Brandon Donnelly

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.

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  • Consumption-based carbon accounting

    The typical way to measure carbon emissions is to think about it in terms of geography. You pick a particular place, such as a country or a city. You add up all the emissions that are taking place within its boundaries. And you’re then left with a territorial carbon footprint. If you’ve done any research on carbon emissions or climate change, you’ve likely encountered this method of accounting for carbon.

    But there’s a flaw with this logic.

    The problem with this method is that it considers each geography to being more or less independent. For example, let’s say you live in Philadelphia and you happen to be the owner of something called a computer. With territorial accounting, the carbon emissions associated with you powering your computer would get attributed to Philadelphia and the emissions associated with the actual production of the computer would get attributed to wherever it was made. Let’s say it was China.

    One of the problems with this approach is that it penalizes the places that make a lot of stuff and it privileges the places that don’t make as much stuff, even if they may actually be the consumers of far more stuff. This might make you feel better about your life decisions if you happen to live in a dense urban knowledge economy that doesn’t really make anything physical — but is it entirely accurate?

    An alternative measurement approach is consumption-based carbon accounting. The goal here is to capture all lifecycle emissions associated with a particular good or service, and then attribute it back to the consumer that arguably triggered the emissions. In the case of our Philadelphia computer example, the emissions associated with the production, transportation, and consumption of the computer would also get attributed locally to Philadelphia, instead of to China.

    This more complex method of carbon accounting — which is something that the University of Pennsylvania has been working on over here (hence the Philadelphia computer example) — can be instructive for a whole host of reasons. It also has some relevance to city building.

    It is widely understood that building up is more sustainable than building out. Because when you build out, you end up doing things like forcing people into cars. But the other side of this equation is that cities tend to also house a lot of rich people, and household wealth is a massive driver of carbon emissions when you account for them based on consumption. Some would argue it is more important than urban density.

    In my opinion, none of this is to suggest that dense urban environments are bad. The point here is that territorial carbon emissions don’t fully capture the emissions caused by high consumers who might happen to live in an otherwise efficient urban environment. You can live in a compact apartment and walk to work, but what else are you consuming? And how might these consumption patterns change based on built form?

    For more on this topic, check out this report by Daniel Cohen and Kevin Ummel (of the University of Pennsylvania) called, “The case for neighborhood-level carbon footprints.”

    Photo by Chris Henry on Unsplash

  • Who should pay for affordable housing?

    Deeply affordable housing is mostly infeasible to build.

    This is why you don’t see the market naturally building this kind of housing on its own. It, for the most part, doesn’t make any economic sense to do so. So this is also why the US has fabricated things like low-income housing tax credits. They are a way to make up the economic shortfall that exists with low-income rental housing and get the private sector building this kind of housing.

    We sometimes try to convince ourselves — or maybe it is a way of shirking responsibility — that there can be such a thing as no-cost affordable housing through things like inclusionary zoning. But I think we all know that there’s no such thing as a free lunch. Somebody is ultimately going to need to pay. The big question, of course, is who should that be?

    By definition, we acknowledge that the people who will ultimately live in these affordable homes cannot afford to pay market rates. So by default, the subsidies will need come from somewhere else. But again, from where and from who? Should it be specific people who pay or should it be mostly everyone who pays?

    If we return to the Toronto building industry’s favorite topic right now — development charges — you’ll see that under the current rates, every new 2 bedroom or larger apartment that is constructed must pay $3,727 toward affordable housing. Under the proposed rates, this will increase to $12,545 for every new large apartment. It’s by far the largest proposed percentage increase (237%) and also one of the largest service items.

    This raises two interesting philosophical questions.

    One, should the buyers of new housing be responsible for contributing to affordable housing in this way? Because what we are in effect saying to these people is, “Hey, you can afford to buy a new market rate home, so we’re going to collect some additional money from you — $12,545 to be exact — so that we can try and help those that aren’t in the same position as you. We’re also going to mandate additional affordable homes within your building and we’d like you to subsidize those too.” This is one way to redistribute wealth.

    But if the goal is to try and create more broad-based affordability, an alternative approach might be, “Hey, you already own a home and it has gone up a lot in value, so we’re going to collect some additional money from you over time so that we can try and help those that aren’t in the same position as you.” This would be the property tax approach. It’s probably not perfect, but might it be a more fair and equitable way to redistribute wealth?

