The Greater Toronto and Hamilton Area is expected to see 6,821 new rental homes completed this year. This is a "multi-decade high", according to Urbanation's latest rental report. Indeed, you need to go back to the 1970s to get rental supply figures of this magnitude.
A big part of this has to do with the fact that we are now taxing rental housing less. Toward the end of last year, the federal government removed their portion of the HST on new rental housing and, then in November, the province of Ontario followed with theirs.
But there's another reason that many developers are now looking to purpose-built rentals: fewer people are buying new condominiums. And if you can't presell condos, well then you're going to need to find another path forward for your land.
However, flipping over to rental is not necessarily a panacea. The margins are generally razor thin (+/- 50 bps). It requires more and different capital (typically). And you need to believe in some fairly non-consensus assumptions (high rent growth, low cap rates, etc.).
It'll be interesting to see how many developers are able to successfully flip over to rental and how sustained this rental supply number will be.
I came across the above floor plan over the weekend. I reshared it on Twitter and there was then a pretty good discussion about what people like and don't like. I mean, who doesn't like looking at floor plans?
The suite is 790 square feet with 2 bedrooms and 1 bathroom. It rents, at least according to Bobby's original tweet, at $2,600 per month. That's $3.29 per square foot. I'm guessing that the apartment is in Philadelphia solely based on Bobby's location.
The divisive thing in this floor plan is the two inset bedrooms. Some people don't like these. But designing a good floor plan is like working through a puzzle. You have all these constraints (some of which are just personal preference) and you have to find ways to work around them.
When you're working with a deep urban floor plate, you pretty much have no choice but to design floor plans with inset bedrooms. Otherwise, the suites get too big and they stop making economic sense. I have talked about this a few times before on the blog.
So what you do is "bury" the bedroom(s) and keep the main living space as open as possible. In this case, the living/dining dimensions are about 17' wide x 10' deep. So a pretty good size, and certainly a very good width.
An alternate solution might be to flip one of the bedrooms up towards the main glass (keeping the second one inset). But given that you only have 17 feet to work with here, something is going to have to give. So if you made the living room 9' wide, you'd then only have somewhere around 8' for your bedroom.
Personally, I don't mind inset bedrooms, especially if they allow for more generous living spaces. So I think that this is a fairly reasonable and functional suite layout. I would have absolutely lived in an apartment like this when I was going to school in Philadelphia. (Is this even the right location?)
But if I were to make a few tweaks:
I would compress the bedrooms slightly to enlarge the living space even more. (Though if the target market is student roommates, perhaps the idea is to allow for a desk in the bedroom.) I would then flip the closets to the partition wall between the two bedrooms to improve sound attenuation.
I would also try and get the kitchen out of the hallway and into the main living/dining area. I don't know where all the plumbing stacks sit (see, constraints), but perhaps it just slides up toward the glass. Another solution might be on the other side of the upper bedroom (where there is currently a closet).
But what are your thoughts? Would you rent this apartment? Comments welcome below.
The San Francisco Chronicle recently published an article called, “
SF residential projects languish as rising costs force developers to cash out
.” It talks about the impact that rising costs (both construction and other) are having on new housing supply. Some developers aren’t building even though may have entitled sites. And that’s because the math doesn’t work, even though we’re in a market with a severe housing shortage.
Here is an excerpt from the article that talks about the kind of pricing that is needed in order to make a project work:
Chris Foley, a real estate investor and partner in brokerage firm Polaris Pacific, said that in the current construction environment a condominium developer needs to sell units for at least $1,400 a square foot for a wood-frame building and $1,800 a square for a taller, steel-frame midrise or high-rise. Even in a city where more than 80 percent of the population is priced out of the market, those numbers are a stretch, Foley said.
San Francisco also has inclusionary zoning, which requires a certain percentage of units in any new development to be priced below market. According to the article, it is 18% for new rental projects and 20% for new condo projects. That’s a cost that needs to be absorbed by the remaining market rate units – so price accordingly.
The MIRA tower designed by Studio Gang is currently under construction and has 156 affordable units and 393 market rate units. The market rate pricing looks something like this:
That’s the case with three buildings rising near the new Transbay Transit Center: Mira, the Avery at 400 Folsom St., and One Steuart Lane, which overlooks the Embarcadero at the foot of Howard Street. Unless there is a remarkable drop in the market, units in all three of those buildings will probably have an average sales price of more than $2,000 a square foot and penthouses could fetch $3,000 or even $4,000 a square foot. A 3,326-square-foot penthouse at 181 Fremont St., which opened last spring, recently sold for $15 million, or $4,500 a square foot.
Projects being squeezed by rising costs is something that we are also seeing here in Toronto. And I don’t believe that the general public fully appreciates that there are limits to the costs that can be shouldered by new development. And the reason for that is because there are limits to what people can afford to pay for new housing.
