Here in Toronto there’s a push for more family-sized apartments. That’s what the planners want to hear.

Because the city has been trying to encourage developers to build more of them for years, but the challenge has always been that they didn’t sell or that they took a long time to sell. The market wasn’t ready.

But as I discussed earlier this week, that is starting to change. I think Toronto is reaching a tipping point where low-rise housing has simply become too expensive and people are starting to look to alternatives, mostly at the mid-rise scale.

It’s interesting though that something of the opposite appears to be happening in New York. I don’t know enough about the New York new construction market to really comment on overall unit mixes and sizes, but there definitely seems to be a push to create more affordable micro-units.

Curbed published this last October:

“…a report currently under public review, called Zoning for Quality and Affordability, recommends relaxing density caps and eliminating the 400-square-foot minimum for studio apartments, thereby creating more housing for single people. Almost 50 percent of the city’s population is estimated to be single, but only seven percent of the housing stock is studios.”

And just recently, New York completed its first all-micro-unit apartment building called Carmel Place. Rents start at $2,650 per month for a 265 square foot apartment. 

As a point of reference, that works out to be $10 per square foot per month and more than 3x the highest rents you could reasonably achieve in the more desirable areas of Toronto, today.

The model suite is 302 square feet and looks like this:

All of the above photos are via Curbed.

Daniel Hertz of City Observatory recently published an interesting post talking about what makes American zoning unique compared to the rest of the world. It is based on the conclusions of a book published earlier this year called Zoned in the USA.

Here are 2 snippets that I liked from his post:

Hirt’s major claim is that what really sets American zoning apart is its orientation, explicit or implicit, to putting the single-family residential zone at the top of the hierarchy of urban land uses. Not only are single-family zones listed first in many zoning codes, but they make up significant pluralities, or even majorities, of total land area in most American cities. Interestingly, Hirt points out that this wasn’t necessarily true when zoning was first introduced: New York’s famous first zoning law didn’t even have a single-family zone at all.

As Hirt points out, Americans appear to be unique in believing that there is something so special about single-family homes that they must be protected from all other kinds of buildings and uses—even other homes, if those homes happen to share a wall. The recent revolt in Seattle over a proposal to soften that city’s single-family districts, in other words, would not be possible anywhere else in the world, not least because very few people live in single-family districts to begin with.

I don’t know if Canada is covered in the book, but we clearly share many similarities with that of the US.

I would say more, but at this point in the day I should probably rest my eyes and stop looking at a computer screen. Hopefully we can continue this discussion in the comment section below.

London street of early 20th century Edwardian terraced houses by Bombaert Patrick on 500px

Over the weekend The Economist published an interesting article called, Space and the city: Poor land use in the world’s greatest cities carries a huge cost. The argument is that land isn’t scarce. It’s the land use policies we have created that are artificially limiting supply and driving up real estate values.

In fact, land is not really scarce: the entire population of America could fit into Texas with more than an acre for each household to enjoy. What drives prices skyward is a collision between rampant demand and limited supply in the great metropolises like London, Mumbai and New York. In the past ten years real prices in Hong Kong have risen by 150%. Residential property in Mayfair, in central London, can go for as much as £55,000 ($82,000) per square metre. A square mile of Manhattan residential property costs $16.5 billion.

And part of the reason this has become so prevalent is because of the shifts we’ve seen in our economy and the great return back to cities.

In the 20th century, tumbling transport costs weakened the gravitational pull of the city; in the 21st, the digital revolution has restored it. Knowledge-intensive industries such as technology and finance thrive on the clustering of workers who share ideas and expertise. The economies and populations of metropolises like London, New York and San Francisco have rebounded as a result.

So how do we get better at meeting real estate demand in our cities? The Economist has two suggestions.

One:

First, they should ensure that city-planning decisions are made from the top down. When decisions are taken at local level, land-use rules tend to be stricter. Individual districts receive fewer of the benefits of a larger metropolitan population (jobs and taxes) than their costs (blocked views and congested streets). Moving housing-supply decisions to city level should mean that due weight is put on the benefits of growth. Any restrictions on building won by one district should be offset by increases elsewhere, so the city as a whole keeps to its development budget.

Two:

Second, governments should impose higher taxes on the value of land. In most rich countries, land-value taxes account for a small share of total revenues. Land taxes are efficient. They are difficult to dodge; you cannot stuff land into a bank-vault in Luxembourg. Whereas a high tax on property can discourage investment, a high tax on land creates an incentive to develop unused sites. Land-value taxes can also help cater for newcomers. New infrastructure raises the value of nearby land, automatically feeding through into revenues—which helps to pay for the improvements.

These recommendations will probably be unsettling for a number of people. 

I would imagine that many communities would prefer to have planning and growth decisions happen bottom up, as opposed to top down. But I think there’s some truth to this recommendation and I don’t think it has to mean completely excluding bottom up feedback. Communities and individuals are naturally going to look out for their own self-interests. And so I think many would agree that there’s value in having a holistic urban strategy in place.

Recommendation number two pertaining to land value taxes is a loaded one. So I’m going to save my specific comments for a dedicated post on LVTs. 

But I will say that I don’t think trying to squeeze landowners into development via taxes is the most efficient and immediate way to address supply shortages. In advance of this, we should be examining the current barriers to development. Because we’re talking about hyper competitive global cities with perpetual supply deficits. And I don’t believe the problem is incentive-based. The problem is finding sites. The problem is finding ways to build.

What do you all think? This is an interesting topic of discussion.