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

  • Nelson, BC is running a laneway house design competition

    The City of Nelson, BC — which happens to be the launching pad for some of the best snowboarding in the world — is currently conducting a laneway house design competition. The objective is to come up with a set of “pre-reviewed” design options that homeowners can then purchase and build themselves. Here’s more about what they’re trying to achieve:

    The objective is to provide easy access to high-quality designs and code-compliant plans that strike the right balance between affordable construction and ecologically-sound design. They will be plans designed for Nelson, offering exceptional value-for-money for homeowners and making it easier for them to build a laneway house on their property. The contest evaluation criteria emphasise (sic) adaptability to various lots and topographies.

    Three designs will be selected, as well as a “people’s choice award.” Payment for a winning design will come in the form of a monetary prize and a $1,000 royalty each time the design is purchased by a homeowner. I’m not sure how many houses there are in Nelson, but I would imagine there are enough to make this a worthwhile exercise.

    I also think this is a good approach to making laneway housing more accessible to homeowners. The simpler they are to build, the more housing we will see. Nelson clearly understands that. If you’d like to submit, you have until September 2, 2019. More details, here. Apologies for the short notice.

    Thank you to Mason Studio for sharing this competition with me.

  • Personalizing outdoor spaces on multi-family buildings

    I am still making my way through (and editing) my photos from Lisbon and Malaga. Here is one that I took from the Playa de La Malagueta. I also posted it to Twitter and Instagram and asked: Should we encourage the personalization and customization of outdoor spaces on multi-family buildings?

    This building overlooks the beach and the Alboran Sea. If you look closely, you’ll see that a number of the balconies have been modified to include different kinds of awnings and shade structures. And some look to have been converted to interior space.

    A few of you seem to support this level of customization, provided that the overall design integrity of the building is maintained. And I would agree that in this particular instance, it seems to work, which is actually why I took the photo. It gives the facade life.

    I recall seeing instances of this in Toronto, but generally speaking it’s not encouraged or allowed. In condominiums, outdoor spaces attached to units are typically defined as “exclusive-use common elements.”

    The challenge, here, lies in the subjectivity of “maintaining the overall design intent of the building.” I’m not sure how you codify that, unless you pre-design the options. Perhaps that’s one way of doing it.

  • Tiny, prefabricated, and expensive

    This is not a new video (click here if you can’t see it embedded above). It’s from 2015. But I still very much like the simplicity of the Vipp Shelter. It’s only 55 square meters.

    One problem is that it cost USD 585,000 at the time it was prefabricated. It goes to show you that prefabrication and small don’t necessarily equate to affordability. For this reason, Lloyd Alter called it a “problematic prefab” back in 2015.

    Of course, there are ways to make a home like this much more cost effective. I’ve been looking, on and off, for over a year for a piece of land that would be suitable for a project like this. I’ll let you all know if I find something.

  • Why Phoenix is ground zero for algorithmic home buying

    I have been writing about algorithmic home buying on the blog since Opendoor launched back in 2014.

    I don’t have anything new to report on that today, but this recent article from the WSJ is interesting in that it talks about why Phoenix, in particular, has become ground zero for algorithmic home buying, as well as for institutional investors looking to buy cheap rentals.

    Across Opendoor, Offerpad, and Zillow, nearly 500 homes are now being purchased — largely by software — in Phoenix each month:

    One of the reasons why Phoenix is well suited to these platforms is that the housing stock is cheap and fairly homogenous. (The WSJ calls it “stucco sprawl.”) This makes it easier for the algorithms to put a value on the homes.

    A big chunk of the housing stock is also relatively new. Just over 36% of it was built in 2000 or later. And it tends to trade fairly often. Below is the percentage of homes in 2018 that were resold within a year of purchase.

    It’s also worth noting that Arizona is a non-recourse state, meaning you’re typically not personally liable if you default on your home mortgage. You simply hand back the keys. So it’s viewed as a fairly risk tolerant state, which may be one of the reasons why Phoenix’s median home price chart looks like this:

    I’ll end with this quote from the article: “It’s the dawn of e-commerce for real estate,” said Zillow Chief Executive Rich Barton. “Phoenix is ground zero.”

