Brandon Donnelly
Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly.
Brandon Donnelly
Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly.
Read through planning documents across North America and you're bound to find language that refers to low-rise residential neighbourhoods as "physically stable areas" where the "existing neighbourhood character" is paramount. But to be more precise, what this kind of language is actually saying is not that these neighbourhoods need to be broadly stable; it is saying that they just need to look more or less stable.
Here in Toronto, for example, it has been widely documented that many of our low-rise neighbourhoods are losing people. Household sizes are getting smaller, and houses that used to be subdivided are being returned to single-family use. A similar thing is happening in other cities like New York:
Bloomberg News recently reported that since 2004, at least 9,300 homes have been lost as a result of multi-family buildings getting "rolled up" into single-family homes. More recently, the city has even seen an increase in people combining two or more buildings into large urban mansions.
And while the total number of homes removed is relatively small for New York as a whole, it can be quite impactful to individual neighbourhoods. In the West Village, where there's a high concentration of rowhomes and townhouses, Bloomberg estimates that one out of every six small apartment buildings has been rolled up into a single-family home since 2004!
From a built form standpoint, you could say these are "physically stable" areas that are obediently adhering to their existing neighbourhood character. But under the hood and behind their street walls, they are clearly changing.
It is one of the great ironies of city building. People often fear new development because they worry it might disrupt the character of a neighbourhood. But preventing development does not guarantee stasis. In fact, we know that not building new housing actually increases the pressures felt on a city's existing housing stock, as people compete for a more fixed amount of supply.
The wealthy can always outbid the less wealthy on housing. So if you don't provide any new options, the wealthy will just buy up the existing stuff and turn it into what they want. Alternatively, you can build more housing and create a "moving chain" that frees up more existing housing for people of lower incomes.
Cover photo by Chanan Greenblatt on Unsplash
Map from Bloomberg
Last month, we talked about how even "luxury" housing can improve overall housing affordability in a market. In that post, we spoke about a recent study that looked at the downstream effects of a new condominium tower in Honolulu. Today, let's look at Switzerland.
I stumbled upon this working paper on Twitter. The authors are Lukas Hauck and Frédéric Kluser, both from the University of Bern. In it, they look at the country-wide effects of new residential housing supply in Switzerland and, more specifically, the "moving chain" that new supply produces.
Moving chains work generally as follows:
A household moves into a newly constructed home
Their previous home becomes vacant
Another household moves into this vacant unit, leaving their previous home vacant
And the process continues, until someone breaks the chain (which can happen by way of a new household being formed or someone moving in from out of the market)
The authors found that these moving chains are relatively short in Switzerland. Approximately 75% of them terminate within three migration rounds. But this doesn't mean that these chains aren't critical for the market.
Importantly, they found that every new market-rate unit typically results in 0.75 moves for households with below-median incomes. So, that is 75 moves for every 100 new homes constructed.
The reason why new supply ends up also benefiting lower-income households is because there's a clear income and rent gradient across the moving chain:
Whether it's said out loud or not, invariably something like this comes up when talking about new housing development:
“There’s another solution,” says Lucas, mulling over the housing shortage. “I’m not saying I know what it is. Maybe the city’s full. What’s wrong with Windsor instead? Or Cornwall? A hundred years ago, manufacturing and employment were spread out way better than they are now. Everybody needing to be in Toronto and Vancouver is killing us.”
So, is Toronto full? Do we need to return our urban economies to what they were a century ago? To use rough whole numbers, let's consider that Toronto's average population density (in the city proper) is upwards of 5,000 per km2. It's much higher in the downtown core, but our low-density inner suburbs bring down the average.
Now, let's consider Paris, as we often do on this blog. Paris proper has roughly 1/6th the footprint of Toronto (again, the city proper boundary) and roughly 4x the population density (upward of 20,000 people per km2). So, if Toronto is full, what the hell is going on with Paris?
Even Paris is nowhere near full. The opportunities for intensification in central neighborhoods may not be as obvious as they are in Toronto, but urban Paris continues to grow through small-scale projects, office conversions, and, most notably, through ambitious transit projects and mixed-use developments designed to stitch together the greater urban region.
Read through planning documents across North America and you're bound to find language that refers to low-rise residential neighbourhoods as "physically stable areas" where the "existing neighbourhood character" is paramount. But to be more precise, what this kind of language is actually saying is not that these neighbourhoods need to be broadly stable; it is saying that they just need to look more or less stable.
Here in Toronto, for example, it has been widely documented that many of our low-rise neighbourhoods are losing people. Household sizes are getting smaller, and houses that used to be subdivided are being returned to single-family use. A similar thing is happening in other cities like New York:
Bloomberg News recently reported that since 2004, at least 9,300 homes have been lost as a result of multi-family buildings getting "rolled up" into single-family homes. More recently, the city has even seen an increase in people combining two or more buildings into large urban mansions.
And while the total number of homes removed is relatively small for New York as a whole, it can be quite impactful to individual neighbourhoods. In the West Village, where there's a high concentration of rowhomes and townhouses, Bloomberg estimates that one out of every six small apartment buildings has been rolled up into a single-family home since 2004!
From a built form standpoint, you could say these are "physically stable" areas that are obediently adhering to their existing neighbourhood character. But under the hood and behind their street walls, they are clearly changing.
