Brandon Donnelly

Daily insights for city builders, delivered every morning at 6 AM ET. I’m Brandon Donnelly — a Toronto-based real estate developer and founder of Globizen. I’ve been writing here since 2013.

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Category: Housing

  • Mississauga is the only major city in Canada that lost people in the last census

    The Globe and Mail published an interesting article this weekend talking about how Mississauga, a suburb of Toronto, is the only major city in Canada to have lost people in the last census. Here are the population changes for the top 10 largest municipalities in the country:

    There is a simple explanation for this and it is one we have talked about a number of times before on the blog. Many/most of our low-rise single-family neighborhoods are actually losing people. Empty nesters are becoming over-housed and young people aren’t backfilling in quite the same way.

    Mississauga has a lot of these neighborhoods and is heavily geared towards this kind of built form. But they are certainly not alone. The same phenomenon is happening in places like Toronto; there is just enough other growth to offset these negatives so that the headline number still remains positive.

    However, this is slowly changing. Toronto is working to “expand housing options” in its low-rise neighborhoods; it is considering how to better intensify its major streets; and it is re-introducing small–scale retail uses so that people living in a house can easily walk to a corner store for milk.

    It is a shift in mindset. But I believe that this trend will only continue, and eventually it will make its way to the suburbs.

    Images: The Globe and Mail

  • State-to-state net income migration from 2019 to 2020

    Here is an interesting chart from the WSJ showing how much net income migrated to the state of Florida between 2019 and 2020:

    I’m not sure what the exact dates are for this dataset, but it seems to again suggest that this migration was already a trend before the pandemic happened.

    Either way, Miami is red hot and the continues to lead the US in residential rental rate growth. But all of this growth is now apparently starting to catch up to the city. Here is just one example from the same article (though developers here in Toronto would gladly take this sort of timeline):

    Right before the pandemic, when he moved to Miami, he said it took no more than four months from when he submitted development plans to when he got city approval. Now, with the number of projects swamping Miami Beach’s staff and resources, that same process takes nearly a year, Mr. Curnin said.

    This frenetic run-up is also causing some in the city, including Barry Sternlicht of Starwood Capital Group, to pause:

    “Everyone and their cousins are looking to build a building here,” he said. “I’m getting nervous.”

    Miami has historically always been a boom and bust kind of market. I don’t know if this is one of those times, but there’s clearly no denying the allure of palm trees, warm winter weather, and no state income tax.

  • What might Toronto learn from this infill rental project in Tokyo

    This is a lovely little infill rental project in Tokyo by ETHNOS (architect) for Real Partners (developer):

    The building is 4 storeys plus a rooftop terrace. From the plans, it looks like there are 8 units, all of which are two-storey suites.

    The A and B suites are accessible from the ground floor. For the A suites, you enter at grade, and then go down into the first basement level. And for the B suites, you enter at grade and then go up to your second level. One of the entrances (suite B-3) is via an exterior walkway.

    The middle of the ground floor is the lobby entrance and there’s a single elevator that services the second and third floors (it then drops off for the fourth floor). On the second level is a co-working space, and so the upper C suites (these sound fancy) are all accessible from the third floor.

    The fourth floor and fifth floor terraces are all accessible from within the C suites, which means that the only real common area corridors in this building are on the third level. And it looks like they wanted this particular corridor to have a view to the street, because they could have easily reduced it even further to increase the building’s overall efficiency.

    What is also interesting to look at this building’s dimensions. Based on the above section, the floor-to-floor heights are 2500mm, which is low compared to the 2950/3000mm that is typically used here in Toronto for new reinforced concrete builds.

    In terms of the overall building, it is only about 10m deep and it is less than 10m tall if you exclude the stair popups on the rooftop terraces. For context here, our Junction House lot is about 30m deep and the build is about 30m tall, so actually a similar kind of box proportion.

    But let’s scan more of Toronto.

    If you move away from designated “Avenues” (which is where Junction House sits) and look at some of our other major streets (which is something the City of Toronto is in fact doing), you can sometimes/oftentimes find even deeper lots.

    Below is a random area that I quickly panned too on Dufferin Street — these single-family house lots are around 36m deep:

    Now obviously Toronto is not Tokyo and Tokyo is not Toronto. But my point with all of this was to demonstrate just how much space we actually have within our existing boundaries, should we ever feel the need to increase our overall housing supply.

    As I have argued many times before, I think one of the greatest opportunities to quickly do this sits along our majors streets.

    Architectural drawings: ETHNOS

  • Artificially low property taxes

    A blog reader responded to yesterday’s post about rent controls (and inclusionary zoning) with an excellent point: If you’re against rent controls, then you must also be against artificially low property taxes for homeowners. And I would agree with this.

    One of the points I was trying to make yesterday was that if you’re in a situation where your revenue is capped but your operating expenses are free to grow based on the market, then you are likely heading down an unsustainable financial path.

    This is true if the revenue is in the form of rent and this is true if the revenue is in the form of property taxes. A good example of this is California’s Proposition 13, which is the principal thing that keeps property taxes artificially low over on that coast.

