Daily insights for city builders, delivered every morning at 6 AM ET. I’m Brandon Donnelly — a Toronto-based real estate developer and founder of Globizen. I’ve been writing here since 2013.
This is going to be old news to many of you, but this past week I experienced Tesla’s self-driving capabilities for the first time. And I must say that I was very impressed. It did everything from navigate stop-and-go city traffic to navigate lane changes on the highway. Overall, it makes my five-year old car feel pretty quaint. The software is that much more sophisticated and one has to assume that all of this autonomy stuff will only get significantly better as LIDAR becomes common place in production vehicles.
In other car news, North America appears to be narrowing in on an EV charging plug standard. It is Tesla’s plug, but it is now appropriately called the North American Charging Standard (NACS) plug. And last week, Electrify America — which is the largest non-Tesla, fast-charging network in the US — announced that it would be adding the plug to its network. The company also happens to be owned by Volkswagen. So big and important companies seem to be coalescing around this plug type.
Lastly for today, here’s a post by Fred Wilson talking about (1) bi-directional EV charging, (2) the apartment buildings he and his wife are developing, and (3) our ongoing transformation away from a centralized electrical grid to a decentralized one. What he talks about in his post is something that we are actually piloting in a few of Slate’s office buildings right now. It’s still early days, but I think it’s really exciting. Tech seems to be enabling a broader shift toward decentralization. And in the case of our electrical grid, it’s going to lead to a more resilient one.
One of the most important considerations for livability in a multi-family building is the elevators. And as someone who has lived in a condominium building for the last 10 years, I know firsthand that it can be frustrating when they aren’t working properly. So this is obviously something that we pay a lot of attention to in our own projects.
The very general and crude rule of thumb is that you want at least 1 elevator for every 100 homes. For example, at Junction House, we have 151 suites and 2 elevators. So that means we have 1 elevator for every ~76 homes. At One Delisle, we have 371 suites and 4 elevators. So 1 for every ~93 homes. At the same time, I live in a building with 357 suites and 3 elevators (1 for every 119), and it works just fine.
But again, this is a very general rule of thumb. There are many other factors that can influence performance such as the number of levels in the building, the number of suites per floor, the number of below-grade parking levels, and so on. In my building, we have all above-grade parking, so I’m sure that impacts things.
If you have a building with a lot of below-grade parking, that will generally decrease performance all else being equal (i.e. increase weight times). Because now you have that many more stops, even if the number of homes remains constant above.
One common way to mitigate these impacts is to add a parking shuttle elevator. This is a dedicated elevator for just the parking levels, and it’s something that you’ll often see in office buildings. This helps service levels. It can also help the overall building efficiency (saleable area/gross construction area) by potentially eliminating the need for another elevator shaft in the above-grade levels.
But the trade-off is that you now need to transfer elevators, usually at the ground floor. Some people don’t mind this and think it helps with building security. If someone sneaks into the garage, there’s another obstacle to getting up into the residential floors. But it does mean that if you’re coming home with groceries in your hands, you need to take 2 elevators.
I’d be curious to hear from all of you what you think about parking shuttle elevators in residential buildings. Because I suspect that as building heights increase and as parking ratios continue to decline, parking shuttle elevators will likely become more common in cities like Toronto. Let me know in the comments below.
Disclaimer: I am not an elevator consultant! I am telling you just what I have learned over the years from speaking with actual professionals. So I recommend you speak with one before making any important elevator decisions on your own projects.
Yesterday evening I visited the future of Toronto’s neighborhoods. It is located at 367 Howland Avenue. And it takes the form of 10 homes on a lot that previously used to house only 1. Developed by Green Street Flats and designed by Craig Race Architecture, it is a near perfect example of what Toronto hopes to achieve with its new multiplex policies. As Craig put it last night, “we found the missing middle!”
Now to be fair, this is a double lot, measuring about 10m wide in total. And so this is twice the size of what the new policies now allow on a single lot — a fourplex plus a laneway suite or garden suite (4+1). But it is still generally consistent with what you could do today if you had two contiguous lots.
That said, this project predates the new multiplex policies, meaning it required a long list of zoning variances and it led to an inevitable fight with the neighbors. This small project required an 8-day contested hearing before it was granted approval! Start to finish, Howland took over 3 years.
That is ridiculous and so I think all of us should view the new multiplex policies as meaningful progress in our city. What was once contentious and a huge pain is now permissible as-of-right. Isn’t it funny how rules and perspectives change? “No, you can’t do this! Okay, now you can. Please do a lot of it.” So for the purposes of this post, let’s talk about Howland as if it were built on an as-of-right basis and you could do the same on your own lot if you were so inclined.
From a design perspective, the homes are organized as follows:
There’s a full-floor basement suite, a full-floor suite on the main level, two back-to-back two-storey upper suites, and then a laneway suite at the back. One reason for this configuration is that it means you never have to walk up more than one flight of stairs to get to your main living space. This was one of the design criteria and I think it works very well. Here’s an example of what this looks like (this is a suite #3):
For this particular site, the entrance to suite #4 is at the back of the fourplex and accessed via an adjacent laneway. But for the “inboard” fourplex, each suite is accessed via the main street. Once again, I think this all works very well. I just wonder if there could be an opportunity to shave additional costs by moving some of the circulation outside (kind of like this). I guess it would depend on the width of the lot.
