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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  • Los Angeles adopts “standard plan program” to encourage ADU construction

    The city of Los Angeles has taken an interesting approach to accessory dwelling units (what we generally call laneway or garden suites here in Toronto). In an effort to streamline the approvals process and bolster the supply of housing in the city, they’ve gone out and pre-approved a series of “standard plans” that you can quickly implement on your property. The idea here is that all of their approved plans have already been checked for compliance with the various building codes. So those reviews don’t need to happen before a permit can be issued (though the building department would still need to review any site-specific conditions).

    What that means is that if you’re in the market for, say, a one-storey, one-bedroom ADU at around 450 sf, you can simply scroll through their list and find the one you like the most. Here is one that fits this criteria by Design, Bitches (I just wanted to mention this firm name). The potential downside of this approach is that it could encourage less architectural experimentation. On the flipside, many of their approved designs are really nice and so maybe it’s a boon for those who are lacking in good taste. Either way, if you want to encourage more of something, the way to do that is to reduce friction.

    To start to give you a sense of how meaningful this could become, the city of Los Angeles received 1,980 applications for ADU construction back in 2017. This is the year in which the state changed its regulations so that ADUs were no longer prohibited in some municipalities (I don’t know all of the specifics truthfully). Last year, LA saw 5,374 applications and I suspect the number will be even higher this year. Should other cities look at pre-approving certain designs? And could this be an approach used for even larger building typologies? Speed is good.

  • The Ideal City

    Gestalten and SPACE10 have a new book out that I think many of you may want to add to your library. It’s called The Ideal City, and it’s all about what’s next when it comes to cities. Here’s a short excerpt from the publisher:

    Urban life is humankind’s biggest experiment to date, our cities are constantly evolving and adapting to climate and economy. The cities we have today are not necessarily the ones we need, but big and small innovation is rethinking visions of urbanization. Together with pioneering research and design lab SPACE10, we present future-orientated design which enhances quality of life and makes our urban spaces more vibrant.

    As technology and urban life edge ever closer, The Ideal City explores the ambitious actions and initiatives being brought to life across the globe to meet tomorrow’s demand in clever, forwarding-thinking ways. From pedestrian infrastructure to housing, the book uncovers what is being discussed at the forefront of urbanism through expert essays and profiles.

    Image: Gestalten

  • Long live the city

    The sentiment around downtown/urban condos has completely changed over the last month or so. This is happening in Toronto and, from what I hear, it’s happening in many other cities as well. Carolyn Ireland published an article in the Globe and Mail today called, “For downtown Toronto condos, the worm has turned.”

    But I can also speak to what we (and our colleagues in the industry) are seeing on the ground. A sense of urgency has returned. Prices are starting to push upward. And people are buying. The last few weeks have also seen some very successful condo launches in the city including 8 Wellesley by CentreCourt Developments. I can’t remember if they sold out in 7 minutes or 7.5 minutes.

    None of this is necessarily surprising. Interest rates are low. The US is doing a good job at vaccinating its people. Single-family home prices have exploded over the last year (pushing buyers toward condos). And there seems to be an emerging view that the second half of this year is going to be pretty good. (This was my view at the beginning of the year and stand behind that position.)

    Today was a beautiful spring-like day in Toronto. I was out for a site visit this morning and the sidewalks were filled with people milling about and enjoying the sunshine. City life isn’t going anywhere my friends. Long live the city.

  • The 10x Class

    I just discovered the work and writing of Dror Poleg. Initially trained as an economic historian and media theorist, Dror went on to work in advertising, tech, and real estate private equity, among probably a bunch of other things. Today he mostly writes. He’s the author of Rethinking Real Estate: A Roadmap To Technology’s Impact on the World’s Largest Asset Class. I haven’t read it (yet), but I did just subscribe to his weekly newsletter. Here are a couple of excerpts from a recent post called, “Rise of the 10X Class.”

    In 2020, things are very different. Charli D’Amelio, a TikTok star that 99% of you have likely never heard of, makes $48,000 per post. By uploading one short video every day, the 16-year-old D’Amelio can earn 20 times more than the world’s most successful singer earned in 1801. Charli is scalable in a way that was possible only for a tiny group of TV, film, and pop stars 20 years ago, and was not possible at all in Elizabeth Billington’s time.

    The internet makes it possible for many knowledge employees to work from anywhere. The earning potential of (many of) the most productive employees is no longer capped by geography. As a result, we will see the emergence of a new class of people earning salaries that are an order of magnitude higher than what we saw in previous decades.

    Note that I am not talking about the emergence of a handful of highly-paid superstars in the vein of Hollywood’s Brad Pitt or Tom Hanks. I am talking about micro-stars in the vein of TikTok’s Charli D’Amelio: a whole new layer of professionals than earn incomes that are a level below the biggest earners on in their field, but still much higher than what the average employee (or singer, or dancer) could earn in the pre-internet era.

    I call this new layer of professionals the 10X Class.

  • Who should win the 2021 Pritzker Prize?

    The winner of the 2021 Pritzker Prize — which is often considered to be the highest honor in the world of architecture — is expected to be announced sometime in “early March.” In anticipation of that, ArchDaily is asking its readers to opine on who they think should win the prize. This is something they usually do each year. I just casted my vote (for someone who happens to be pictured above). If you’d like to do the same, click here. And if you’d like to see who the jury members are for this year, go here.

    Image: ArchDaily

  • 225 Brunswick Ave is yet another example of why the missing middle is so damn hard to deliver

    Building buildings is really hard.