It is one of the great ironies of city building. People often fear new development because they worry it might disrupt the character of a neighbourhood. But preventing development does not guarantee stasis. In fact, we know that not building new housing actually increases the pressures felt on a city's existing housing stock, as people compete for a more fixed amount of supply.
The wealthy can always outbid the less wealthy on housing. So if you don't provide any new options, the wealthy will just buy up the existing stuff and turn it into what they want. Alternatively, you can build more housing and create a "moving chain" that frees up more existing housing for people of lower incomes.
Cover photo by Chanan Greenblatt on Unsplash
Map from Bloomberg
Last month, we talked about how even "luxury" housing can improve overall housing affordability in a market. In that post, we spoke about a recent study that looked at the downstream effects of a new condominium tower in Honolulu. Today, let's look at Switzerland.
I stumbled upon this working paper on Twitter. The authors are Lukas Hauck and Frédéric Kluser, both from the University of Bern. In it, they look at the country-wide effects of new residential housing supply in Switzerland and, more specifically, the "moving chain" that new supply produces.
Moving chains work generally as follows:
A household moves into a newly constructed home
Their previous home becomes vacant
Another household moves into this vacant unit, leaving their previous home vacant
And the process continues, until someone breaks the chain (which can happen by way of a new household being formed or someone moving in from out of the market)
The authors found that these moving chains are relatively short in Switzerland. Approximately 75% of them terminate within three migration rounds. But this doesn't mean that these chains aren't critical for the market.
Importantly, they found that every new market-rate unit typically results in 0.75 moves for households with below-median incomes. So, that is 75 moves for every 100 new homes constructed.
The reason why new supply ends up also benefiting lower-income households is because there's a clear income and rent gradient across the moving chain:
Whether it's said out loud or not, invariably something like this comes up when talking about new housing development:
“There’s another solution,” says Lucas, mulling over the housing shortage. “I’m not saying I know what it is. Maybe the city’s full. What’s wrong with Windsor instead? Or Cornwall? A hundred years ago, manufacturing and employment were spread out way better than they are now. Everybody needing to be in Toronto and Vancouver is killing us.”
So, is Toronto full? Do we need to return our urban economies to what they were a century ago? To use rough whole numbers, let's consider that Toronto's average population density (in the city proper) is upwards of 5,000 per km2. It's much higher in the downtown core, but our low-density inner suburbs bring down the average.
Now, let's consider Paris, as we often do on this blog. Paris proper has roughly 1/6th the footprint of Toronto (again, the city proper boundary) and roughly 4x the population density (upward of 20,000 people per km2). So, if Toronto is full, what the hell is going on with Paris?
Even Paris is nowhere near full. The opportunities for intensification in central neighborhoods may not be as obvious as they are in Toronto, but urban Paris continues to grow through small-scale projects, office conversions, and, most notably, through ambitious transit projects and mixed-use developments designed to stitch together the greater urban region.
New housing (migration round 1) is typically priced at the highest end of the market. This makes sense because we know that development happens on the margin. But by migration rounds 2 and 3, median rents fall off noticeably, creating housing opportunities for other people.
New market-rate housing is sometimes criticized for only serving one segment of the market. But once again, we see evidence that it helps to ease overall housing pressures. There are other indirect benefits that shouldn't be ignored.
Cover photo by Henrique Ferreira on Unsplash
Because if this weren't the case, then I suppose you might hear more people say, "I really wanted to move to Toronto, but it was quite literally full. Like, absolutely no physical room for me. I couldn't do it. I would have had to sleep on the streets." Nope. We've got a space allocation for you. In fact, if you're in the market for a new home, give me a call.
Importantly, this is different from a city being, maybe, too expensive. That is not the same as not having any more room. But the two are interconnected: saying a city is full and then blocking housing because of said fullness creates a self-fulfilling prophecy of artificial scarcity. This drives up prices and can then create a false sense of being full.
Of course, in this scenario, you aren't out of land; you're out of permission to use the land differently. "Full" is a funny thing.
Cover photo by Julian Gentile on Unsplash
New housing (migration round 1) is typically priced at the highest end of the market. This makes sense because we know that development happens on the margin. But by migration rounds 2 and 3, median rents fall off noticeably, creating housing opportunities for other people.
New market-rate housing is sometimes criticized for only serving one segment of the market. But once again, we see evidence that it helps to ease overall housing pressures. There are other indirect benefits that shouldn't be ignored.
Cover photo by Henrique Ferreira on Unsplash
Because if this weren't the case, then I suppose you might hear more people say, "I really wanted to move to Toronto, but it was quite literally full. Like, absolutely no physical room for me. I couldn't do it. I would have had to sleep on the streets." Nope. We've got a space allocation for you. In fact, if you're in the market for a new home, give me a call.
Importantly, this is different from a city being, maybe, too expensive. That is not the same as not having any more room. But the two are interconnected: saying a city is full and then blocking housing because of said fullness creates a self-fulfilling prophecy of artificial scarcity. This drives up prices and can then create a false sense of being full.
Of course, in this scenario, you aren't out of land; you're out of permission to use the land differently. "Full" is a funny thing.
Cover photo by Julian Gentile on Unsplash
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