Benjamin Couillard is a PhD candidate at the University of Toronto whose research looks at things like residential choice and housing supply. And in this recently published paper, he studies the causal effects of rising housing costs on fertility. Here's what he found when examining US Census Bureau data:
...rising [housing] costs since 1990 are responsible for 11% fewer children, 51% of the total fertility rate decline between the 2000s and 2010s, and 7 percentage points fewer young families in the 2010s. Policy counterfactuals indicate that a supply shift for large units generates 2.3 times more births than an equal-cost shift for small units. This analysis concludes that the supply of housing suitable for families can meaningfully contribute to demographic sustainability.
Intuitively, it makes sense that rational adults might consider where they would put a child if they had one, or had one more, and consider the cost of this incremental space. Housing is expensive in major urban centers. Perhaps it's no surprise that Canada, which is known for its broadly unaffordable housing, has fallen into the "ultra-low fertility" category.
But I think this fertility-housing relationship is an important one to call out when considering appropriate public policies. Housing is often viewed through the lens of what bad things will happen if we build it. That's why we do shadow studies, force stepbacks, charge development charges (impact fees), and the list goes on.
What is harder to grasp is what happens when we don't build new housing. Most — or at least many — seem to agree that not building enough housing hurts overall affordability. But what this study also demonstrates is that not building enough family-sized housing is bad for making babies!
This has all sorts of socio-economic repercussions, one of which is that a country now has to rely more heavily on immigration in order to offset a shrinking population base. It becomes a larger economic problem. When framed this way, it makes me wonder: why do we tax new family-sized homes the way we do?
An alternative approach to encourage more infill family housing might be to eliminate development charges, building permit fees, parkland fees, and as many other government fees as possible on all three-bedroom or larger homes. And the reason you would do this is because the economic and demographic cost of not building is even greater.
Based on the work of Couillard, we know at least one of the outcomes: more babies.
Cover photo by Lotus Design N Print on Unsplash
CoStar recently published an article titled “Architectural stars appear on the skyline of Canada's largest city — Toronto reaches a new level of global reach and ambition.”
What the article is talking about is a slew of iconic, under-construction projects designed by some of the world's most celebrated living architects. Namely, Forma by Frank Gehry (Los Angeles), One Delisle by Jeanne Gang (Chicago), KING Toronto by Bjarke Ingels (Copenhagen), as well as a handful of other noteworthy projects by some of the best local firms in Toronto.
It is no doubt an exciting moment. These are projects that, I think, the world will come to associate with our great city. They will strengthen the global brand of Toronto.
But let me also state the obvious: These projects are the result of a particular moment in time and a particular point in the last real estate cycle. They wouldn't exist today, irrespective of our level of ambition.
This is not to say that this calibre of project won't exist again in the future — it will. But for right now, these are special and differentiated architectural treasures that truly stand alone, showing us what is possible when we bet on the unknowable future.
When it’s hard to find great deals, it’s easy to find money.
When it’s hard to find money, it’s easy to find great deals.
This tweet by Sean Sweeney is, of course, 100% true. It is also true of markets and investing in general. When everyone feels confident, money becomes available, and then returns fall. There's too much competition. But when everyone is scared and liquidity dries up, bargains emerge. Now there's very little competition.
Warren Buffett has made an entire career out of playing this paradox. It's his well-known "be greedy when others are fearful" mantra. But in order to do this, you need to be patient, you need to have the resources, and you need to have the right emotional temperament when things are in meltdown.
I am seeing this first-hand in Toronto real estate. To give just one example, development land is right now worth, oh I don't know, roughly half of what it was before (a broad generalization).
There are very good reasons for this. The value of land depends on what you can do with it, and if you can't do anything with it, then it's not worth very much. But as soon as you can once again do something with it, and clarity returns to the market, the bargains disappear.
So to find the "great deals" you have to be willing to wade into areas where most of the market is unwilling to go in the current moment. Put differently, there's money to be made when you're right about something that most people think is wrong, or when you're able to do something that most people can't do for whatever reason.
All of this is easier said than done, but I think about Sean's tweet a lot these days. It's easy to find reasons to say no right now. But here's the approach I'm trying my best to take: it's a great time to be in real estate. In fact, it's a generational opportunity. And so it's my job to find the great deals.
Cover photo by Sean Pollock on Unsplash