Here is an interesting discussion paper on the Toronto region’s economy, demographic outlook, and its land use. It was recently published by IBI Group and Hemson Consulting to support the 10-year review of our regional transportation plan.

I wanted to share a couple of charts from the report that I thought were interesting. If you’re not in the Toronto region, I would be very curious to hear how your city might compare in terms of the way it is trending.

The first chart is net migration by age group. Like Vancouver – similar chart posted here – people have been moving into the city/Toronto when they’re young and then moving out to the suburbs once they start having families. 

Will that continue? The oldest Millennials are now hitting their mid-30′s and I am very interested to see if there will be any reversal in this.

Given the above trend, people in this region are not surprisingly also swapping apartments for ground-related housing as they get older. The crossover point seems to be (or at least has been) when people hit their mid-30′s. Again, I am curious how this may evolve as the city matures.

Because if you look at housing completions from 2001 to 2016 (chart below), the only municipality that was able to meaningfully increase its housing supply was Toronto. 

Every other municipality – except for Hamilton, which posted modest gains – experienced significant declines in the number of new homes delivered to the market over the last census periods. 

Of course, the only reason Toronto was able to increase its housing supply was by building up – in other words by building condos and apartments. (Shown in the purple below. For some reason the legend is incomplete in the report.) 

If you look at the share of housing completions, over 80% of new homes in Toronto are now in apartment form. 

Intensification is a deliberate policy choice. And we can certainly debate whether it’s a good or bad thing (I believe it’s a good thing). 

But putting that aside, the above charts are a great answer to the perennial question: “How is it that Toronto is building so many condos?” This is why.

Kate Downing was formerly a planning commissioner in the City of Palo Alto. She recently resigned from her position and, about about a day ago, she posted her resignation letter on Medium. It has since gone viral.

The reason it has spread so quickly, I think, is because it addresses the very same issues that so many cities around the world are facing: a lack of housing supply and eroding affordability.

As a developer, I obviously have a vested interest in this matter. But to the extent that I can put that aside, I really do believe that our goal should be to build inclusive, rather than exclusive, cities.

For instance, when I think of great cities such as New York and Toronto, I think of their history of taking in a large number of immigrants and then empowering them to climb the socioeconomic ladder. There’s something magical about that. One of my best friends likes to talk about this potential as “immigrant hustle.”

But when we sterilize our cities by allowing only the incumbents to survive, I believe we place that socioeconomic potential in jeopardy. So for that reason, I am reposting Kate’s entire letter. I have bolded the points that stood out for me. Let me know what you think in the comments.

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Dear City Council Members and Palo Alto Residents,

This letter serves as my official resignation from the Planning and Transportation Commission. My family has decided to move to Santa Cruz. After many years of trying to make it work in Palo Alto, my husband and I cannot see a way to stay in Palo Alto and raise a family here. We rent our current home with another couple for $6200 a month; if we wanted to buy the same home and share it with children and not roommates, it would cost $2.7M and our monthly payment would be $12,177 a month in mortgage, taxes, and insurance. That’s $146,127 per year — an entire professional’s income before taxes. This is unaffordable even for an attorney and a software engineer.

It’s clear that if professionals like me cannot raise a family here, then all of our teachers, first responders, and service workers are in dire straits. We already see openings at our police department that we can’t fill and numerous teacher contracts that we can’t renew because the cost of housing is astronomical not just in Palo Alto but many miles in each direction. I have repeatedly made recommendations to the Council to expand the housing supply in Palo Alto so that together with our neighboring cities who are already adding housing, we can start to make a dent in the jobs-housing imbalance that causes housing prices throughout the Bay Area to spiral out of control. Small steps like allowing 2 floors of housing instead of 1 in mixed use developments, enforcing minimum density requirements so that developers build apartments instead of penthouses, legalizing duplexes, easing restrictions on granny units, leveraging the residential parking permit program to experiment with housing for people who don’t want or need two cars, and allowing single-use areas like the Stanford shopping center to add housing on top of shops (or offices), would go a long way in adding desperately needed housing units while maintaining the character of our neighborhoods and preserving historic structures throughout.

Time and again, I’ve seen dozens of people come to both Commission meetings and Council meetings asking Council to make housing its top priority. The City Council received over 1000 signatures from Palo Alto residents asking for the same. In the annual Our Palo Alto survey, it is the top issue cited by residents. This Council has ignored the majority of residents and has chartered a course for the next 15 years of this city’s development which substantially continues the same job-housing imbalance this community has been suffering from for some time now: more offices, a nominal amount of housing which the Council is already laying the groundwork to tax out of existence, lip service to preserving retail that simply has no reason to keep serving the average Joe when the city is only affordable to Joe Millionaires.

Over the last 5 years I’ve seen dozens of my friends leave Palo Alto and often leave the Bay Area entirely. I’ve seen friends from other states get job offers here and then turn them down when they started to look at the price of housing. I struggle to think what Palo Alto will become and what it will represent when young families have no hope of ever putting down roots here, and meanwhile the community is engulfed with middle-aged jet-setting executives and investors who are hardly the sort to be personally volunteering for neighborhood block parties, earthquake preparedness responsibilities, or neighborhood watch. If things keep going as they are, yes, Palo Alto’s streets will look just as they did decades ago, but its inhabitants, spirit, and sense of community will be unrecognizable. A once thriving city will turn into a hollowed out museum. We should take care to remember that Palo Alto is famous the world over for its residents’ accomplishments, but none of those people would be able to live in Palo Alto were they starting out today.

Sincerely,

Kate Downing

There’s no shortage of talk about a Canadian housing bubble:

In Vancouver, the price of a single-family home (as of June of this year) increased 39% to C$1.6 million from the year prior. Does that constitute bubble territory?

In an effort to stop prices from running away even further, I am sure you all know that the BC government has recently imposed an additional 15% transfer tax on Metro Vancouver homes purchased by foreign buyers (people who are not Canadian citizens or permanent residents).

The data that I have seen (here and here) suggests that foreign buyers could make up somewhere around 5-10% of the market. Given that many will now get creative in terms of hiding their foreignness, I am not so sure this new tax will have a dramatic impact on affordability. But it certainly sounds nice if you’ve been grouchy about home prices and thinking “those damn foreigners.” We’ll have to see how it plays out.

Having said all of this, if Vancouver is in fact in bubble territory, would that be so bad? Are we thinking about this the right way?

Here’s an alternative viewpoint.

I recently stumbled upon an old blog post by Tom Evslin (2005) called: Why we need bubbles. I discovered it via it Fred Wilson. Tom’s argument is that we need irrational exuberance because it provides the capital that allows for dramatic overbuilding. The overbuilding of things like rail infrastructure, internet infrastructure and – I’m adding this – housing infrastructure. And once this happens, it dethrones the incumbents and paves the way for future economic progress.

Tom’s focus is on technology, but I couldn’t help but think of the parallels with city building. Is the proposed Rail Deck Park in Toronto so bold that it’s only possible during a period of irrational exuberance? Should Vancouver instead be working to dramatically expand its housing supply instead of trying to tax away a portion of demand? Is a period of irrational exuberance precisely the moment where we lay the ground work for our future successes?

I’m not saying we’re in a bubble. I don’t believe in or know how to time markets. But I am asking whether the bubble headlines are missing the greater opportunity.