    Charts: WSJ

  • Berlin approves rent freeze on existing apartment buildings

    Berlin just approved a five year “rent freeze” on apartments in the German capital. The rent caps will be implemented on January 1, 2020, but will apply retroactively to all rental agreements from June 18, 2019 onward (which is when the decision was made). It is estimated that this new law will apply to some 1.5 million apartments.

    The move is in response to rapidly rising apartment rents, which grew about 12% in 2017 alone. So I can appreciate where this is coming from.

    From what I have read, it will not apply to new construction, which is the first thing I checked when I saw the decision. That would have almost certainly choked off any new apartment construction in the city. With a capped top line, it wouldn’t take long for costs to increase and make new rental construction infeasible.

    That said, a similar squeeze is liable to happen for existing buildings. It is one thing to cap rents (revenue), but what about utility, maintenance, labor, and other operating costs (expenses)? As costs rise and operating margins tighten, it can become exceedingly difficult to reinvest in, or even maintain, an apartment building.

    For more on the announcement, here’s an article from FT.

  • Google announces $1 billion investment in housing

    This week, Google announced a $1 billion investment in housing across the San Francisco Bay Area. Here is the blog post announcement by CEO, Sundar Pichai. And here are a couple of paragraphs from the post explaining how this is expected to work:

    First, over the next 10 years, we’ll repurpose at least $750 million of Google’s land, most of which is currently zoned for office or commercial space, as residential housing. This will enable us to support the development of at least 15,000 new homes at all income levels in the Bay Area, including housing options for middle and low-income families. (By way of comparison, 3,000 total homes were built in the South Bay in 2018). We hope this plays a role in addressing the chronic shortage of affordable housing options for long-time middle and low income residents.

    Second, we’ll establish a $250 million investment fund so that we can provide incentives to enable developers to build at least 5,000 affordable housing units across the market.

    In addition to the increased supply of affordable housing these investments will help create, we will give $50 million in grants through Google.org to nonprofits focused on the issues of homelessness and displacement. This builds on the $18 million in grants we’ve given to help address homelessness over the last five years, including $3 million we gave to the newly opened SF Navigation Center and $1.5 million to affordable housing for low income veterans and households in Mountain View.

    Google is not alone in its efforts to improve housing supply in the Bay Area but, according to CityLab, this is “the single largest commitment by a private employer.”

    There’s a lot of debate about the value of housing supply, alone. But in 2017, the Bay Area added 3.5x as many jobs as it did housing. I think most people would agree that’s a suboptimal, and potentially unsustainable, mismatch.

    Also, if large companies such as Google and Microsoft are making these sorts of investments, it is likely that they’re worried about housing unaffordability impacting their ability to attract and retain top talent going forward.

    Perhaps this is a signal for just how unsustainable this mismatch has gotten.

  • San Jose approves 800-unit co-living project

    Earlier this year, an 800 unit co-living project was approved in downtown San Jose. The developer is Starcity. And it is said to be the largest co-living project in the pipeline in the United States right now.

    A few months later (presumably because of this project), San Jose also created a new “co-living” land-use classification. It is similarly thought to be a first for US cities.

    I think it still remains to be seen how broad the market can be for co-living. Do older generations also want to go back to dorm-like living? Or is this a housing solution mainly for twenty-somethings?

    At the same time, it’s not an entirely new housing idea. I like the parallel that Sarah Holder of CityLab draws between today’s co-living and yesterday’s single room occupancy buildings (SROs).

    There are, of course, many differences, including the amount of space dedicated to common areas (the community aspect). But in both cases, part of the value proposition is about affordability.

    Where do you see co-living going?

  • Software developers are half of the homebuyers in San Francisco

    A couple of months ago I wrote about the relationship between IPOs and home prices. It was in response to the current wave of tech companies — most of which are headquartered in San Francisco — that have gone public or are expected to go public this year (2019). What impact will this have on the city’s housing market?

    I cited this academic study on the topic, which already discovered a “positive and significant association between local house price changes and firms going public.” But today I stumbled upon another interesting study by a San Francisco real estate agent, name Deniz Kahramaner, who happens to also be a Stanford-trained data scientist.

    What Kahramaner wanted to figure out was, who tends to buy residential real estate in San Francisco?

