Brandon Donnelly

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.

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Category: Development

  • Honks against housing in San Diego’s University City

    The University area is one of 53 community planning areas in the City of San Diego. And this one, as the name suggests, houses the University of California, San Diego (UCSD), which is at the northern end of the blue transit line.

    The last time the University Community Plan was updated was in 1987, and so it’s an old plan and it is currently being redone to better align with the City’s current strategic plan — which includes things like “creating homes for all of us” and “championing sustainability.”

    The final draft community plan won’t be available until later this year, but there are two draft scenarios available for download. Here’s what Scenario A looks like:

    The “T” circles are transit stops on the Blue Line (which runs south to downtown and then to the Mexico border), the olive green areas are institutional (UCSD, hospital, etc.), and the purple areas are “urban villages” with densities that go as high as 218 dwelling units per acre (darkest purple). For the other areas, please refer to the legend.

    Now let’s put this residential density into some sort of context. One acre = 43,560 square feet. So we’re talking about 218 homes on every 43,560 square feet of land. For context, our mid-rise Junction House project is 151 homes and our site area is approximately 22,000 square feet (about 0.5 acres). That puts us at roughly 302 homes per acre — more than what is proposed here.

    In total the revised plan could allow for somewhere between 35,000 to 56,000 new homes in the University City area. Not surprisingly, the community has reacted by organizing rallies, such as this one, here, called “Honks against housing”:

    (I used a screenshot because embedded tweets don’t seem to show up properly in my email newsletter.)

    This is, again, not unexpected. And all of the typical things could be said about incumbent residents opposing new homes on top of an existing transit line, next to a major university. But what stands out to me about this protest is its format.

    These residents are worried that high-rises will destroy their community. So presumably they are looking to get the word out to as many people as possible. And one of the ways they have decided to do that is stand on the side of a busy road and appeal to people in their cars.

    Ironically, I think this actually reinforces the need for an updated Community Plan. Because it speaks to the car-oriented nature of this community and the need for better land use planning around its existing transit stations.

    In my view, the line of thinking here should not be, “this is going to destroy our community. How will our roads ever accommodate 35,000 new homes?” It should be, “how do we better plan this community so that our next generation of residents have the luxury not to have to drive everywhere?”

    If you’d like to offer constructive feedback on this plan, I’m told that you can email Nancy Graham at nhgraham@sandiego.gov.

  • Seattle is building more accessory dwellings than single-family houses

    In 2019, Seattle made it easier to build accessory dwelling units (ADUs). Among other things, they started allowing two ADUs per lot, they stopped requiring the owner to live on site, and they stopped requiring off-street parking. The result is that the city is now permitting close to 1,000 ADUs per year (2022 figure). And for the first time ever, this figure now exceeds the number of permits issued for single-family houses.

    Part of what’s driving this adoption is that the City created 10 pre-approved plans that owners/builders can choose from. And since they were launched in September 2020, these plans have been permitted 130 times. (Los Angeles did something very similar with its “standard plan program.”)

    In general though, Seattle’s policies seem more permissive than what we have here in Toronto. According to this recent “annual report”, it is estimated that about 12% of ADUs in Seattle are licensed as short-term rentals. About a third are also being permitted as condominiums. In Toronto, any sort of severance is heavily discouraged. The objective was and is to create new rental housing.

    But for Seattle, this seems to be creating more affordable homes for sale. The median selling price for an ADU is apparently $732,000, compared to $1.2 million for a single-family house. This sounds kind of good.

    Image: The Seattle Times

  • More on soft story buildings — a Q&A with structural engineer James Cranford

    As I mentioned yesterday, I am not a structural engineer. However, my friend James Cranford is. He is Principal at Stephenson Engineering and he was nice enough to answer a few of my questions about soft story buildings (storey if you’re Canadian).

    BD: What is a soft (or weak) storey building? And why is it such an important design challenge, even in a very un-seismic city like Toronto?