Of course, the big question remains: Do projects of this scale actually make any money? Because if they don’t, then people aren’t going to continue building them. Though, I would say there are two ways to think about underwriting a project like this.
The first is from a 100% investment standpoint: build 5 homes, rent 5 homes, and then collect a reasonable risk-adjusted return. The second is a hybrid approach. Maybe it’s build 5 homes, rent 4 homes, and live in the other one. In this case, the math is likely a bit different. It could just be about subsidizing your living expenses as opposed to generating a commensurate return.
But in both cases, we know that these are very skinny projects. You need to be extra careful with your costs. And from what I gleaned last night, 6 or more suites is a better underwriting starting point (compared to 5). We also know that these projects only pencil with CMHC financing. Period. Full stop. If CMHC financing were to go away or meaningfully change, so to do these missing middle projects.
So as we look toward the future of housing in Toronto’s neighborhoods, we need to keep in mind that these projects happen very much on the margin (as does all development, but it’s an even thinner line here). Meaning it remains to be seen whether these will happen at scale across the city, which is now the hope. It’ll also be interesting to see if developers like Green Street don’t scale up over time. I suspect they will.
Congratulations to Green Street Flats, Craig Race Architecture, and the rest of the team on helping to pioneer this new housing typology. It’s a glimpse of the future and, judging by the turnout at last night’s open house, Toronto is ready for it.
This proposal by Dubbeldam Architecture + Design, called Incremental Density, is both an obvious step in the right direction and a problem. It is directionally right because it is exactly the kind of “gentle density” that we need and that many of us hope to see in our cities.
Four to six storeys, prototypically built on an as-of-right basis all across city, possibly by small-scale owner/developers. In fact, this approach is one of the things that Toronto’s new mayor, Olivia Chow, has been speaking about on her first day in the office:
Further, Chow said she wants to make it “easy and fast” for those who want to “build up” their single-family, often detached, homes to address what is known as the “missing middle” due to a history of “red tape” around zoning.
“What I’m saying is ‘build, build, build, build,’ up to four storeys if you want to have four units,” she said. “You can rent out three of them and some money right. Then you are creating more housing, and you’re earning some extra dollars,” she continued.
“So I want to unleash the power of the homeowner and say to them, ‘go build it,’ because we need housing right here now.”
Here’s the problem, though. I’m going to go out on a limb and assume that at least a few people will not want 6 storeys beside them and their backyard. I mean, I struggled with a 2.5 storey laneway house for many years. (11 to be exact.)
So how do we get from where we are today to what you see above? It’s going to take some finessing. Maybe it’s only in specific areas and on certain sites to start, or maybe we need to gradually increase the massing over time. Either way, I too am ready to “build, build, build, build.”
Jeremiah Shamess of Colliers made the claim this week that land values in some areas of the Toronto region are down 25%. He then shared a chart from Alan Leela showing how various factors have increased or decreased land values since 2020.
Broadly speaking, a revenue increase and/or more development density should increase land values; whereas something like inclusionary zoning, which is a cost to the project, should decrease land values. Indeed, this is one of the arguments in favor of inclusionary zoning: “Don’t worry about the additional cost to the project because landowners will simply pay for it through reduced land prices.”
In theory, all of this is correct.
Land is (or should be) the residual claimant in a development pro forma. Start with your revenue, subtract your costs, and then see what is left over for the land. (Though keep in mind that what is left over for the land could be $0 or even a negative number.)
But as I have argued before in the context of inclusionary zoning, I don’t think things always play out so neatly in the market. Put differently, if the cost impact of inclusionary zoning is something like $44 psf, I don’t think all landowners suddenly drop their prices accordingly — especially in a rising market where developers are competing fiercely for land.
They don’t care about your residual value model. Many or most will just hang on to their number and wait for someone to pay it.
So what I am saying with all of this is that, yeah, there are factors that put either downward or upward pressure on land values. But how it all actually plays out in the market tends to depend on the macro environment and what else is going on at the time. And right now we are at a point in the cycle where there is clearly downward pressure on land values.
Here’s some data (via Jeremy Withers) explaining that a large portion — about 61% — of new condominiums built in Ontario between 2016 and 2021 were not owner-occupied. In the case of low-rise houses, the figure is lower — about 24%.
Now, the premise of Jeremy’s tweet storm is that non-owner-occupied housing is bad and that the government should be doing more to discourage this. Simply taxing and restricting foreign buyers is not enough (and I agree that this is mostly symbolic).
But is non-owner occupied really such a bad thing?
First of all, non-owner occupied implies that somebody else is renting the place. I don’t think that a significant chunk of these homes are being left vacant. So isn’t the fact that somewhere around 61% of all new condominium apartments are becoming rental housing something that is potentially positive?
One counter argument would be that these investors are bidding up new home prices and squeezing out end users. But that brings me to my second point: small-scale individual investors are a critical ingredient in the delivery of new condominium housing in Ontario.
