I recently tweeted this photo of St.-Anna-Strasse 16 in Munich (the building in the centre) along with a pithy comment about how I really like the look and scale of this neighbourhood. It's beautiful, right? The tweet blew up and, as of right now, it has over 170k views. Pithy comments with pretty pictures always seem to outperform anything more nuanced that I might share. But in the spirit of yesterday's post about housing affordability, let's dig a little deeper.

Developed by Legat Living and designed by Munich-based Landau + Kindelbacher, the mixed-use building is located in Lehel, which I understand is one of the most desirable areas in the city. It's about 960 m2 and has five apartments (ranging from 140 to 200 m2) and one commercial unit at grade. Each home has direct elevator access and its own landing. To give you a better sense of the suites, here's a photo of the rear elevation:

What is clear is that this is a luxury, boutique offering. Based on a cursory review of the Munich real estate market, Lehel seems to be the most expensive neighbourhood, with an average apartment price of €12,468.33/m2. If we apply this average to their smallest apartment, that's a starting price of €1,745,566. But presumably, this isn't your average building. It was completed in 2020, so I'm going to assume these homes sold for meaningfully more.

All of this leaves us with a really beautiful building and a nice urban scale, but certainly not the secret to a magically affordable city. This is not a criticism of the project by any means. I stand by my original tweet. It's a beautiful development, but it does demonstrate some of the affordability challenges of building urban. Legalizing urban infill housing is not a silver bullet in and of itself.

Photos via Landau + Kindelbacher

So:

Urbanism is failing in Canada, and a two-decade-long effort to reduce sprawl through policies such as urban growth boundaries has caused sprawl to accelerate due to the leapfrogging effect, in which development is pushed out to smaller communities without transit, leaving middle-class workers facing long daily commutes back to the metros where their jobs are located.

Indeed, the data show that net migration out of Canada's largest metro areas is particularly strong among those early in their careers (late-20s to mid-30s). In the words of Mike Moffatt from the Missing Middle Initiative, "Canadians are choosing affordability over density."

This statement highlights the inherent tension between dense, walkable communities and car-oriented sprawl. The former may be nice, better for the environment, and advantageous for agglomeration economies, but the kind of built form that comes along with it tends to be fundamentally more expensive to build.

Now, we can get into a debate about transportation costs, environmental costs, and how people tend to discount the value of their time relative to direct costs, but regardless, it is clear that affordability is dictating where people move.

So Moffatt is not wrong in stating that the communities that we urbanists often like to celebrate as "success stories" are, in fact, the ones that many young people are leaving. And in my view, this highlights a missing success criterion. Great design and urbanism are all well and good but, how attainable is the resulting housing?

The most promising solution right now appears to be happening on the multiplex front. It's the most cost-effective way to build multi-unit homes, and I think our goal should be to apply this same general approach — as-of-right, cost-effective builds — to larger and larger housing typologies.

If we can unlock the same market enthusiasm for six-storey wood-framed builds, then I think we'll really be on to something.

Cover photo by Craig Cook on Unsplash

Chart from the Missing Middle Initiative

Because of how long it takes to build a building, real estate markets almost always overbuild at the top, and underbuild at the bottom (see yesterday's post about the pig in the python). In a theoretically perfect economic model, supply would adapt instantly to changes in demand. But in the real world of development, this adaptation can take 5 to 10 years.

At the same time, it's not just about the quantity of real estate being delivered at any given time; it's also a question of what kind of real estate. We talk a lot around here about this moment in time being a healthy reset for Toronto's housing market (and other markets). But what exactly are we resetting? I find it helpful to think of it in terms of three prongs.

First, there's customer type. Who will be the buyers and tenants during the next cycle and what will they be looking for? For instance, when it comes to pre-construction condominiums, to what extent will individual investors factor in like they did during the last cycle? Many think they will play a much smaller role.

Second, there's the cost structure. The cost of building is changing, and hopefully we will see continued efforts to make housing more cost-effective to deliver. And third, there's a question of building typology. As the demand profile changes and as costs evolve, it is naturally going to have an impact on the kind of buildings that get built.

My gut is that we will see more housing geared toward end-users in medium-density builds, but only time will tell.

Cover photo by Lennon Kong on Unsplash