    JC: A soft storey refers to any level in a building that has LESS capacity than the level above. This means it has both less strength to resist loads and less stiffness so that it will move more than the levels above. Soft stories are one of the most significant challenges that many modern building designers face because they are one of the most likely ways that a building can fail catastrophically if not properly designed. A soft storey failure occurs when the building hinges above the weak level and the columns below can no longer support the load of the building above as they become overstressed and loaded in ways they were never meant to act. This leads to a sudden, often pancake type collapse that is likely to bring down the entire building.

    We see potential soft storey issues most commonly in mid to high-rise residential buildings that have either amenity or retail spaces at the ground floor. These are spaces that by nature are large and as open as possible. During design, the structural engineer needs to recognize this and compensate for the lost capacity in other ways. This is usually done through a combination of increasing the capacity of the remaining walls and adding new walls at the weak level that fit with the building layouts.

    BD: What does the Ontario Building Code mandate in terms of soft storeys?

    JC: The OBC generally does not permit soft stories in any form for buildings where people are likely to live, work or play. In critical infrastructure like hospitals which must remain fully functional in the event of a major earthquake, the OBC goes further and does not permit any ‘lateral force resisting elements’ like shear walls or steel frames to be discontinuous below. This means that if you have a wall on the 5th floor of a hospital, that wall must exist with equal or greater capacity on EVERY level below, without exception.

    BD: How much more stringent is British Columbia, where there is greater seismic risk?

    JC: The requirements in the British Columbia Building Code (BCBC) are almost identical to those in Ontario in this case. However, the seismic design forces will be much higher based on the potential for much larger earthquakes, so while buildings will generally be designed for a higher seismic capacity, they must be proportioned similarly to prevent soft stories.

    BD: Speaking generally, what is usually required structurally in order to retrofit an existing soft storey building so that it can properly withstand things like earthquakes?

    JC: The most common way to retrofit a soft-storey is to increase the capacity of the weak level. In smaller buildings this can usually be achieved by adding new ‘lateral-force-resisting elements’ like shear walls or moment/braced frames until the overall storey capacity matches or exceeds the capacity of the levels above. On larger buildings this becomes more complex, as the loads are much higher and simply adding capacity may not be either feasible or practical. Therefore a full structural analysis is usually required to find a solution that can be tailored to the unique structural and architectural conditions. This often involves a combination of increased capacity and the introduction of ductile detailing which will allow the building to dissipate seismic energy. This can be roughly thought of as a ‘bend but don’t break’ approach to surviving an earthquake.

    In some jurisdictions, the extreme risk caused by (many) homes built with soft stories has prompted local governments to intervene. The City of San Francisco (as well as many other municipalities in California) have enacted ordinances requiring home owners to assess and upgrade their properties, including single family home with garages a the lowest level, to reduce the risk of soft-storey failure in an earthquake.

    BD: Thanks for this, James.

    I don’t usually do Q&As on this blog, so let me know in the comment section below if you found this one valuable and if you’d like to see more of them.

  • Soft story collapses

    I am not a structural engineer (or an architect for that matter). But one of the things that has come to greater light as a result of the devastating earthquake that hit Turkey & Syria last month is the number of “soft story buildings” throughout these countries.

    Technically, a “soft story building” is exactly what the name suggests. It is a building where one floor is less than 70% as stiff as the floor above it, or less than 80% as stiff as the average of the three floors above it (source).

    The typical application of this is a ground floor that has less structure (missing shear walls for example) and is more open. And it is usually done to accommodate things like parking and retail uses, and to, of course, build more cheaply.

    However, there is a massive problem in that they are often structurally suboptimal! (Again, not a structural engineer.) This is why we saw so many of the buildings in Turkey “pancake” during its earthquake. The ground floor failed and then it brought down the rest of the building.

    I can appreciate that retrofitting older buildings is both difficult and expensive; but it is inexcusable to not work toward that and it is certainly inexcusable to not mandate that every new building meet whatever building codes are required to save lives.