This point cannot be overstated.
The lender requirement to pre-sell suites in order to obtain construction financing means that developers rely heavily on buyers who are willing to purchase many many years before occupancy. And this is generally a lot more challenging for end users, as we have talked about many times before.
So if it weren’t for investors, I am certain that we would see a lot less new housing getting built. And in turn, that would mean a lot less new rental housing getting built.
I was a little surprised by some of the numbers here, namely municipal fees. But that is not the point here. The point is that this is a great idea and that, judging from the comments on Twitter, many people seem to want this.
The obvious benefit is that it allows consumers to better understand where their money is going. But I also think that by showing people all of the costs that get levied on new housing, it could benefit the overall development industry.
What do you think? Should developers in Toronto adopt a similar approach? Let me know in the comments below.
We have spoken before about buildings, such as this 6-storey one in Paris, that were allowed to be built with only a single exit stair. This is noteworthy because, here in Canada, if you were to try and build an equivalent 6-storey building on an equivalent 100 square meter site, you would be required to have two exit stairs. And that would create more non-leasable space and make it even more challenging to develop such a small building.
It is for this reason that single-stair buildings have been getting an increasing amount of attention as of late. They are seen as a way of encouraging more missing middle housing.
So where are single-stair buildings currently allowed? Below is a map from Seattle-based Larch Lab showing the maximum number of storeys for point access blocks (what they call single-stair buildings) around the world. Based on this, Canada is one of the most conservative countries on the planet when it comes to required exiting (I don’t want to speak for any of the grayed-out countries). It also shows that much of the world allows 6 or more storeys.
Larch Lab is a major advocate for point access blocks and they have this policy brief outlining the problem and the opportunities. One of their most interesting statistics has to do with minimum project size inflation. As recent as 2000, only about 13% of all multifamily completions in the US had more than 50 units. Today, this number has jumped to more than 55% of all new multifamily buildings, meaning we are quickly losing our ability to build small and intimate.
Point access blocks can help with this.
Of course, the reason we have exiting requirements in our building codes is because of life safety. But there’s research to suggest that this level of redundancy may not be needed in certain buildings. According to the above policy brief, the average death rate (caused by a building) in point access block countries like Switzerland, France, Italy and Germany, is significantly lower than that of the US. On top of this, almost no countries in the EU require buildings less than 28m tall to be sprinklered. The US does.
All of this said, I don’t think that single-stair buildings are a silver bullet for missing middle housing. It is just one important ingredient in a complicated recipe. And as evidence of this, we can look to Seattle. The 2018 Seattle Building Code allows point access blocks up to 6 storeys, which is a rare occurrence in the US. However, the city appears to be still working on missing middle reform. Presumably other ingredients are still — missing.
Approving new housing is one thing. And it is an important one thing. But you also need to sell/lease and finance the project. And that is a lot more challenging in today’s environment compared to a few years ago. I think a lot of people look at our cities, see a shortage of housing, and wonder why developers don’t just build more of it. But it’s not that simple:
“Our industry is now taking a second look at our [calculations] and saying it’s costing more to build, it’s costing more to lend,” he said. “And there is a threshold in regards to what a purchase price or sale price can be. So there’s a bit of a pause in the market right now in regards to starting construction.”
Throughout this last development cycle and, in particular, during the pandemic, development costs increased dramatically. But the revenue side was also increasing — meaning you could sell and/or lease space for more. That kept development going. You could still successfully underwrite new projects.
But now the cost of debt has increased and the revenue side has expectedly slowed both in terms of pricing and velocity. This dramatically changes the feasibility of new projects, which means the market is going to need time to adjust to this new environment. This, of course, will happen. But in the interim (i.e. right now), it is going to mean a lot less new housing.
It’s 158m tall and about 40 storeys (which makes it comparable in height to One Delisle). It’s extremely narrow in one direction (see above), and so from central Paris it is intended to be read as a kind of thin pencil tower. But when viewed in the east-west direction, you get the full width of its trapezoidal shape (see above, again).
Not surprisingly, this has been a highly contentious development — which is why it was 15 years in the making. It is now under construction, though, and it is expected to be completed sometime in 2026. But this is likely to be the last tower in Paris for quite some time.
Partially because of this Triangle Tower, Paris has just decided to ban tall buildings in the city. The new height limit is now back to 37 meters (or 12 storeys), which is essentially the same height cap that was put in place in 1977 following completion of the Tour Montparnasse.
So this is seemingly how things work in Paris. Somebody builds a tall tower. People mostly hate it. And then the city bans tall buildings for a number of decades. The previous height cap was relaxed in 2010. (Also, for those of you who are wondering, La Défense, which is generally where Paris puts its tall buildings, is outside of the city limits.)
Regardless, I think there’s no question that this new Triangle Tower is destined to become an iconic punctuation in the city’s skyline. Which means that we’re probably going to have to update our thinking. If Paris, today, is sometimes thought of as a city with two principal towers — the Eiffel Tower and the “awful tower” — it will soon be a city with three principal towers.
Perhaps the only question that remains is: Will people learn to love it like the Eiffel Tower or will it end up as another Tour Montparnasse?
