The Liberals just announced that, if elected, they will form a new entity called Building Canada Homes (BCH) which will, "get the federal government back in the business of building homes." Broadly speaking, this new entity is proposed to have three key functions: it will build affordable housing at scale (including on public land), it will help to "catalyze" the private sector, and it will provide financing to affordable housing developers. There's a lot that is interesting in the policy teaser, but let's focus on function number one today: Do governments make good developers?

The outlined intent is that BCH will "act as a developer to build affordable housing" and "partner with builders for the construction phase of projects." So it sounds like they will not be constructors. The language they use also suggests that BCH will be an acquirer of land. Sometimes it will develop on already-owned public land, but in other cases it will go out and buy new land, sometimes offering it back to the market via land leases.

Acquiring new land will be challenge number one. As we have talked about many times before on this blog, land should be the residual claimant in a development pro forma. Meaning the value of land depends on what you can build on it. So if BCH is looking to build affordable housing and the rest of the market is looking to build some higher-and-better use, it will be very difficult for them to complete in the market. This is the same reason why, historically speaking, the City of Toronto has struggled to acquire new parkland with the funds it collects from developers. It can't compete.

On the flip side, it's very possible that in a downmarket, like the one we're in right now, BCH might be the only real buyer of development land. Affordable housing requires subsidies and if the subsidies BCH has access to result in both feasible projects and higher residual land values, well then they'll be able to win sites. But it will depend on the market conditions at the time. It also raises an important question: What is the right level of subsidy for the affordable housing that BCH intends to develop itself?

The second challenge is going to be execution. Development is a risky endeavor, but most of the time the private sector accepts these risks because they believe they will be compensated accordingly. And once they have taken on these risks, they become highly motivated to deliver for their investors and partners. Will the federal government be equally motivated? Perhaps. There are, of course, lots of examples of public housing developers in other parts of the world. But is it the most effective way to deliver new affordable housing? An alternative approach would be motivating the private sector to participate.

Getting the federal government "back in the business of building homes" may sound promising, but there's reason to be skeptical. There will be lots of details to figure out if it's actually going to be efficient and effective.

Cover photo by Eduardo Alvarado on Unsplash

It is disappointing to me that we often vilify all condominiums as being "luxury condos." I think the rhetoric is disingenuous and I think it distracts us from finding more productive solutions. As Mike Moffatt points out in this thread, if you look at virtually all major cities in Canada, the most affordable housing options are going to be condominiums and not low-rise freehold houses.

In his case, he looked at current for sale listings in London, Ontario, and found that for homes under $400k, about 81% of them were condominiums, and for homes over $1,200,000, only 4% of them were condominiums. Again: the real "luxury homes" are the low-rise houses that not the condos.

Now to be fair, John Pasalis is not wrong in responding to the thread and saying that on a per pound basis, or a per square foot basis, condominiums are actually more expensive. I've been saying this for years on the blog. When measured this way, mid-rise buildings are one of if not the most expensive housing typologies.

So John's argument is that, while condominiums may be the more affordable option for 1-2 person households, if you're a family in need of more space, low-rise housing is likely going to be more affordable for you on a per square foot basis. And I would agree with this statement.

The problem with this approach in the real world, though, is that people don't buy and afford homes based on this metric. You can't go to a bank and say, "I want to buy this house for $1.7 million dollars because it's only $680 per square foot when I include the basement, and that's better value than this 700 square foot condominium selling for $1,400 psf."

Sorry, the bank is going to tell you what total price you can afford based on your income. And that's why condominiums in our market have tended to serve as a critical entry point for first-time buyers. They're the most affordable option in terms of their total sale price.

So in my view, labelling all condominiums as "luxury" is not exactly productive. It ignores their role in providing more affordable homes; it overlooks the supply constraint that low-rise houses represent in most of our cities; and it's a distraction from the more systemic issue at hand: how do we make housing more affordable for everyone, including families?

Photo by Marcos Paulo Prado on Unsplash

The City of Vancouver recently published this video talking about missing middle housing. For those of you who are following this trend (and reading this blog), there won't be a lot that is new in the video (although Uytae Lee is great). But I'm sharing it here, anyway, for three reasons. One, it's an example of Toronto being ahead of Vancouver, which wasn't the case with laneway housing. Vancouver started allowing these first. Two, it is further evidence that this shift toward intensifying low-rise residential neighbourhoods is really happening -- and gaining momentum -- all across North America. And three, the City of Vancouver is about to bring forward new multiplex housing policies. So now is a good time to get involved and say things.