    So he started with title data and then scraped the internet to try and match up individual buyer names with specific companies and industries. Since not everyone has some sort of public profile and because real estate is sometimes held within a company, he was only able to traceback about 55% of home purchases in San Francisco last year.

    Still, the data looks pretty clear. About half of the homes bought in 2018 were by individuals whose employment has roots in “software.” The next biggest buyer segment was “finance.”

    The other interesting thing about this data set is that it shows where people have been buying (at least last year). Historically, the north end of the city has been the wealthiest, but the above data shows things moving in a southeasterly direction. Though, it remains to be seen what all of this will look like when the dust settles after this current crop of tech IPOs.

    Chart: The Atlantic

  • The investment case for mid-rise condos

    Shane Dingman’s recent Globe and Mail article about “the investment case for mid-rise condos” is a good summary of why this housing type has become so popular in Toronto.

    Mid-rise buildings tend to attract more end-users because of their boutique scale. That is, they attract people who plan to move into the building once it is built, as opposed to buyers who plan to rent out their unit. We are certainly seeing this with purchasers at Junction House.

    Because of their generally smaller scale and because they are often built in mature neighborhoods with few opportunities for new construction, supply of new mid-rise housing also tends to be limited. That bodes well for future price appreciation.

    Here’s a quote from Shaun Hildebrand (President of Urbanation), taken from the above Globe article. (Sorry, it’s behind a paywall.)

    “Price growth between the two building types [mid-rise and high-rise] began to converge in 2018, and in Q1-2019, buildings under 12 storeys saw average resale prices per square foot grow 10 per cent year-over-year, compared to 6.5 per cent for buildings of 12 or more storeys,” Mr. Hildebrand said. “We may be now entering back into a period of outperformance of mid-rise buildings as the market is shifting.”

  • Low but dense — a missing middle solution for Toronto’s neighborhoods

    Alex Bozikovic (architecture critic for the Globe and Mail) is one of the most vocal proponents of more housing and more density within Toronto’s low-rise neighborhoods. Last year, he organized an international design competition where he asked firms to come up with innovative, yet sensible, solutions for how this could be done. I’m a little late getting to this, but today I’d like to walk you through this immensely clever solution by Batay-Csorba Architects, called Triplex Duplex.

    The project uses two prototypical, but random, semi-detached lots from the Christie & Bloor area of the city. Each one is 18′ wide x 100′ deep. So your typical long and narrow lots. From the street (see above image), it looks highly contextual. But in plan, you begin to see the 3 main volumes of the project emerge. Here’s a ground floor plan from the architect:

    Each volume is around 2,500 square feet. I presume that includes the basement. If you exclude the basement area and the vertical voids throughout the project, which you’re allowed to do in your calculation of gross floor area in residential zones, I suspect we’d arrive at an FSI (density) number that isn’t that much more than what already exist in these sorts of areas.

    At the front of the house (right side of the above plan) is a set of stairs (and a patio) leading down to the front basement unit and a set of stairs leading up to the main front unit. An inset patio also forms part of this main entrance (image below), which is a great way of adding outdoor space while at the same time maintaining privacy across the units. These strategy is one of my favorite aspects of the project.

    The rear units are similarly accessed at the back of the building. And the two middle units are accessed along the side of the house. All in all, this housing typology has the ability to accommodate up to 6 units: 3 main suites and 3 secondary type suites. By the architect’s own estimate, this could result in 147,000 new housing units across the city if every lot occupied by a semi-detached house were to be redeveloped in this way.

    But I wonder if any consideration was given to the secondary (basement) suites that may already exist in these zones. Because in some cases, and as beautiful as these homes may be, we may only be talking about 2 additional suites. Triplexes are also already allowed in some areas of the city. So does this ultimately achieve its intended goal, which is the creation of more “missing middle” housing in order to ease overall housing pressures? Or do we need to be thinking bigger?

    As a follow-up to this post (subscribe to stay connected), I am going to look at what a development pro forma might look like for a project of this scale. The numbers have a way of answering a lot of questions. That said, kudos to Alex for taking on this initiative and kudos to the design team for a pretty spectacular architectural solution.

    All renderings by the talented Norm Li.