  • Real estate developers are stupid

    Big Ben Myers of Bullpen Consulting doesn’t usually have strong opinions on Twitter (obviously joking), but I did see him respond to this tweet this morning:

    The assertion he is responding to is basically this: “developers are stupid because they tend to hold onto land during downturns, instead of building through them.” On some level, I think I know where this line of thinking is coming from. It’s the whole Warren Buffet philosophy of “being fearful when others are greedy, and greedy when others are fearful.”

    But what it ignores is development feasibility. Developers typically rely heavily on the availability of debt financing. First you need land financing in order to acquire the land, and then, once you have your entitlements, condominium pre-sales and/or any other requirements in place, you move onto a construction loan (which often “takes out” your land loan).

    Maybe you have deep enough pockets to fund everything with cash, but most of the time that is not the case. And so if these debt facilities are not available to you, then you are not building.

    The other part of this equation is that, during downturns, it can be harder to forecast your future revenues. What can I sell/rent this space for, and how long will it take to absorb? These are difficult questions in the best of times, but they’re even more difficult when you don’t have a lot of market activity/comparables to point to.

    All of this contributes to debt being less available, especially for smaller developers. It also makes new sites difficult to underwrite. Because as we have talked about many times before on this blog, land should be the residual claimant in a development pro forma. Revenue minus development costs equals how much you can afford to pay for land.

    If the math doesn’t work and if you can’t get financing, it almost certainly doesn’t matter how much “leading” you feel like doing. You’re not building.

  • Beautiful brick mid-rise proposed for Toronto’s Junction neighborhood

    Last week, Sierra Communities (developer) and my friend Gabriel Fain (architect of Mackay Laneway House fame) submitted the above development proposal for 2760 Dundas Street West in the Junction. It is a beautiful proposal. So not surprisingly, the response has been overwhelmingly positive. Here are the first batch of comments from Urban Toronto:

    It also happens to be one block west of our Junction House project, so I definitely would have been annoyed if somebody proposed something ugly here. I am 99.9% biased, but I think the Junction has some of the best new mid-rise buildings in the city. Presumably, this is what “Mrgeosim” was getting at with their comment about “the number of good proposals for this neighbourhood.”

    But here’s the thing. This is a relatively small proposal. It’s a 6-storey mid-rise building with 28 new homes on top of a tiny 482 square meter site (16m frontage). This makes it a challenging new development to execute on. So the fact that this is required to go through the typical rezoning and site plan processes is, in my opinion, a painful problem.

    We should be doing everything we can to encourage these kinds of new housing developments all across the city. And that necessarily means removing as many barriers as possible. A pair of development applications and a few community meetings may seem benign, but they’re not. They add time and real costs that then need to be passed onto future residents.

    There is also a very valid question around what kind of development charges (or impact fees) we should be levying on projects of this scale. If you want to build a laneway suite in the City of Toronto, you can have the development charges deferred and eventually forgiven. Why? Because we want more rental housing and we have arguably recognized that it’s important for project feasibility.

    Should the same apply if you’re building 2 new homes, or perhaps 28 new homes? At what point should the “impacts” kick in and the fees be levied? And might there be an argument that adding many new homes on top of small 482 square meter parcels is actually an incredibly efficient way of using existing public infrastructure? I think so.

    Congratulations to the team on a beautiful proposal! I’m looking forward to this being our neighbor.

    Image: Gabriel Fain Architects

  • Hong Kong is building new “light public housing” — why?

    We have spoken before about how the average wait time for public housing in Hong Kong is now over 6 years. This is a problem for the quarter million people who are on this list, and so the city has decided to start building modular housing as a kind of stopgap:

    The city has embarked on a $3.3 billion plan to build about 30,000 temporary apartments over the next five years, which Housing Secretary Winnie Ho has said is a “very important social project.” The aim of the program is to give people an option to move out of cramped quarters while waiting for public housing. Critics say it only shows the government’s inability to deliver enough permanent homes.

