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

  • Never too small, until you get an inset bedroom without a window

    Never Too Small remains one of my favorite YouTube channels. And I have written about their videos before on the blog. The homes that they feature on their channel are generally below 600 square feet or so, and most of them are well below this mark. Some have even been designed for young families.

    One of the common strategies that you’ll see with small floor plans is that the bedroom is often reduced to only what is necessary for sleeping and it is often inset within the home, away from any exterior glass. As an example, here are before and after screenshots from a 318 sf apartment in London (link to video).

    Before:

    After:

    In this case, the bedroom was pulled away from the apartment’s bay window and a small mezzanine level was created. This makes a lot of sense since the bay window is kind of a main feature — one that, I think, is better reserved for a primary living space. They also flipped the kitchen up against the other window, rescuing it from the bowels of the apartment.

    If I had been the one tasked with redesigning this apartment, this is a floor plan that I could see myself landing on. But here’s the thing. All things being equal, I think most people would prefer a bedroom with a window. And even when all things aren’t equal, a lot of people seem willing to compromise on their main living space so that they still get one (see before plan).

    So before you go ahead and watch the NTS video, I’m curious: Which do you prefer? Would pick the before plan or the after plan given these two options?

  • Toronto proposes at 49% increase to development charges

    The big news this week for Toronto city builders is that the city has put forward a proposal to substantially increase development charges. Here’s a tweet storm that I published earlier today on the topic, and here’s a summary of what the new fees might look like:

    To translate this into a specific example, let’s assume that you’re building a 300 unit apartment building with 180 one bedroom suites and 120 two bedroom suites.

    Under these proposed DC rates, this would translate into charges of about $9.6mm for the one bedroom suites and $9.8mm for the two bedroom suites, totaling over $19.4mm in DCs alone. But keep in mind that there would be other charges on top of this for parkland dedication, community benefits, and a bunch of other things.

    When our cost consultant ran the numbers back in 2019, the estimate was that about a quarter of the price of a new condominium in Toronto was going to government fees and taxes. But with the above increase and with the introduction of policies like inclusionary zoning, I am sure that the number is higher today.

    These are easy fees to hide. Most people don’t know they exist. And a lot of people don’t seem to like new development and new housing. Property taxes on the other hand are highly visible and highly sensitive. So that tax tends to be left alone, especially by comparison.

    But these increases are hugely impactful. It means that developers across the city will now need to start looking at increasing rents and prices in order to try and offset it. If they can’t, they won’t build. And if they can, it will mean that the housing that does ultimately get built will be that much more expensive.

  • Over $26 trillion in US homeowner equity

    Last year was a pretty good year for people who own a home in the US (or in Canada and many other places). Current estimates peg the total value of US residential real estate at somewhere around $40 trillion.

    But of course, a lot of this real estate has debt on it. The Federal Reserve considers this in their calculation of “homeowner’s equity,” and so the net number, as of the end of last year, was just over $26 trillion (see above chart). This is up from about $10 trillion in 2012, following the financial crisis.

    Not surprisingly, a lot of these gains are accruing to a pretty specific demographic. According to City Observatory, about 67% of residential real estate in the US is owned by non-Hispanic white people. And about 44% of owners are 55 years or older.

    Oddly enough, this also happens to be a demographic group with a disproportionate say over the kind of new housing that we’re allowed to build in our cities. Scarcity is a very good thing when you already have and own some.

  • A mapping of US rental housing rents, scraped from Craigslist

    This is an interesting way of seeing rental housing rents (national scale). And there’s a lot that you can glean from a mapping like this. But it’s also interesting in that what you are seeing here is a visualization of some 11 million Craigslist rental housing listings (taken from this study). The authors refer to it as a “nontraditional source of volunteered geographic information”, and they argue that it’s probably more granular and real-time than what is typically available when it comes to rental housing. That sounds right to me.

  • [Video] Are NIMBYs selfish?

    Peter Baugh tweeted this out on Monday. Essentially, he attended a community meeting for a new housing project in his neighborhood. He spoke in favor of the proposed development. And was then accused of being a developer shill. His comments were subsequently no longer allowed at this “public” meeting. I mean, how could anyone possibly be in favor of new urban housing? Surely he must be a developer “plant.”

    This is wrong, disappointing, and a whole host of other unsightly things. So today I thought I would share a recent City Beautiful video that asks: “Are NIMBYs selfish?” I have shared Dave Amos’ videos before. He’s an assistant professor of city planning at Cal Poly and a well known YouTuber. And I think this video does a great job explaining some of the tensions and trade-offs at play when it comes to development, particularly infill development.

    But as Dave clearly explains in the video, he is not a neutral actor when it comes to this topic. His view is that, yes, NIMBYs are selfish.

  • Destructive development?

    Planner Sean Hertel shared this (embedded above) on Twitter over the weekend. It is a lawn sign from Toronto’s Junction neighborhood that is calling for a stop to demolishing family houses for high rises.

    From what I can tell, this law sign is trying to communicate a few key messages.

