of government forgoing something like $6.6 billion in tax revenue each year. And within this lost revenue, there's something like a $2 billion reduction in revenue just from development charges (which don't get paid if developers aren't starting construction).
These are alarming figures that beg the question: How will government make up this shortfall? But once again, here's the thing. If development charges are intended to be "growth paying growth" then, in theory at least, development charge revenue shouldn't matter. The growth has disappeared and so the things that DCs pay for should also disappear — right?
In practice, we know that it's more nuanced than this and that growth pays for a lot of stuff. The clearest evidence of this is likely to rear its head when the DC funds run out. We're going to be forced to plug the hole with something else. So over the long term, I actually think this will prove to be a positive outcome for the housing market. Because it's going to necessarily wean us off the practice of overtaxing new homes.
There's no other choice right now.
Cover photo by Dinil Fernando on Unsplash
This week, our team toured a new 9-storey mass timber residential building going up at 230 Royal York Road in Toronto. The developers are Windmill Developments and Leader Lane Developments. The construction manager is Oben Build. The mass timber company is Vancouver-based Intelligent City. And when it's completed, it is expected to be the tallest residential building in Toronto. But I suspect it won't hold this title for very long. Building out of wood is destined to become a major part of how we build in this city and country. So here are a bunch of photos from the site walk. I tried to include as many detail shots as possible so that you can all get a sense of how it pieces together.
A few weeks ago I accidentally sparked, via this tweet, an entertaining debate about what it takes to be called a developer. This led to my post "Do you even develop, bro?", where I explained my view on when it might be appropriate. (Spoiler: It's a broad term.) But my friend Brendan Whitsitt of Imprint Development has just published an even better post on the topic. It's called "Developer vs. Dirt-Flipper" and you should give it a read.
In it, he says this:
So if we tried to sketch a Platonic ideal for what a developer is, we might say that the ideal developer would have a solid understanding of, and experience in, all phases of development, including construction. This person will have a holistic perspective that attempts to optimize across all phases of a project rather than just one part.
This doesn't relate directly to the debate of who should be called a developer, but I think it's an insightful comment. Developers have very specific skillsets, but they also tend to be generalists. Our job is to stitch together lots of different disciplines and elements to ultimately produce a space that people can live, work, play, and/or do other things inside. The more you know about the entire process, the better you can be at any one part.
I even think this transcends just the development process. The more you know and understand about cities, market trends, human behavior and countless other things, the more thoughtful you can be about formulating new developments. It's never ending and it makes for an interesting line of work. But I do think this raises the question of: When is it valuable to specialize?
For example, some development companies like to follow a division of labor model. One team focuses on acquiring new sites, one team focuses on approvals/entitlements, and so on. Once a particular phase is completed, the project gets passed on to the next group. And in theory, these specialist teams should be able to go deeper and harder than a team forced to spread their time.
But on the flip side, it means that the person trying to buy sites might not be thinking about what a pain in the ass it will be to build on. They may just be trying to get deals done. Let the other team worry about building the thing. So personally, I've always liked the accountability that comes with taking a project from beginning to end — it's never somebody else's problem. It's your problem.
Of course, even if you don't do this, you're still a developer.
Cover photo by Max Langelott on Unsplash
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