Daily insights for city builders, delivered every morning at 6 AM ET. I’m Brandon Donnelly — a Toronto-based real estate developer and founder of Globizen. I’ve been writing here since 2013.
The government of Ontario is trying to encourage the construction of a lot of new housing over the next 10 years. More specifically, the plan is for 1.5 million new homes from now until 2033. To have a chance at hitting this target, the province has rightly recognized that some things will need to change around here and so they’ve been busy coming up with legislative changes such as Bill 23 (the More Homes Built Faster Act, 2022).
The Bill is really long, so I personally appreciate it when the act name itself does a good job of summarizing what it’s all about: more homes, built faster. But if you’d like to read the entire thing, you can do that over here. I also attended a breakfast this morning — put on by Goodmans — that provided a great summary of the key points. I took all of my notes on Twitter through a live stream, so if you’d like something more digestible, click here.
At a very high level, I would say that there are some obviously good changes in the Bill and some other things that will need refinement, such as the proposed changes around third-party appeals. The devil is in the details. And that was actually one of the key takeaways from the breakfast: This government is not afraid of being bold, moving quickly, and then working iteratively with stakeholders. It’s a less typical approach for government, but done is better than perfect, right?
Japanese Metabolism was a post-war architectural movement that was based around the idea that cities and buildings should be able to grow and transform just like other organisms. There are other elements to the movement, but this was at its core. And perhaps the best example of the Metabolism movement was the Nakagin Capsule Tower in Tokyo (pictured above).
Constructed between 1970 and 1972, the 13-storey tower consisted of two structural elements and 140 self-contained / prefabricated capsules that were hung off the building’s cores.
The original intent was that these capsules could be removed and replaced over time and that the building could evolve just like any other organism might. But that never really happened and, coming on the end, only about 30 of the 140 capsules were apparently still being lived in, with the others being used for various purposes, such as storage, or not at all.
And so after a whole lot of debate, the building was disassembled earlier this year, which isn’t quite the same as a straight demolition. The pods were removed and then the core came down.
But a number of the pods have been salvaged. The architect’s family took 4 pods and created an Airbnb retreat a few hours outside of Tokyo. And a longtime resident in the building decided to quit his job, acquire 23 of the capsules, and dedicate his life to now getting these things into museums and other commercial settings.
I don’t feel like it’s my place to comment on whether disassembling the tower was a good idea or not. But I do think there’s something poetic about an icon of Metabolism having its capsules removed, restored, and then sprinkled around various places. Wasn’t that always kind of the intent?
I have been reading Fred Wilson’s blog for over a decade now (and he has been blogging for almost two decades). A lot of the time it is about venture capital and tech, but similar to what I do here, it can be about almost anything. Today he wrote about the two weeks that he just spent in Paris with his wife (the Gotham Gal). And the post covers everything from real estate to relationship advice. But here are two points that will be particularly relevant to what we usually talk about around here:
Paris has done an excellent job of prioritizing cycling and building a ton of new lanes over the last number of years. We know this. But another good point that Fred makes is that Paris has allowed competition in their micro-mobility ecosystem. It started with Velib, but now you can also use Dott and Lime. The last time I was in Paris I used Lime bikes and scooters, mostly because I already had the app and because they were everywhere. Competition is good and Toronto should probably allow the same. Our bike share system — specifically the mobile app — is incredibly cumbersome to use, and the last time I checked most of the e-bikes were consistently out of service. Let’s see if someone else can do a better job. We should, of course, also add scooters to the mix while we’re at it.
Next, Fred describes Paris’ real estate market as being more “stable.” And by this he means that, for whatever reason, values and rents seem to be more moderated. This has some benefits. Restaurants and other retail businesses seem to stick around for decades, whereas according to Fred, “it’s hard to find a shopping street in Manhattan that doesn’t have multiple vacant stores”. I’m not exactly sure why this is the case in Paris (assuming it is). I don’t believe that they have any sort of vacant store tax. Though they do have a tax on unoccupied homes. Maybe this is just what happens when you’re a little less capitalistic. (This is me deliberately avoiding the term socialism.)
If any of you have more insight into the real estate market in Paris, I would love to hear from you in the comment section below.
Here is an interesting chart, from Mike Moffat, that looks at housing completions — both ownership and rental — in the province of Ontario. The way to read this chart is that, for each date, you are looking at completions for the previous 10 years. (It says 12, but that seems to be a mistake.) For example, Q4-1964, which is the start of this chart, equals all homes built between Q1-1955 and Q4-1964.
