Whenever I read studies that cite census data, I’m often left feeling like the data is out-of-date.
Five years – which is how often Canada conducts its national census – is a long time. Somebody could move to this country for school, complete a 4-year degree, and then leave, and we wouldn’t even pick it up in our data.
Thankfully, we’ve at least reinstated the long-form census for next year. Here are the questions, if you’re curious.
But all of this is a digression.
This morning I read through a housing report that the City of Toronto published in October of this year. It’s about housing trends. And I wanted to share the below chart that covers housing completions for the period of 1996 to 2014. Keep in mind that this is for the City of Toronto, and not the Greater Toronto Area.
What it shows is that over this 18 year period, 78% of all housing completions in this city have been either low-rise or high-rise condominiums/apartments. The remaining 22% is a mix of detached and semi-detached houses and townhouses.
However, this 22% is an average.
Detached and semi-detached housing completions declined from 22% in the 1996-2001 period to 10% a decade later. And row and townhouses declined from 16% to 6% during this same period.
At the same time, “many” of the housing units in this 22% were actually replacing existing and older housing stock. That is, according to the report, many were “knock-downs” and rebuilds. In these cases, it means that the completions actually do not represent net new housing units. So in reality, the supply of new single-family housing is even lower than it appears in the chart above.
When you look at all of this, it should come as no surprise to you that our current combination of low interest rates and low supply has been leading to huge price increases on the single-family side of the market.
And it’s for this reason that I believe Toronto will eventually start to look towards allowing more low-rise intensification. Laneway housing, as one example, would represent virtually 100% new ground-related housing in already built up areas. Where else are we going to find that kind of housing opportunity?
So in my view, it is a question of when, not if, this will happen.
Just a few days ago, The Federal Reserve Bank of San Francisco published an interesting research study where they argue that this U.S. housing boom is different than that of the early 2000s.
During the last boom, U.S. home prices peaked in 2006 and then dropped about 30% in the wake of The Great Recession. Since then prices have rebounded – almost to their pre-recession levels. This has some people asking whether this story is headed towards the same ending.
“We find that the increase in U.S. house prices since 2011 differs in significant ways from the mid-2000s housing boom. The prior episode can be described as a credit-fueled bubble in which housing valuation—as measured by the house price-to-rent ratio—and household leverage—as measured by the mortgage debt-to-income ratio—rose together in a self-reinforcing feedback loop. In contrast, the more recent episode exhibits a less-pronounced increase in housing valuation together with an outright decline in household leverage—a pattern that is not suggestive of a credit-fueled bubble.”
And here’s the chart:
Source: Flow of funds, Bureau of Economic Analysis (BEA), CoreLogic, and BLS. Data are seasonally adjusted and indexed to 100 at pre-recession peak.
On Tuesday night I attended a great industry event that Quadrangle Architects organized about mid-rise buildings.
Mid-rise buildings (somewhere around 4-12 storeys) are all the rage in Toronto these days. But there are many challenges associated with this building typology and this was an event to talk about them and hopefully push things forward.
One of the speakers at the event was Jeanhy Shim of Housing Lab Toronto. And I’d like to share one of her slides here:
It reads:
Value = (rational benefit x emotional benefit) / price
I believe she admitted to taking it from someone at Bruce Mau Design. But that’s okay. That’s how ideas build. What I really like about it is that it attaches a value to the things that are difficult and sometimes impossible to measure: the emotional stuff.
As I mentioned in this post over the weekend, we are all obsessed with the quantitative side of our businesses. In the case of development, we look at prices, per square foot prices, apartment sizes, and the list goes on. And we often reduce our “products” to these sorts of key metrics.
But if you’re competing just on numbers, then you’re missing a big and important part of the equation. People consume things – and housing is no different – for a number of different reasons. We buy things because of how it makes us feel, how it reinforces our sense of self, how it improves or promises to improve our lives, and so on. These are all harder to measure than square footage.
But we are living in a data driven world and more and more of this type of information will become available for city building. If you and your business can get your head around it first, you’ll have a huge advantage.