I was recently debating with a friend about climate risk in Florida. He is less concerned about climate risk than I am and part of his argument was, "Why would the world's elite move to Florida only to get pushed out by sea-level rise in the near future?"

My view is that we shouldn't necessarily view the migration of high-net-worth individuals to the state as clear confirmation that they all believe everything will be fine (though I'm sure some or many do). Instead, I see it as rational consumer and economic behavior.

If you're a wealthy individual and have the means to be highly mobile, Florida offers two obvious benefits: warm winters and lower taxes (including little to no risk of something like a California wealth tax).

Let's look at some numbers.

If you had a $100 million capital gain from your private placement in SpaceX and you switched your tax residency from New York City to Miami, you would save 14.776% in state (10.9%) and city (3.876%) taxes, equaling about $14.8 million at t = 0 (definitely not tax advice!).

You could then use these tax savings to buy a waterfront home and get this benefit for all future income streams. In addition, you would get the benefit of warm winters going forward and the optionality of bottle service at LIV whenever you want to see David Guetta. I'm personally not an EDM fan. I prefer house and techno, but to each their own.

So in a total doomsday scenario, if the market started pricing in climate risk and your $14.8M waterfront property went to $0 at t = 10 years, it would still be a rational lifestyle and economic decision. And if the value destruction happened at t = 25 years, it would matter even less. It's probably outside of the forecasting period.

For wealthy people, the value of their personal residence generally makes up a much smaller percentage of their net worth compared to that of the middle class. And my assumption is that the wealthy are making self-serving economic decisions and/or they really want to live in Florida for lifestyle reasons.

The greater concern is for less-wealthy people for whom an erosion in principal residence value would have a more meaningful impact on their financial health. At a certain point, the tax benefits and lifestyle benefits may not outweigh the climate risks, assuming you believe this is a risk in the foreseeable future.

Cover photo by Alex Guillaume on Unsplash

Over the weekend, Berkshire Hathaway announced that it has come to an agreement to buy Arizona-based homebuilder Taylor Morrison for US$6.8 billion in cash. The agreed-upon price is $72.50 per share, representing a 24% premium over the company's closing stock price on the prior Friday. Once the transaction closes, Taylor Morrison will be delisted from the New York Stock Exchange and become a privately held company within the Berkshire Hathaway conglomerate.

Now, the press release only says so much, but I did find the canned quotes interesting. Greg Abel of Berkshire said that the company wants to "unify our site-built homebuilding operations into a combined platform." And Sheryl Palmer, CEO of Taylor, said the acquisition "will allow us to scale the Taylor Morrison platform in ways that would not be possible as a standalone company.”

Berkshire has a long history in housing. It also owns a manufactured home company (i.e. not site-built), and various companies that make up the housing supply chain: bricks, paint, insulation, roofing, sales, and more. So it'll be interesting to see what they are able to achieve by way of a "combined platform." It has elements of both vertical and horizontal integration.

The other interesting thing about this announcement is that it also seems to signal the following: Abel wants Berkshire to be more of an active manager (finding those "synergies" across its subsidiary companies), and he likely feels the housing market is at or near the bottom of the cycle (despite current inflation risks). Regardless, the US has a structural housing deficit and so homebuilding is probably a good business to be in for the long term.

Cover photo by Josh Olalde on Unsplash

The countdown is on. Our baby girl will be arriving at some point in the near future (we're on her schedule) and so I think you should all expect to see more baby-in-an-urban-condo-related content.

If you're familiar with planning in Toronto, you'll know that there are specific urban design guidelines related to children in vertical communities. (The final 2020 report can be found here.) They include neighbourhood guidelines, building guidelines, and specific unit guidelines, which include, among other things, recommendations for "ideal" family units.

Why all of this matters is that approximately 95% of the new housing built in the City of Toronto today is now multi-unit housing (buildings greater than 5 storeys). Our future is vertical. So even though only about 32% of all households with children currently live in a multi-unit community (Toronto proper figure), it's not hard to imagine this number going up. Either that, or we're left with more sprawl, plummeting birthrates, and a bleak, childless city.

As I was writing this post, I asked my wife what she thought would be the biggest benefits and drawbacks of having a kid in a condo. On the positive side she said she likes the safety of being in a building and our nice walkable, urban community. On the negative side, her mind went straight to stroller management and general space constraints.

Indeed, when you visit friends and they have a driveway big enough to park an aircraft, a basement with a climbing gym for the kids, and bedrooms bigger than many urban apartments, it's hard not to think to yourself, "Yeah, you know what, maybe this would be nice!"

Interestingly enough, neither of us thought once about elevators. We live in a mid-rise building and never have to wait more than a few seconds. Now onto stroller management. Right now, it's sitting folded in our front hall closet:

It fits nicely, but it's obviously going to be work to constantly fold it up and put it away. We'll see how that goes. We are, however, fortunate in that we have two floors in our place, so it is house-like in that there's greater physical and acoustic separation between the main living areas and the bedrooms. We also have a good-sized outdoor space, but a backyard with grass it is not.

Back in the day, I used to enjoy following a blog out of Vancouver called 5 Kids, 1 Condo. Adrian Crook stopped updating in 2020 (presumably his kids grew up), but it was a good example that home is not a housing typology; it's both a physical and psychological space where humans (hopefully) feel a sense of comfort and belonging.

As our urban home grows, I'm looking forward to sharing what we learn along the way on this blog. It feels extremely relevant to the work that many of us do as city builders.