Many years ago I was in a community meeting talking about a proposal we had to add retail uses adjacent to a park. Residential was the highest and best use, but we were excited by what retail could do for the project and area. We were imagining something like a Parisian cafe where everyone would sit facing outward toward the park.

Much to our surprise, the community was vehemently opposed. And when we eventually asked who had been to Europe and sat outside in a nice cafe, the response we generally got was, "yeah, we have, and it's obviously nice there, when on vacation. But that's Europe. It won't work here and it's not appropriate for the area."

Hmm. This raises all sorts of interesting questions. But for today, let's ask this one here: Why is it that some people choose to live in places that are so different than the ones they visit when on vacation?

Is it because we, as humans, want fundamentally different experiences when we travel? i.e. We want to escape from our current reality. "Oh look how novel this is." In this case, I guess you could say that our markets are fairly efficient and people are getting the kind of lifestyles that they truly want, both at home and abroad.

Or, is it because, for a variety of reasons, we've created rules and obstacles that force certain built form outcomes? We think the other ways won't work. I often find myself in this latter camp, meaning that when I travel, I at some point end up thinking: "This is a good idea. I want to both move here immediately, and steal this idea and bring it back to Toronto."

How about you?

Photo by DAT VO on Unsplash

Average condo prices in the City of Toronto are up about 150%. But...

Land costs are up 160%.

Soft costs are up 118%.

Construction and related costs are up 91%.

Financing costs are up 93%.

Government fees, charges, and taxes are up 413%.

And development charges (a subset of the above) are up 3,244%!

At the same time, the profit margin over costs is down about 45%.

(As a point of comparison, CPI only increased by about 26.5% during this same time period.)

The point here is that condos are so %@$#$! expensive largely because of cost-plus pricing. Government fee increases are also outpacing every other cost bucket.

If you're developing new housing in Toronto, you have no choice but to accept these rising costs. You have to pay development charges and you have to pay them when you're told, even if that means swallowing some new massive increase.

So by necessity, end prices get continually pushed as a way to try and absorb these costs. You figure out what your costs are going to be and then you price accordingly. But of course, you also have to ask yourself: Can people actually afford this kind of pricing and can this neighborhood support it?

Sometimes the answer is yes, which is why development continues. But sometimes the answer is no. In this case, the next step is simple: you don't build.

Many years ago I was in a community meeting talking about a proposal we had to add retail uses adjacent to a park. Residential was the highest and best use, but we were excited by what retail could do for the project and area. We were imagining something like a Parisian cafe where everyone would sit facing outward toward the park.

Much to our surprise, the community was vehemently opposed. And when we eventually asked who had been to Europe and sat outside in a nice cafe, the response we generally got was, "yeah, we have, and it's obviously nice there, when on vacation. But that's Europe. It won't work here and it's not appropriate for the area."

Hmm. This raises all sorts of interesting questions. But for today, let's ask this one here: Why is it that some people choose to live in places that are so different than the ones they visit when on vacation?

Is it because we, as humans, want fundamentally different experiences when we travel? i.e. We want to escape from our current reality. "Oh look how novel this is." In this case, I guess you could say that our markets are fairly efficient and people are getting the kind of lifestyles that they truly want, both at home and abroad.

Or, is it because, for a variety of reasons, we've created rules and obstacles that force certain built form outcomes? We think the other ways won't work. I often find myself in this latter camp, meaning that when I travel, I at some point end up thinking: "This is a good idea. I want to both move here immediately, and steal this idea and bring it back to Toronto."

How about you?

Photo by DAT VO on Unsplash

Average condo prices in the City of Toronto are up about 150%. But...

Land costs are up 160%.

Soft costs are up 118%.

Construction and related costs are up 91%.

Financing costs are up 93%.

Government fees, charges, and taxes are up 413%.

And development charges (a subset of the above) are up 3,244%!

At the same time, the profit margin over costs is down about 45%.

(As a point of comparison, CPI only increased by about 26.5% during this same time period.)

The point here is that condos are so %@$#$! expensive largely because of cost-plus pricing. Government fee increases are also outpacing every other cost bucket.

If you're developing new housing in Toronto, you have no choice but to accept these rising costs. You have to pay development charges and you have to pay them when you're told, even if that means swallowing some new massive increase.

So by necessity, end prices get continually pushed as a way to try and absorb these costs. You figure out what your costs are going to be and then you price accordingly. But of course, you also have to ask yourself: Can people actually afford this kind of pricing and can this neighborhood support it?

Sometimes the answer is yes, which is why development continues. But sometimes the answer is no. In this case, the next step is simple: you don't build.

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