    The second interesting philosophical question has to do with whether this is consistent with the dogma that growth should pay for growth. The idea behind development charges (also known as impact fees in some parts of the world) is that they should pay for the cost of new development. This makes complete sense. When you build new housing you certainly need some additional stuff — everything from additional school capacity to emergency services.

    But the question here is whether the construction of new housing in and of itself creates a direct need for more affordable housing, and therefore should be charged for it. Asked in the opposite way, if you weren’t building this new housing, would you then no longer need this affordable housing, just like you no longer need that additional school capacity?

    This is definitely not the case. In fact, I would argue that the opposite is true. If you don’t build any new housing in a growing city, you actually exacerbate the problem of affordability. So here’s a provocative thought. Rather than a charge, should this affordable housing line item actually be a credit towards each new project given that it benefits affordability?

    While it may not make any economic sense to build affordable housing, I think that many of us would agree that it makes a lot of social sense to build affordable housing. We know that our cities are at their best when they are both diverse and inclusive. The problem is that we can’t agree on who should pay for it.

  • Where Americans moved over the last decade

    Today’s post is perhaps a good follow-up to yesterday’s post about housing supply in Ontario. Below are a few charts taken from a recent article by Wendell Cox looking at net domestic migration across the US. The takeaway here is that the shift from larger cities to smaller cities seems to be accelerating, following a trend that started before COVID.

    The data in these charts is organized according to population and by Core Based Statistical Areas (CBSAs). At the bottom are America’s two megacities: New York and Los Angeles. Both have metro areas that exceed 10 million people. As you can, these two city regions have been losing the most people, both in terms of total humans and on a percentage basis. The goldilocks sweet spot seems to be cities in the 500k to 1 million range.

    But the most telling figure is probably this one here:

    This chart adds up all major metropolitan areas with a population greater than 1 million, and then shows net migration over the last decade. Here you can see when this trend started (around 2016) and how it has been accelerating. In this case, it does appear that COVID added some fuel to the fire. But the question remains: Why is this longer-term trend even happening?

    Is it a short-term phenomenon? Is it because once a city reaches a certain size it simply becomes more annoying to live in it and people would prefer to live elsewhere? Or is it more about overall affordability? That is, if we could figure out how to deliver more affordable housing in our cities, could we stymie the bleeding toward smaller and more affordable ones?

    I don’t know the answers to the questions. But they have been widely debated and I still think they’re interesting ones. If all things were equal (or closer to equal), how and where would most people choose to live? Put differently, how much of this is some sort of natural market outcome and how much of it is a direct result of our actions (or inactions)?

  • Housing supply across Ontario

    Here are a few Ontario / Toronto housing supply charts taken from this recent blog post by Mike Moffat (an assistant professor at Ivey Business School):

    So what do these tell us?

    Well, 2015 was a banner year for the supply of new apartments/condominiums in the City of Toronto. And supply, in general, has been ticking upward for apartments across the province.

    But if you’re in the market for a new single-detached, semi-detached, or row house, supply is on the decline in the Toronto CMA. You’re likely going to have to go further out for that.

    This, of course, makes sense. The Toronto CMA has been built out. Most of the new growth is now going to need to take place through intensification, which usually means apartments and condominiums.

    Though obvious, I think all of this is an important reminder. Because the more difficult and the more expensive we make it to build in our already built-up areas, the more we are encouraging sprawl in “Ontario outside of Toronto CMA.”

    At the same time, we are also making it more financially challenging for families to remain in the city. We can talk all we want about 3-bedroom suites and ways to make them more accommodating to children, but that doesn’t mean much if people can’t afford them.

  • Toronto housing market has slowed — do you care?

    If you’ve been following the Toronto housing market and/or following any panicky resale agents/brokers on Twitter, you’ll know that things have shifted over the last few months. Here’s what broker (and my friend) Christopher Bibby had to say about the market in his most recent newsletter:

    As anticipated, April has ended up being one of the defining months of the 2022 real estate market. With the recent fragility we are seeing, it is clear that the market peaked in February. In fact, the Toronto Real Estate Board, in its most recent Market Watch, claims that month-over-month prices could be down by 2.6%—which is very likely. TREB also indicated that the overall number of year-over-year transactions in March was down by approximately 30%. I deferred the release of this newsletter because weekend activity positively altered some of my previous commentary. The key takeaway, however, is that sentiment has shifted in our marketplace.