    It’s hard for countless reasons, but one reason in particular is that it can be difficult to please everyone. Take parking, for example. This is often a primary concern when you’re trying to develop something new. Too little parking and people might be concerned that cars will start flooding the surrounding streets in search of a spot. Too much parking and people might be concerned about traffic congestion. So it can often feel like you’re damned if you do and you’re damned if you don’t.

    I thought of this as I was reading through Alex Bozikovic’s recent opinion piece in the Globe and Mail called, “Yes, in my backyard: How urban planning must shift to meet our postpandemic challenges.” In it, he mentions a small missing middle-type infill project at 225 Brunswick Avenue here in Toronto. A century-old office building located in a residential neighborhood, a small developer has been working (with Suulin Architects) since 2018 to convert it into seven apartments.

    Here are a few photos:

    This is the kind of infill housing that planning staff and many councillors are trying to encourage across the city. And yet, the year is 2021. This developer is on year three in a process that will, maybe, deliver a total of seven new rental homes. There are also many other examples that we can point to in the city that have faced similar challenges, like this one here on Gerrard Street East. While not nearly as interesting architecturally speaking, it would have delivered 10 new homes proximate to transit. Maybe that will still happen. I can’t say for sure.

    I’m not going to get into the specifics of any one proposal, but two things are clear to me: (1) Our city, and many other cities around the world, have a need for more missing middle-type infill housing and (2) our system is greatly flawed if it takes years and years to ultimately green light the delivery of only a half dozen or so new homes.

    Time equals money. And when we make the process this difficult it means that many developers aren’t going to bother (because the math probably doesn’t work) and that the ones who are successful will need to absorb a bunch of unnecessary costs in the end pricing/rents of their homes (i.e. make the homes more expensive than they need to be).

    225 Brunswick is exactly the kind of project that I would love to work on: a small-scale adaptive reuse project where design is clearly a priority. But with a 3-4 year entitlement timeline (perhaps longer?), it’s simply not worth it (though I do commend the efforts of the project team). I’m sure many others feel the same way that I do and that’s unfortunate when you’re trying to build a more vibrant, inclusive, and competitive global city.

  • Future flexibility in multi-family buildings

    It was recently reported that Jimmy Fallon and his wife are selling their New York City Penthouse in Gramercy Park. It’s listed for $15 million. In looking at the photos, it’s pretty much what I would have expected. It’s fun and quirky. And they have a “saloon room” that looks like it could be in Wyoming. But what I also find interesting is how they assembled this apartment over time.

    It started in 2002. Jimmy Fallon was single and he bought his first place in the building — a one bedroom for $850,000. According to the article, he couldn’t really afford it. But as he was nearing the end of his run on SNL, Lorne Michael encouraged him to buy his own place. So he went and did that in Gramercy Park in a building that dates back to the 1800s.

    As life evolved and as Jimmy got married, he and his wife started buying contiguous apartments — three more to be exact. Their penthouse apartment is now about 5,000 square feet and spans three floors in the building. It’s an interesting case study in the flexibility of multi-family buildings. Here is a building that was built in the 1800s and has probably seen a myriad of changes over its lifetime.

    Future flexibility is something that is talked about here in Toronto in the context of new construction. We talk about “knock-out panels” so that someone like Jimmy can grow into a larger suite. I’m not sure how often this actually happens, but I would imagine the frequency is relatively low. But it’s very possible and not just in older buildings like The Gramercy Park.

  • Opendoor launches cash-backed offers

    Opendoor is best known for allowing homeowners to instantly sell their homes online. Enter your address. Get a cash offer. And then choose a closing date. (The commissions are around 5%.)

    Today, Opendoor announced something new called cash-backed offers. What it does is help to reduce the friction on the buy side and how it works is that Opendoor literally backs your offer with cash.

    If for whatever reason you can’t come up with suitable financing, Opendoor will buy the home themselves and you’ll have 240 days to figure out your affairs and buy it back from them for the same price and at the same terms.

    The idea is that it helps to improve the attractiveness of your offer, which is particularly useful in competitive low interest rate environments, such as the one we’re living through right now. (Already about 36% of the market in the US is compromised of all-cash homes sales.)

    Opendoor started by dramatically reducing the barriers to selling a home (supply). And now they’re trying to make things easier on the demand side of the marketplace. At the same time, the process is going digital. I think this is great for consumers.

    For more on the trends shaping home buying in the US, check out this report that was published by Opendoor last month.

    Full disclosure: I am long $OPEN.

  • How to model a wealth tax

    I just came across this post by Paul Graham called, “modeling a wealth tax.” It’s from last year, but it recently resurfaced. In it, he paints a scenario. Let’s say you’re a successful entrepreneur in your twenties (i.e. you make some money) and then you live for another 60 years. How much of your stock would the government take with various wealth taxes?

    With a 1% wealth tax, it means that you would get to keep 99% of your stock each year. But assuming the wealth tax gets applied every year, you would be left with 0.99^60, which equals 0.547. Put more simply, a 1% wealth tax would mean that over the course of the 60 years after you built your company, you would be giving the government 45% of your stock.

    How did this number get so big?

    The reason wealth taxes have such dramatic effects is that they’re applied over and over to the same money. Income tax happens every year, but only to that year’s income. Whereas if you live for 60 years after acquiring some asset, a wealth tax will tax that same asset 60 times. A wealth tax compounds.

    Of course, Paul also points out that giving away a portion of your assets each year doesn’t necessarily mean that you’re becoming net poorer, so long as your assets are increasing in value by more than the wealth tax rate.

    Still, these are massive numbers. A 2% wealth tax would translate, over this same 60 year time period, into the government taking 70% of your stock. A 5% wealth tax works out to 95%. For more on this, check out Paul Graham’s post.