Three things will probably immediately stand out to you:
We built a lot of multi-family housing in the 1960s and 1970s. In fact, we built more than we’re building right now and that wasn’t just the case in Toronto and Ontario. In Canada as a whole, the majority of building permits (60%) issued between 1962 and 1973 were for multi-family buildings. More specifically though, this was a rentalapartment boom, as opposed to a condominium boom.
We then said: “Nah, let’s not build so many apartments anymore. Let’s go back to building more single-family houses.”
And that’s what we did — by a fairly wide margin — until the early 2000s when the next great multi-family boom started to take hold. This time, though, it developed into a condominium boom.
Both multi-family booms have mirrored periods of overall economic expansion. But you also need to look at what government was doing. In the 1960s and 1970s we made it attractive to build rental housing (whereas today it’s a very challenging asset class to underwrite). And then more recently, we decided that much of our growth should happen in existing built-up urban areas. That generally means more multi.
But multi-family is a fairly broad term. Are we talking about 4-storey walk-ups or are we talking about 40-storey tall buildings? For those of you who are able to look through this chart to what’s happening in the market, you’ll know that we are far more effective at the latter. We have a lot of work to do when it comes to the in-between housing scales.
People have noted that walking seems to have a special relation to creativity. The philosopher Friedrich Nietzsche (1889) wrote, “All truly great thoughts are conceived by walking” (Aphorism 34). The current research puts such observations on solid footing. Four studies demonstrate that walking increases creative ideation. The effect is not simply due to the increased perceptual stimulation of moving through an environment, but rather it is due to walking. Whether one is outdoors or on a treadmill, walking improves the generation of novel yet appropriate ideas, and the effect even extends to when people sit down to do their creative work shortly after.
The results were a bit inconclusive as to whether outdoor walking is better than other forms of walking, so for now we will just say that walking — in general — is good for creative thinking. But where my mind immediately goes is: Does this finding scale up?
In other words, if you were to take two different cities — City A where everybody, for the most part drives, and City B where everybody, for the most part, walks — could you find any evidence that City B was on average more creative than City A?
I guess one way you could measure this is through patents. And if you were to look at patents per capita in the US, you’d likely find cities like Princeton (NJ), Redmond (WA), and cities in Silicon Valley near the top of the list. I’m not sure there’s an obvious correlation here.
But it is kind of interesting to think about a possible relationship between urban form and creativity.
There is an ongoing debate about the value of cities hosting the Olympic Games. And that’s because this is usually how it works: You, the host, spend a lot of money (Tokyo 2021 was over $25 billion), it feels really good during the games while the world is watching you on TV, and then everyone leaves and you have a big bill to pay.
As I understand it, this has generally been the case for almost all of the games. One rare exception is Los Angeles in 1984, which supposedly managed to make over $230 million from hosting. In pretty much every other case, the rough value was, at least in theory, things like exposure, ego, and hopefully a bunch of assets that will remain useful to other people once the games are done.
But as I have argued a few times before, perhaps the most important hard-to-quantify benefit is this: Hosting the Olympics creates an immutable city-building deadline. Because, what could be worse than not being ready when your global guests show up?
A perfect example of this is what Paris is now trying to do with the Seine ahead of the 2024 Olympics. The goal is to clean up the Seine so that it’s actually safe enough for the athletes to compete in it. That would obviously be really cool for the games, but it would also be a wonderful legacy for Paris.
Would Paris still be doing this if it weren’t hosting the games? Perhaps. Paris has a habit of doing some obviously good things. But I bet it wouldn’t be moving nearly as quickly.
This is an excellent video that I would encourage all of you to watch. It provides a visual look at city finances and explains how car-dependent suburbs are usually heavily subsidized by productive urban places. These are the kinds of analyses that all cities should be doing and, among many other things, I think it could go a long way to positively influencing how we plan our cities. Want to keep densities low and new development to a minimum in your community? Well then you should expect to see a commensurate increase in property taxes. If that doesn’t make sense to you right now, it will once you watch the video.
A few days ago I tweeted this chart out (from Statistics Canada):
It is a list of the densest downtowns in Canada (people per square kilometer). But to be more precise, it is a list of the densest primary downtowns for each census metropolitan area.
In the case of Toronto, for instance, it considers downtown Toronto, but it does not consider downtown Mississauga, downtown Brampton, or any other “downtowns” across the CMA. And in the case of Vancouver, it ignores important centers such as Burnaby.
Many were quick to point this out on Twitter and it is a fair comment. Our cities are often more polycentric than a chart like this might make it seem.