    Similar to what I argued yesterday with rent controls, it too creates a misallocation of housing. If you’re sitting on historic and artificially low property taxes, then you are now highly incentivized to stay put where you are. Why would you move only to have your taxes mark to market?

    So this line of thinking cuts both ways, whether we’re talking about renters or homeowners.

  • Rent control and inclusionary zoning

    I received an email from a reader over the weekend saying that my comments around rent control have been too critical, and that they are not doing proper justice to the challenges that renters face in today’s cities. I thought this was a fair comment and so I’d like to respond to it publicly on the blog.

    But before I get into that, it’s worth saying that housing issues are incredibly complex. And I am certainly not professing to have all of the answers. In fact, part of the reason I write this blog is so that I can think critically about these topics and hear what other people have to say.

    It is obvious that wages have not kept pace with home prices in many cities around the world. This is a problem. And so we can all agree that we need more economic opportunities, we need more housing, and we need more attainable housing. The question is how best to go about this.

    Mechanisms like rent control and inclusionary zoning might seem like obvious solutions. Just cap rents and force developers to build affordable housing. Problem solved at no cost to anyone, right? It’s not that simple. Every intervention creates distortions in the market.

    To give just one example, studies suggest that rent controls end up creating a misallocation of housing. Because if you are living in a rent controlled home and your rent is well below market, you are now heavily incentivized never to move. Even if you have an empty nest with 5 bedrooms, why would you?

    Of course, there are other possible repercussions. Residential contracts are typically gross leases (though some utilities might be sub-metered and paid for by the tenant). This is in contrast to commercial leases where net leases are common and most, if not all, of the operating costs are passed through to the tenant.

    Why this matters is that if your rents are capped but your utility costs, taxes, and other operating expenses are continuing to rise, you may run into a situation as a landlord where you can no longer afford to upkeep your building. And you’re certainly not going to invest in any new improvements if this is your situation.

    Rent controls could also impact the supply of new housing by making it no longer feasible to build. This is similar to what we have seen with policies like inclusionary zoning. Just last month San Francisco went on the record saying that it’s going to rethink its inclusionary zoning policies because of a view that it is now choking off new housing supply.

    And so herein lies one of our great housing challenges. We want more housing and we want more affordable housing. But depending on how we approach the latter, it could hurt the former, which ends up creating a viscous cycle.

    Building new rental housing is very challenging in Toronto (and elsewhere). Typically the way the process goes for a developer is that you start by preparing a detailed development pro forma. This pro forma will then tell you that your new rental development is infeasible. And so you go back, convert it to a condominium development, and then it magically becomes feasible.

    I am exaggerating, but only slightly. The point is that there are lots of developers out there who would love to build more rental housing — they just can’t make the math worth.

    My goal with this post was to explain where I have been coming from with some of my past comments. I also used the opportunity to link to a number of my related posts. But I haven’t really put forward any possible solutions. I plan to do that in a follow-up post, and I think I’m going to call it “the definitive but crazy guide to creating more affordable housing.”

    So if any of you have any crazy ideas, please send them over.

  • Finally — garden suites are now permitted in Toronto

    Some of you might remember that Toronto City Council approved new garden suite policies earlier this year. Garden suites (also known as accessory dwelling units) are kind of like laneway suites but without the adjacent lane.

    Unfortunately, these new policies were subsequently appealed by a group of Resident’s Associations, and so they haven’t been in force. Thankfully, the Ontario Land Tribunal has just dismissed this appeal:

    What this means is that, as of today, you’re now free to build a garden suite in the City of Toronto. So hire an architect and file for a building permit — it’s go time. If you need any referrals, please feel free to reach out.

    The Ontario Land Tribunal is often criticized for its ability to overrule local communities on land use matters such as these. But this is a good example of why it is needed and why it is important to have some kind of neutral arbitral.

    Because these sorts of decisions should not be based on what any one individual or group thinks; these decisions should be based on what makes for good planning and what makes the most sense for the broader city and region.

    Invariably, this is going to piss some people off. But in my mind, it’s kind of like that asshole teacher you used to have. Sure, you hated him/her at the time, but in retrospect you end up appreciating what they were trying to do to help.

    This could be a bad analogy.

  • San Francisco is kind of on the verge of abolishing single-family zoning

    The headline sounds pretty promising: San Francisco is on the verge of abolishing single-family zoning, and will soon allow 4-plexes across the city and up to 6 units on corner lots. It is also clear recognition that, “hey, we have a housing problem and should probably figure out a way to increase overall supply.”

    Unfortunately, when you look at the policy details, you’ll see that this is likely to be more symbolic than effective. What is being proposed is to take the 40% of San Francisco’s land area that is zoned exclusively for single-family houses and upzone it to allow for duplexes on an as-of-right basis.

    And then, if you happen to have owned the property for at least 5 years — or inherited it from a family member that did — you can apply for a special “density exception” from the city. This would allow you to build 6 units on corner lots and 4 units on all remaining mid-block lots.

    But here’s the other thing: if you are granted this density exception, the additional units (beyond your as-of-right two) will be subject to rent control. So the important question here is about whether or not anyone will end up building more than luxury duplexes and, if they do, will there be enough scale to produce a meaningful impact.