    I think many would agree that “light public housing”, which is what this is being called, is probably better than no public housing. But is this really the most effective move? According to some sources, this light varietal may actually cost more to build than their typical public housing.

    So why even bother? Is it just speed? I’m not sure.

    Also, it is interesting to note that even in a city as dense, built out, and in need of housing as Hong Kong, finding support for new development can be a challenge:

    “We understand that Hong Kong needs land to build public housing for people in need, so we never objected until this time,” said Andy Ng, an accountant who bought an apartment in the Upper RiverBank project early last year. The government is squeezing thousands of people on a single plot of land without planning or consultation, he added. “The district simply can’t stomach so many people.”

  • How affordable is a Nabr home?

    We have been speaking about Nabr and the productization of housing for the last year (and, more broadly, about prefabricated housing for probably as long as this blog has existed). And now it is possible to go on to Nabr’s website and reserve a new home in their San Jose project. Here’s what that looks like:

    What is immediately clear is that this is an obvious improvement over the way that new homes are typically purchased. The pricing is transparent. You can easily see the floor plan and features of each home. And if you’d like to reserve one, you can go ahead and do that right away for $1,000:

    You can also specify whether or not you’re interested in Nabr’s lease-to-purchase program (known as LEAP). More information on that can be found, over here.

    But the exciting question remains whether thinking about and executing on this new housing as a product, rather than as an individual project, will ultimately bring greater cost efficiencies and savings. In other words: can it make housing more affordable?

    Today, the base pricing for SoFA One looks something like this:

    • Home 1002: $1,415,000, ~1080 sf (excluding exterior space), $1,310 psf
    • Home 1003: $2,144,000, ~1547 sf (excluding exterior space), $1,386 psf
    • Home 1108: $938,000, ~795 sf (excluding exterior space), $1,180 psf

    These are just the first 3 homes that showed up for me when I opened the website. And while I’m not intimately familiar with the San Jose housing market, Realtor tells me that the median sold price is $1.2 million and that the median list price per square foot is about $766.

    Though not really an apples-to-apples comparison, this suggests to me that the above pricing may not be as affordable as some people were hoping for. However, it is more or less where I figured pricing would need to be in order to make a high-rise project like this pencil.

    Does this change over time with more product scale? I think it could.

  • Social media as zoning review board

    This is an interesting article about the neighborhood-based social network, Nextdoor, and how it has become a tool for housing politics:

    Overall, activists both for and against more housing regard Nextdoor as an increasingly influential and even critical tool in the fight, which conflicts with the platform’s marketing as a friendly, kinder social media. Rather than being the neighborhood bulletin board, Nextdoors around the country are looking more like the local zoning commission hearing.

    Housing debate is no stranger to social media, but in the case of Nextdoor, the audience gets focused down to the scale of a neighborhood. And that clearly changes things.

    For the full article, click here.

  • Development is slow

    Whenever we submit a development application for a new project, we typically get a ton of inbounds from people who are looking to sell us something, partner in some way, or buy/rent space in the development. These can be positive connections and we have completed deals based on these sorts of inbounds.

    But what is clear to me is that many people do not understand the development process and how long it takes to actually bring a new building to fruition. By the time a development application is filed, it is not uncommon for the developer to have already been working on the project for at least a year, and oftentimes longer in the case of more complicated projects.

    And after the application is filed, it is not uncommon (at least in this city region) for the approvals process to take another few years. We have projects that are on year 7 and we still can’t put shovels in the ground. This is a bit of a unique situation, but even still, when it’s all said and done, a “typical” mid-rise or high-rise project could take 7-10 years from beginning to end. And sometimes longer.

    A decade is a long time. So it’s no wonder that low-rise sprawling cities with permissive land-use policies tend to have more elastic housing supply. Quicker builds. And quicker approvals.

    I say all this not because I expect everyone to understand how the development process works. I’m saying it because maybe if more people knew how long everything takes, they’d be more open to streamlining the delivery process and to encouraging the construction of more missing middle housing.