    But let me paraphrase the conclusion of Bibby’s newsletter with two words: who cares? If you think that Toronto (or some other city) will remain an important global city by 2025, 2030, or even 2040, you really shouldn’t be fussed by what the market is doing over the span of a few months.

    Moreover, I can tell you that my least favorite time to go out and buy real estate is when everyone else is submitting silly offers and clamoring to buy whatever they can find.

  • Micro-housing experiment in San Diego’s Little Italy

    San Diego-based Jonathan Segal is a unique kind of builder in that his firm doesn’t have any clients. They act as both the architect and developer for all of their projects. This gives them a lot of control over the building process, but also more freedom to experiment.

    ULI recently interviewed Segal about his micro-housing project on 320 West Cedar Street in San Diego’s Little Italy (called The Continental). And I think it’s a pretty interesting case study for us to discuss here on the blog.

    It’s a 5,000 sf corner site, and Segal developed it with 42 micro units (5 of which are priced at 65% of AMR), two retail spaces at grade, and a separate “single-family townhouse” for his son that sits on top of the retail space at the corner.

    The idea was to create relatively affordable “workforce” housing, which is why there’s also minimal parking. The 37 market-rate units are currently priced between $1,595 and $1,995 per month, and the affordable ones are about $900 per month.

    Segal is forthright in the interview in saying that leasing velocity was slow following completion in December 2019. It was hard to rent these kinds of units in San Diego without any parking. But he viewed the project as an experiment and eventually he did find product-market fit.

    The mix of housing types here is also noteworthy. Presumably his son could have just gone out and built a more typical grade-related home. But why do that when you can build on top of an urban retail space and add 42 other homes to the lot?

  • Never too small, until you get an inset bedroom without a window

    Never Too Small remains one of my favorite YouTube channels. And I have written about their videos before on the blog. The homes that they feature on their channel are generally below 600 square feet or so, and most of them are well below this mark. Some have even been designed for young families.

    One of the common strategies that you’ll see with small floor plans is that the bedroom is often reduced to only what is necessary for sleeping and it is often inset within the home, away from any exterior glass. As an example, here are before and after screenshots from a 318 sf apartment in London (link to video).

    Before:

    After:

    In this case, the bedroom was pulled away from the apartment’s bay window and a small mezzanine level was created. This makes a lot of sense since the bay window is kind of a main feature — one that, I think, is better reserved for a primary living space. They also flipped the kitchen up against the other window, rescuing it from the bowels of the apartment.

    If I had been the one tasked with redesigning this apartment, this is a floor plan that I could see myself landing on. But here’s the thing. All things being equal, I think most people would prefer a bedroom with a window. And even when all things aren’t equal, a lot of people seem willing to compromise on their main living space so that they still get one (see before plan).

    So before you go ahead and watch the NTS video, I’m curious: Which do you prefer? Would pick the before plan or the after plan given these two options?

  • Are all red light districts bad and undesirable?

    Times Square in New York has, as we all know, a checkered past. For much of its history, it has served as an important civic gathering space for New Yorkers. But it has also alternated between being a place for New Year’s Eve countdowns and being a place for salacious entertainment. This was the case as far as back as the late 19th century when prostitution from New York’s entertainment and red light district (then known as the Tenderloin) started moving northward.

    But it was also the case during the economic fallout of the Great Depression and again the case from the 1960s to 1990s when the area become a symbol for a more broadly decaying New York City. The area was seedy, dangerous, and according to tax records, fairly vacant, notwithstanding all the sex shops. Most would probably agree that this was not a high point for the area. As a rule, cities are generally better off when their buildings aren’t vacant and decaying.

    But are all red light districts bad and undesirable?

    Last year, Amsterdam voted in favor of closing down its famed city center red light district and moving it to some kind of new “erotic center” on the outskirts of the city, in a location that is yet to be determined. Not surprisingly, this decision hasn’t been without some controversy. Local sex workers seem to be generally against the idea and petitions are now circulating, such as this one here from Failed Architecture, asking the building industry not to participate in the build out of this new center.