The other thing to consider is that these density numbers are dependent on what you assume as the boundary for each downtown. For downtown Vancouver it’s a fair bit easier because it is a peninsula surrounded by water.
But for downtown Toronto, it’s more nebulous. Where do you draw the line? In this case, Statistics Canada is using the same downtown boundary as what’s in our Official Plan, but that happens to include the lower-density University of Toronto lands. So are we comparing apples to apples?
As I understand it, there is now something called hybrid work. The way this works is that on some days you go into the office and on some days you work from home, or from some “third space” near to your home. As a result of this, there are now more people, at least for the time being, that seem to be willing to live further out from large urban centers. And this is reflected in the data that the Financial Times recently published in an article about “how the pandemic transformed Britain’s commuter towns“:
In-person spending in the City of London has yet to fully recover. It remains below 2019 levels. Whereas a number of places that I am generally unfamiliar with (see chart) are now above where they were pre-pandemic. This, again, makes intuitive sense: more decentralization, more time at home, and less time in the City of London. Though we could also be seeing some low base effect here. Either way, my gut continues to be that a lot of people are still underestimating the stickiness of cities and the importance of in-person interactions.
Between 2016 and 2021, and according to this recent report from Statistics Canada, the population of the Toronto CMA (Census Metropolitan Area) grew by over 274k people:
The population of the Montréal CMA grew by nearly 188k people:
And the population of the Vancouver CMA grew by over 179k people:
These are the three largest CMAs in the country and they, not surprisingly, also have the three largest “downtowns.” As of the spring of 2021, the most populated downtowns were as follows: Toronto (275,931 people), Vancouver (121,932 people), Montréal (109,509), Ottawa (67,169 people), and Edmonton (55,387).
In this exercise, Statistics Canada breaks down each CMA into 5 categories, which are generally based on two things: (1) your typical monocentric city model (downtown in the middle with a declining gradient of surrounding sprawl) and (2) how long it takes to commute — by car during non-rush hours — from downtown to the surrounding areas.
The good news in all of this is that Canada’s downtowns seem to be doing just fine. Broadly speaking, they are growing at a faster rate than their respective CMAs and growing at 2x the rate of the previous census cycle. Halifax’s downtown grew at 26.1% from 2016 to 2021 and Calgary grew at 21%, to give two more examples. So I think you can safely ignore what you may have heard about a pandemic exodus. Those people are now returning from the country after realizing that there aren’t any pretentious coffee shops and expensive butcher shops.
But something else is also going on in Canada’s largest urban centers. The concurrent trend is continued urban sprawl. The biggest downtowns are growing quickly, but so are the distant suburbs (30 minutes or more from downtown). And they are growing at a faster rate than everything in between. This is not entirely surprising, but it is obviously concerning from a climate change perspective and because it suggests that people are being forced to do the old “drive until you qualify” thing.
These two phenomena are the most pronounced in the Toronto CMA. If you scroll back up to the top of this post, you’ll see that downtown absorbed a decent chunk of the population growth (about 14%), particularly considering its small footprint. But then if you look at the distant suburbs (the mustard color), you’ll see that it’s where 72% of new entrants went!
The question I like to ask with all of this is, “are people choosing to move to the distant suburbs because that’s the housing and location that they truly want, or are people choosing it because it’s all they can afford?” There is an argument out there that sprawl is a natural market outcome and that we shouldn’t be forcing people to live in higher-density housing. And I am certainly sympathetic to giving people as much choice as possible.
But how much choice are we really giving people in our biggest cities? We have figured out how to intensify our downtowns through mid- and high-rise development. And evidenced by the growth rates, many people are enjoying this form of housing and the kind of urban lifestyle that comes along with it. But if it happens to not work for you, our current solution is, “either be rich so you can remain close to downtown or go for a drive.”
What is clear from this latest census data is that we haven’t yet figured out the in-between. The missing middle is still missing. And that’s because we have clear mechanisms in place to more or less ensure this is the case: (1) We restrict meaningful growth from taking place in our single-family neighbourhoods and (2) we have made a habit out of shifting some of the incumbent tax burden to new entrants through things like development charges.
Overall, it’s a devilishly clever system where two things happen: “Sorry, you can’t build that kind of housing here. Build it somewhere else. By the way, I’d like to keep my property taxes as low as possible, so not only do I not what you close to me, but I’d also like you to help pay for some things. Cool?” This is the arrangement that we are seeing playing out in these charts. It can be easy to ignore, but it’s there.