The Liberals just announced that, if elected, they will form a new entity called Building Canada Homes (BCH) which will, "get the federal government back in the business of building homes." Broadly speaking, this new entity is proposed to have three key functions: it will build affordable housing at scale (including on public land), it will help to "catalyze" the private sector, and it will provide financing to affordable housing developers. There's a lot that is interesting in the policy teaser, but let's focus on function number one today: Do governments make good developers?

The outlined intent is that BCH will "act as a developer to build affordable housing" and "partner with builders for the construction phase of projects." So it sounds like they will not be constructors. The language they use also suggests that BCH will be an acquirer of land. Sometimes it will develop on already-owned public land, but in other cases it will go out and buy new land, sometimes offering it back to the market via land leases.

Acquiring new land will be challenge number one. As we have talked about many times before on this blog, land should be the residual claimant in a development pro forma. Meaning the value of land depends on what you can build on it. So if BCH is looking to build affordable housing and the rest of the market is looking to build some higher-and-better use, it will be very difficult for them to complete in the market. This is the same reason why, historically speaking, the City of Toronto has struggled to acquire new parkland with the funds it collects from developers. It can't compete.

On the flip side, it's very possible that in a downmarket, like the one we're in right now, BCH might be the only real buyer of development land. Affordable housing requires subsidies and if the subsidies BCH has access to result in both feasible projects and higher residual land values, well then they'll be able to win sites. But it will depend on the market conditions at the time. It also raises an important question: What is the right level of subsidy for the affordable housing that BCH intends to develop itself?

The second challenge is going to be execution. Development is a risky endeavor, but most of the time the private sector accepts these risks because they believe they will be compensated accordingly. And once they have taken on these risks, they become highly motivated to deliver for their investors and partners. Will the federal government be equally motivated? Perhaps. There are, of course, lots of examples of public housing developers in other parts of the world. But is it the most effective way to deliver new affordable housing? An alternative approach would be motivating the private sector to participate.

Getting the federal government "back in the business of building homes" may sound promising, but there's reason to be skeptical. There will be lots of details to figure out if it's actually going to be efficient and effective.

Cover photo by Eduardo Alvarado on Unsplash

It is disappointing to me that we often vilify all condominiums as being "luxury condos." I think the rhetoric is disingenuous and I think it distracts us from finding more productive solutions. As Mike Moffatt points out in this thread, if you look at virtually all major cities in Canada, the most affordable housing options are going to be condominiums and not low-rise freehold houses.

In his case, he looked at current for sale listings in London, Ontario, and found that for homes under $400k, about 81% of them were condominiums, and for homes over $1,200,000, only 4% of them were condominiums. Again: the real "luxury homes" are the low-rise houses that not the condos.

Now to be fair, John Pasalis is not wrong in responding to the thread and saying that on a per pound basis, or a per square foot basis, condominiums are actually more expensive. I've been saying this for years on the blog. When measured this way, mid-rise buildings are one of if not the most expensive housing typologies.

So John's argument is that, while condominiums may be the more affordable option for 1-2 person households, if you're a family in need of more space, low-rise housing is likely going to be more affordable for you on a per square foot basis. And I would agree with this statement.

The problem with this approach in the real world, though, is that people don't buy and afford homes based on this metric. You can't go to a bank and say, "I want to buy this house for $1.7 million dollars because it's only $680 per square foot when I include the basement, and that's better value than this 700 square foot condominium selling for $1,400 psf."

Sorry, the bank is going to tell you what total price you can afford based on your income. And that's why condominiums in our market have tended to serve as a critical entry point for first-time buyers. They're the most affordable option in terms of their total sale price.

So in my view, labelling all condominiums as "luxury" is not exactly productive. It ignores their role in providing more affordable homes; it overlooks the supply constraint that low-rise houses represent in most of our cities; and it's a distraction from the more systemic issue at hand: how do we make housing more affordable for everyone, including families?

Photo by Marcos Paulo Prado on Unsplash

The City of Vancouver recently published this video talking about missing middle housing. For those of you who are following this trend (and reading this blog), there won't be a lot that is new in the video (although Uytae Lee is great). But I'm sharing it here, anyway, for three reasons. One, it's an example of Toronto being ahead of Vancouver, which wasn't the case with laneway housing. Vancouver started allowing these first. Two, it is further evidence that this shift toward intensifying low-rise residential neighbourhoods is really happening -- and gaining momentum -- all across North America. And three, the City of Vancouver is about to bring forward new multiplex housing policies. So now is a good time to get involved and say things.