    I’m not familiar with development cost structures in San Francisco and I’m not sure if there will be any incentives/subsidies for delivering these additional rent controlled units, but the above feels like far too many barriers if the goal is more housing.

    But it remains a step in the right direction. Symbolism certainly has its merits.

    For other posts on infill housing, click here.

    Photo by Braden Collum on Unsplash

  • Mid-market missing middle housing in Victoria

    I am a big fan of Victoria-based developer Aryze. And their Pearl Block project is a good example of why. Developed on an awkward triangular lot that had been sitting vacant for nearly 65 years and that presumably every other developer had been overlooking, the project brought six family-oriented townhouses to the Oaklands neighborhood of Victoria, BC.

    Each of the towns has 3 bedrooms. Each has a living room facing the street (but with privacy from the neighbor). Each has a large rooftop deck (with 5 foot parapet walls so no kids fall over). And according to the developer, each sold for less than the average price of a single-family home in the Oaklands area. Not surprisingly, the project also won all sorts of awards.

    It is a great example of the kind of beautiful and mid-market missing middle housing that so many of us are always talking about. Why build 1 home when you can build 6? Why build 6 homes when you can build 18? Still, there remains far too many obstacles in the way of any sort of housing that doesn’t conform to the status-quo:

    It shouldn’t be this difficult. And it shouldn’t take this long. Actually, let me rephrase this. It can’t be this difficult and it can’t this long; that is, if we’re expecting to actually come close to meeting the demand for new housing. There is no great mystery as to why the missing middle is, you know, missing. We made it that way.

    Keep up the great work team Aryze.

    Photography: Ema Peter via D’Arcy Jones Architects

  • Zoning controls, sprawl, and housing affordability

    Maybe it’s confirmation bias, but I continue to feel like there is a groundswell of interest in trying to improve housing supply and overall affordability. The YIMBY movement continues to gain steam. Here are are few excerpts from a recent M. Nolan Gray article where he calls for an end to zoning as we know it today:

    In nearly every major U.S. city, apartments are banned in at least 70 percent of residential areas. San Jose prohibits apartments in 94 percent of its residential areas. The most a developer can build in these zones is a detached single-family home.

    The results speak for themselves. Houston builds housing at 14 times the rate of peers like San Jose. And it isn’t just sprawl: In 2019, Houston built roughly the same number of apartments as Los Angeles, despite being half its size. Since reforms to minimum-lot-size rules were put in place in 1998, more than 25,000 townhouses have been built, overwhelmingly in existing urban areas.

    To be clear, Houston has made its share of planning mistakes. But, free of zoning, the city can constantly remake itself. That Houston is now one of the most affordable and diverse cities in the country is no accident.

    The relationship between housing affordability and constraints on development is a well-documented one. If you want more affordable housing, you generally want fewer, rather than more, constraints on delivering new housing.

    But as I was reading through the article, I couldn’t help but think more specifically about the relationship between sprawl and affordability. Because it is also true that, for a variety of reasons, the former has tended to help the latter (or at least coincide with it), which is why Gray felt it was important to say “and it isn’t just sprawl” when talking about Houston.

    Part of this relationship has to do with the fact that expansionist development tends to be of the low-rise stick-built varietal, which is a relatively cost effective way to build. Whereas the higher density infill stuff tends to be built using more expensive materials like reinforced concrete. But of course there are many other factors at play, including lower land costs.

    So I think one really interesting question is this one here: To what extent could we break this relationship between sprawl and affordability with what Gray is advocating for? In other words, how cheap could we make new infill housing in our older cities if we were to greatly loosen zoning controls or possibly even remove them all together?

    I don’t know the exact answer, but I know that directionally it would be better.

  • What kind of monster wants to bulldoze wild roses?

    I just finished reading this article by Nellie Bowles about how San Francisco became a failed city. Here’s an excerpt that relates to housing supply:

    Consider the story of the flower farm at 770 Woolsey Street. It slopes down 2.2 acres in the sunny southern end of the city and is filled with run-down greenhouses, the glass long shattered—a chaos of birds and wild roses. For five years, advocates fought a developer who was trying to put 63 units on that bucolic space. They wanted to sell flowers there and grow vegetables for the neighborhood—a kind of banjo-and-beehives utopian fantasy. The thing they didn’t want—at least not there, not on that pretty hill—was a big housing development. Who wants to argue against them? In San Francisco the word developer is basically a slur, close to calling someone a Republican. What kind of monster wants to bulldoze wild roses?

    Decades of progressive governance in San Francisco yielded a thicket of regulations—safety reviews, environmental reviews, historical reviews, sunlight-obstruction reviews—that empower residents to essentially paralyze development. It costs only $682 to file for a discretionary review that can hold up a construction project for years, and if you’re an established club that’s been around for at least two years, it’s free. Plans for one 19-unit-development geared toward the middle class were halted this year because, among other issues raised by the neighbors, the building would have increased overall shadow coverage on Dolores Park by 0.001 percent.

    These are just two examples of San Francisco’s exclusionary zoning problem, but of course, the city has other unfortunate things going as well. For the full article, click here.