As some of you know, I take a French class one evening every week. I have chosen to go in person, but apparently the majority of students enrolled at the school, don't. They do it online, which is obviously easier for everyone. Call me old school, but I prefer being in a classroom, especially when trying to learn and perfect a language.

I was reminded of this as I read through this recent article by Alain Bertaud. Alain is perhaps best known for his book, Order without Design: How Markets Shape Cities, and so it's no surprise that he would write an article praising the randomness of cities. In it, he talks about how it is, of course, possible to never leave home. Meetings, food, entertainment, and exercise all happen online.

This is convenient and all, but:

Randomness makes city life exciting and productive, and how we design cities can multiply or reduce the chances of serendipitous encounters of people and ideas. Creativity and innovation, two of the most desirable traits of metropolitan environments, depend on unplanned meetings between people of different skills, tastes, and backgrounds.

So here's to leaving home, sometimes.

Urbanist Alain Bertaud -- who is author of Order without Design -- was recently in Vancouver for a talk about planning and housing matters.

One of the things that he argued, according to The Hub, was that Vancouver "cannot complain about high housing prices and, at the same time, drastically limit the amount of land available [for development]."

This should be an obvious thing. But then again, many people seem to believe that housing follows its own unique set of rules when it comes to supply and demand. So let's look at some basic math to illustrate what it means to, not even stop or limit development, but just slow it down a little.

Consider a development site that yields 300,000 sf of gross floor area. If I were to pick a number out of the air and apply a land price of $175 per buildable square foot, this is a site worth $52.5 million.

In today's environment, a land or acquisition loan for a site like this might come with a 50% LTV and an interest rate of 10%. What this means is that in a simple interest-only scenario, the annual debt service on this loan would be around $2.6 million ($52.5 million x 50% x 10%).

Now let's think of this on a per suite basis. Assuming an efficiency of 80%, 300,000 sf of GFA might equal 240,000 sf of saleable/livable area. Divide that by an average suite size of 625 sf, and you end up with 384 new homes on this piece of land.

If you now divide the debt service by this many homes, you get to an annual land loan debt service cost of approximately $6.7k per home. This means that if it takes two years to start construction (and take out the land loan), that's about $13.5k of land interest costs per home.

Of course, if the approvals process takes even longer, this cost goes up. Let's say that it gets decided that a "community working group" should be formed in order to further consult the community on the impacts of this proposed development.

If this adds another year to the timeline, you now have an over $20k bill per home just to cover the land loan interest. And this does not just get magically "absorbed", it needs to be added to the cost of the new home.

This also does not include the cost of the actual construction loan, or any of the other hundreds of costs associated with building new housing.

Obviously this is one of the costs of doing business. It is what developers sign up for when they look to build new housing. But I think it's important to remember that limiting development, or even just slowing it, has real financial implications: it makes housing more expensive than it needs to be.

A few months ago I wrote about an upcoming book by Alain Bertaud called, Order without Design: How Markets Shape Cities. Well the book has just come out and CityLab just did an interview with him. 

Bertaud has worked all around the world from Yemen to China and his experiences, particularly in places that were transitioning to market economies, lend an interesting perspective.

I like this bit on designing in China:

I quickly realized that if you do not have prices to guide you, you end up relying on arbitrary norms. For example, in China, the central government decided that every home must have one full hour of sunshine each day. So you would plug in the height, latitude, and angle of the sun at winter solstice for your site, and that would formulaically spit out the permitted density of housing.

And I like the comparison he makes between food and housing supply:

I compare it to food: You can’t solve a famine by simply mandating that everyone eat 2,000 calories a day. That’s absurd. You have to bring in more food. In the same way, cities like San Francisco have to increase the supply of floor area, and let consumers determine the size of units.

So I just ordered a copy of his book. 

For the rest of his interview with CityLab, click here.

As some of you know, I take a French class one evening every week. I have chosen to go in person, but apparently the majority of students enrolled at the school, don't. They do it online, which is obviously easier for everyone. Call me old school, but I prefer being in a classroom, especially when trying to learn and perfect a language.

I was reminded of this as I read through this recent article by Alain Bertaud. Alain is perhaps best known for his book, Order without Design: How Markets Shape Cities, and so it's no surprise that he would write an article praising the randomness of cities. In it, he talks about how it is, of course, possible to never leave home. Meetings, food, entertainment, and exercise all happen online.

This is convenient and all, but:

Randomness makes city life exciting and productive, and how we design cities can multiply or reduce the chances of serendipitous encounters of people and ideas. Creativity and innovation, two of the most desirable traits of metropolitan environments, depend on unplanned meetings between people of different skills, tastes, and backgrounds.

So here's to leaving home, sometimes.

Urbanist Alain Bertaud -- who is author of Order without Design -- was recently in Vancouver for a talk about planning and housing matters.

One of the things that he argued, according to The Hub, was that Vancouver "cannot complain about high housing prices and, at the same time, drastically limit the amount of land available [for development]."

This should be an obvious thing. But then again, many people seem to believe that housing follows its own unique set of rules when it comes to supply and demand. So let's look at some basic math to illustrate what it means to, not even stop or limit development, but just slow it down a little.

Consider a development site that yields 300,000 sf of gross floor area. If I were to pick a number out of the air and apply a land price of $175 per buildable square foot, this is a site worth $52.5 million.

In today's environment, a land or acquisition loan for a site like this might come with a 50% LTV and an interest rate of 10%. What this means is that in a simple interest-only scenario, the annual debt service on this loan would be around $2.6 million ($52.5 million x 50% x 10%).

Now let's think of this on a per suite basis. Assuming an efficiency of 80%, 300,000 sf of GFA might equal 240,000 sf of saleable/livable area. Divide that by an average suite size of 625 sf, and you end up with 384 new homes on this piece of land.

If you now divide the debt service by this many homes, you get to an annual land loan debt service cost of approximately $6.7k per home. This means that if it takes two years to start construction (and take out the land loan), that's about $13.5k of land interest costs per home.

Of course, if the approvals process takes even longer, this cost goes up. Let's say that it gets decided that a "community working group" should be formed in order to further consult the community on the impacts of this proposed development.

If this adds another year to the timeline, you now have an over $20k bill per home just to cover the land loan interest. And this does not just get magically "absorbed", it needs to be added to the cost of the new home.

This also does not include the cost of the actual construction loan, or any of the other hundreds of costs associated with building new housing.

Obviously this is one of the costs of doing business. It is what developers sign up for when they look to build new housing. But I think it's important to remember that limiting development, or even just slowing it, has real financial implications: it makes housing more expensive than it needs to be.

A few months ago I wrote about an upcoming book by Alain Bertaud called, Order without Design: How Markets Shape Cities. Well the book has just come out and CityLab just did an interview with him. 

Bertaud has worked all around the world from Yemen to China and his experiences, particularly in places that were transitioning to market economies, lend an interesting perspective.

I like this bit on designing in China:

I quickly realized that if you do not have prices to guide you, you end up relying on arbitrary norms. For example, in China, the central government decided that every home must have one full hour of sunshine each day. So you would plug in the height, latitude, and angle of the sun at winter solstice for your site, and that would formulaically spit out the permitted density of housing.

And I like the comparison he makes between food and housing supply:

I compare it to food: You can’t solve a famine by simply mandating that everyone eat 2,000 calories a day. That’s absurd. You have to bring in more food. In the same way, cities like San Francisco have to increase the supply of floor area, and let consumers determine the size of units.

So I just ordered a copy of his book. 

For the rest of his interview with CityLab, click here.