    One, high-rises are monstrous beings that enjoy praying on innocent low-rise houses and squashing them with their feet, and sometimes their asymmetric hands.

    Two, it is mostly impossible to conceive of a world in Toronto where families live in high-rises and don’t live in grade-related housing with a backyard.

    And three, there is little value in building more, rather than less, housing in order to help with affordability concerns. Perhaps the thinking is that it needs to be low-rise affordable housing, or nothing.

    With all of this said, let’s do a little thought exercise today on the blog.

    Let’s for a second assume that there aren’t any high-rises proposed in the Junction; only European-scaled mid-rise buildings that sit on the area’s main avenues and back onto low-rise single-family neighborhoods. Let’s also assume that these buildings will be sculpted in complete deference to their rear neighbors so that things like shadows are minimized.

    Let’s assume that more housing is better than less housing.

    Finally, let’s assume that, get this, noble families may actually be able to live in mid-rise and high-rise buildings. And that there are already many successful examples of this taking place in the city, such as over here in CityPlace.

    What key messages would this lawn sign be then communicating?

  • Zoned housing supply vs. actual housing supply

    This Twitter thread by UC Davis Law Professor, Chris Elmendorf, is a good reminder that there can be a meaningful difference between actual completed homes and zoned land that might one day becoming new housing.

    The point he makes is as follows: The state of California’s housing needs allocation for the city of San Francisco is approximately 80,000 new homes over the next decade. In the past, cities could demonstrate that they were able to meet these targets through, as I understand it, some fairly loose assumptions. But more recently, amendments have made it such that the probability of new homes actually getting built needs to be considered.

    San Francisco has been doing this and, according to Chris, the conclusion was that the city should upzone portions of the city — primarily on the west side — to allow for some 22,000 new homes. Sounds cool. But as part of this process, the city also hired an outside consultant to run indicative pro formas and assess overall development feasibility. This is what they found:

    I haven’t seen any of the actual numbers, but what this chart is saying is that nobody is going to develop on the west side of the city no matter what entitlements you put in place (tier 3 and tier 4 market areas). The only new development that is likely to take place is high-rise development over 24 storeys in the highest value submarkets (tier 1 and tier 2 market areas).

    Based on this, the 22,000 new homes figure is probably closer to 0 new homes.

  • Miami rents increased 55.3% on a year-over-year basis

    All of the talk of people moving to Miami over the last two years is certainly coming through in the numbers. According to this recent rental report by Realtor.com, residential rents in the Miami-Fort Lauderdale-West Palm Beach metro area increased 55.3% on a year-over-year basis (as of February 2022). And the next 2 metro areas on the list are also in Florida. This is compared to a 17.1% increase for national rents, which is quite a bit lower, but still a massive increase. These are clearly unsustainable numbers and eventually things will settle down. How exactly things settle down is yet to be determined. But for right now, the above figure feels to me like a pretty good answer to the following question: If you had the flexibility to work from anywhere, where would you go? Somewhere sunny, I guess.

  • Location always matters

    Well this is interesting, yet not surprising: According to RBC’s annual “Home Ownership Poll”, three out of every five respondents (so nearly 60%) said that location is more important than buying a larger home. Now, there’s only so much you can glean from a single survey question, but the overarching sense is that people’s home-buying attitudes are now starting to revert back to pre-pandemic levels.

    Other evidence includes how quickly urban residential rents/prices have bounced back and, in many cases, now exceed their pre-pandemic levels. Below is a chart from the WSJ showing residential net-effective median rent prices in Manhattan. The low came in November 2020 when the median rent price hit $2,743 per month. But today it is well over $3,500, which is the highest it has been in a decade.

    Certain aspects of how we will continue to live and work in our cities is admittedly still evolving (see my recent post on office utilization). But part of our pandemic narrative was that location was no longer going to matter, or at least not matter nearly as much. New York City, to give just one example, had died forever. But that was obviously bullshit. And what we are seeing in the residential space is an important leading indicator. Location always matters.

  • The great housing supply debate continues

    The great housing debate continues: Are we building enough housing, or are we not?

    Right now the media is talking about a new report from the Union of B.C. Municipalities, which is claiming that cities in British Columbia are actually building enough housing to keep pace with population demand.

    Between 2016 and 2021, the province’s population grew by 7.6% and the number of new dwellings grew by 7.2%, according to the report. So supply appears to be lining up with demand.

    One problem with this robust analysis is that many people, including the Housing Minister, don’t agree. Here’s an excerpt from the Globe and Mail:

    “The overly naive analysis comparing housing to population growth to declare the adequacy of our housing supply fails to understand that housing and population growth are intimately related,” said statistics analyst Jens von Bergmann, a regular decoder of housing statistics for Vancouver and Canada. “It’s a slap in the face of those who have been pushed out, or those who failed to move here, because of the unavailability of housing.”

    And on a related note, here is a recent piece by Shawn Micallef (Toronto Star) talking about why the left can’t get Toronto’s housing right.