    In some ways Amsterdam has the opposite problem compared to what Times Square experienced between the 1960s and the early 1990s. Amsterdam is too popular. Back in 2019, prior to COVID, the city saw some 22 million unique annual visitors. And I am guessing that more than a few of these visitors probably got drunk, wandered through the narrow streets of De Wallen, and peed on the side of a few buildings. Is it unsafe? I don’t know. I’ve never been. Is it immoral? Depends on who you ask. Is it annoying for locals? Probably.

    The city has been clear in that it views this as over-tourism, and also the wrong kind of tourism. Rather than rely on sleaze, Amsterdam wants to “reset” its tourism approach and focus more on highbrow things like art and culture. This is an understandable objective. Because presumably the tourists who actively seek out art and culture attractions are, you know, a bit less reckless and a bit less likely to pee on the side of buildings. Of course, you never know.

    But is this really the right city planning approach? Is there any cultural value to these historic uses? And what does this say about the city’s famously liberal attitudes? More specifically, does wanting to move your red light district from the middle of the city to some less conspicuous location — in an effort to dissociate your city brand — a reflection that you’re becoming maybe a little less tolerant towards the activities that take place in said district? It certainly seems like it.

    But I don’t know, maybe that isn’t entirely the case. Maybe there’s a tenuous argument that the city is just as liberal and permissive. After all, the city is still generally okay with this kind of debauchery. It just wants this debauchery to take place in a different area outside of the overcrowded city center. In other words, the activities themselves aren’t the problem. It is arguably the negative externalities that come along with them that need to be managed. And a suburban “erotic center” is simply better for that.

    What are your thoughts? And what would you do if you were the mayor of Amsterdam?

    https://twitter.com/donnelly_b/status/1515024945578921989?s=20&t=US_deKgC2QqKTo9v6Wsdtw

    Photo by Joan Oger on Unsplash

  • Le Pen’s voter base: France’s poor rural drivers

    The presidential election that is underway right now in France is playing out exactly as one might imagine. The first round of votes took place on April 10, and the second and final round — which is now between Macron and Le Pen — will take place on April 24.

    How people voted in the first round can be mostly explained by geography. If you live in an urban center, an attractive tourist center, or have reasonably good rail connectivity to either of these two kinds of places, you likely voted for Macron.

    On the other hand, if you live in a poorer rural area, you were more likely to vote for Le Pen. Our spiky unequal world remains, even in France, where more wealth tends to be redistributed compared to places like the UK and the US.

    But there’s another potentially correlative factor that should interest readers of this blog (even if it is somewhat obvious). If you voted for Macron in the first round, you were also less likely to rely on a car to get to work. Here are two charts from the Financial Times:

    This point is perhaps obvious because geography and built form largely determine whether or not you want/need to drive. And the way to not drive is to live in a dense city. But I think it’s also a useful reminder that owning a car does not necessarily need to correlate with high economic status.

    In fact, when I look at these charts, not having to drive to work feels like a good thing.

  • Three in four Americans believe it’s better for the environment if houses are built farther apart

    Living in a low-density place with lots of greenery and open space can feel like a pretty “green” way to live. Maybe you’ve even got a little garden where you grow delicious tomatoes. And indeed, a lot of people seem to think this is the case. According to this recent YouGov poll (which surveyed 1,000 Americans), 75% of US adult citizens believe that “it’s better for the environment if houses are built farther apart.” The number drops slightly to 68% for Democrats, but we’re still talking about a clear majority.

    Most experts will tell you that the opposite is, in fact, true. One of the best ways to be green is to live in a high-density urban setting and get as far away as you can from the natural environment so that you don’t screw it up. There are multiple reasons for this, but it generally comes down to the fact that cities use land and other resources far more efficiently on a per capita basis. Smaller living spaces, fewer cars, more things that are shared, and so on.

    The reason why this isn’t so obvious is that per capita thinking is perhaps harder to grasp. Living in the countryside certainly feels more green than living in the middle of New York City. But what if the 8.5 million or so people in New York City suddenly decided to sprawl outward into the countryside to consume more housing (that would then need to be heated and cooled), and then started driving everywhere (in lieu of taking transit, cycling, and walking)?

    This would be a less green outcome. It’s about the collective here, not what feels nice and green for any one individual.