Here is an interesting chart (source) showing housing starts in Canada, by type, between 2000 and 2023:
As recent as 2000, single-family houses accounted for 61% of total starts and multi-family housing accounted for 39%. This flipped somewhere around the financial crisis and, last year in 2023, the percentages were 23% and 77%, respectively. This is a meaningful inversion which has helped our cities become more vibrant and more conducive to non-car modes of transport.
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%).
Here is an interesting chart (source) showing housing starts in Canada, by type, between 2000 and 2023:
As recent as 2000, single-family houses accounted for 61% of total starts and multi-family housing accounted for 39%. This flipped somewhere around the financial crisis and, last year in 2023, the percentages were 23% and 77%, respectively. This is a meaningful inversion which has helped our cities become more vibrant and more conducive to non-car modes of transport.
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%).
Brandon Donnelly
Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly.
about Canadian housing, Donald Wright more or less argues: so what? We've been densifying our cities for all these years, but it hasn't helped our affordability problem. Supply must not be the answer to our housing crisis.
I'm not exactly sure what he believes to be the solution, but I don't think this problem is as simple as "we've built some housing, we made our cities denser, and yet housing is still expensive -- more supply must not be the answer. Let's move on."
Among many other things, it's important to understand what kind of density we've been building. Because up until very recently, we've basically taken the position that single-family neighborhoods should never be touched, and that density should only go in very specific areas -- and only after a lengthy and expensive rezoning process has been completed.
We've designed new housing to be expensive.
But attitudes are changing all across North America. We are now starting to do two very important things: (1) we are opening up more of our cities to intensification and (2) we are now allowing more multi-family housing on an as-of-right basis. Meaning, no lengthy rezoning exercises and no risk of community opposition.
These are two fundamental changes that should alter the kind of density that gets built. And in my view, it's going to be a positive thing for Canadian cities.
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.
this recent article
about Canadian housing, Donald Wright more or less argues: so what? We've been densifying our cities for all these years, but it hasn't helped our affordability problem. Supply must not be the answer to our housing crisis.
I'm not exactly sure what he believes to be the solution, but I don't think this problem is as simple as "we've built some housing, we made our cities denser, and yet housing is still expensive -- more supply must not be the answer. Let's move on."
Among many other things, it's important to understand what kind of density we've been building. Because up until very recently, we've basically taken the position that single-family neighborhoods should never be touched, and that density should only go in very specific areas -- and only after a lengthy and expensive rezoning process has been completed.
We've designed new housing to be expensive.
But attitudes are changing all across North America. We are now starting to do two very important things: (1) we are opening up more of our cities to intensification and (2) we are now allowing more multi-family housing on an as-of-right basis. Meaning, no lengthy rezoning exercises and no risk of community opposition.
These are two fundamental changes that should alter the kind of density that gets built. And in my view, it's going to be a positive thing for Canadian cities.
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.
