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.
A colleague of mine sent me this Bloomberg article today and said, “Here’s an article about things you already know.” The article cites a recent report by Altus Group that compared government-related fees on new housing across Canada and the U.S. What they discovered will not surprise any of you who are in the industry: Toronto has some of the highest government-imposed charges on new homes.
For new condo apartments, the report found that government charges can add up to as much as C$124,582 per unit. That’s about 50% higher than the average unit in the U.S. and about 30% higher than the average unit in Canada (see above chart for the list of cities). While all of us in the industry can appreciate this, I don’t think most homeowners and tenants understand this. Hopefully they’re reading this post.
This week, Matthew Yglesias of Vox makes the case for raising kids in the city. Spoiler: Driving sucks. Cities have lots to do. And parks can be better than lawns. However, he also talks about why this proposition is becoming increasingly difficult for many families. Here are a couple of excerpts:
Now the father of a 4-year-old son, I live in Washington, DC, a city that is, mercifully, marginally more affordable than New York, and I wouldn’t want to raise a family any place other than the city.
But unfortunately, families are disappearing from American cities even as city living in general has become fashionable again for those who can afford it.
Children cost money. And they take up space. And urban space has become much more expensive — repelling growing families. This suits the proclivities of smug suburbanites just fine, but as someone who grew up in a big city in the 1980s and 1990s when city living was both less fashionable and more affordable, it seems like a tragedy to me.
I didn’t grow up in the city. Though, I spent time in apartments and other higher density housing. And I don’t have kids. But I find this topic interesting. It’s also an important one. I don’t believe that the childless city is a good thing.
Rachelle Younglai and Chen Wang’s recent piece in the Globe and Mail on suburban household debt (in Canada) has a number of interesting stats. Here are some of them:
Looking at debt service ratios across the country, the most financially stressed neighborhoods in Canada are almost exclusively in the suburbs. (Map of the Greater Toronto Area shown at the top of this post. Data from Environics Analytics.)
34 of the top 100 most financially strained neighborhoods in Canada are located in Brampton, Ontario.
Brampton has grown at 2x the rate of Toronto over the last decade.
43% of Brampton’s housing was built between 2001 and 2016.
80% of homeowners in Brampton have a mortgage compared to 63% across the Toronto region as a whole.
80% of Brampton’s property tax revenue comes from residential property (not surprising). In comparison, 47% of Toronto’s property tax revenue comes from commercial properties.
About 2/3 of Brampton’s work force leaves the city for their job. This makes sense given the above point.
The other thing the article talks about is the increase in the average household size in many suburban communities as a result of people renting out parts of their house.
One Brampton gentleman is quoted as saying that he rents his basement out to 3 or 4 students and his upstairs bedrooms to two truckers. This translates into typically 6 vehicles parked in his driveway.
Assuming this is the trend, I wonder how much of this additional income is being reported to CRA. Because if it’s not, then it could be throwing of these debt ratios and making the financial situation look more dire than it is.
In any event, I think this speaks to, among other things, the role that many suburban communities now serve for new immigrants coming to Canada. They are doing what they can to try and get ahead.
It’s also worth noting that if you look at the above map of the Greater Toronto Area, the lowest “debt spots” are in fact where homes tend to be the most expensive — the core.
Developing a building can often feel like you’re trying to solve a rubik’s cube. Among other things, you have to manage a myriad of different stakeholders, all of which — naturally — operate in their own self-interest. There’s the city, community, politicians, various agencies, consultants, tenants, purchasers, lenders, investors, the market at large (of which you really have no control of), and many others. Oftentimes you even have stakeholders whose interests are mutually exclusive. Indeed, the things that they want can sometimes be at odds with each other. Your job is to figure out a solution that satisfies as many of these interests as possible.
To give you an example, let’s say that you’ve been asked to introduce a stepback into your building in order to break up the elevation. From an urban design standpoint, this may make perfect sense. Hello, datum line. But now your construction costs just went up. You have to transfer your mechanical lines, insulate the roof, introduce new bulkheads, and, for the purposes of this example, let’s say you now need to introduce a structural transfer. This is big cost item that you hadn’t accounted for. And because you just reduced the height of the building to satisfy another stakeholder, you don’t have the excess clear height to accommodate the additional depth required by this new structural element. There is, of course, always a solution. But usually something will need to give.
At the same time, this raises some interesting philosophical questions. What’s more important in this example? The urban design move or keeping construction costs low so that the building can be delivered more affordably? The cynics will argue that this is a moot point because developers will always profit maximize. But I would encourage you to check out some of my past posts, such as “Cost-plus pricing” and “The impact of inclusionary zoning on development feasibility.” This problem solving dynamic is one of the things that makes development so challenging. But it is also one of the things that makes it incredibly rewarding.
Some of the projects that they profile include Dock 72 at the Brooklyn Navy Yard, which was raised up in order to lift it out of a floodplain; the “solar carve” tower by Studio Gang, which was designed to prevent shadows from casting along the adjacent High Line (pictured above); and the recently completed Casablanca Finance Tower by Morphosis.
This last one, pictured below, uses thick aluminum beams to shade the building. That’s a pretty important feature in North Africa.
There are a number of home equity startups in the marketplace today.
A few years ago I wrote about an alternative product to HELOCs or home equity loans, called Point. And earlier this year, I wrote about a startup, called Landed, that is helping “essential professionals,” such as teachers, with their down payments. They’ll contribute up to 10% of the value of a home in exchange for a share in any future gains, or losses.
Today, another startup in the space — Patch Homes — announced a $5mm Series A round. From what I can tell, it appears to be similar to Point in that it involves the fractional sale of home equity. Though, to be clear, the model is distinct from the fractional homeownership that is popular in many high demand vacation destinations. Here’s a bit more on how the product works (source):
The Patch model enables homeowners to “tap into” their home equity by selling 20–40% to Patch’s affiliate, Patch Capital, which shares in both the upside and downside. The homeowner remains in control of her or his home for the life of the relationship and exits via a sale or refinances in 7–10 years.
While this product is not for all homeowners, it provides a new and important financing option. The Fed estimates that home equity ownership in the US is $15 Trillion. It makes no sense that the only financing options are additional debt or a complete sale of the property. Patch gives homeowners the option to de-lever their personal balance sheet or otherwise raise cash. Clients have used Patch proceeds for numerous reasons, the most popular of which are to pay off debt, increase liquid savings and finance home improvements.
I am not surprised to see this gaining momentum. The biggest benefit is that it gives you partial liquidity (i.e. cash up to $250,000), without having to sell your property or take on additional debt service payments. It’s equity, not debt. Fred Wilson, an investor in the company, calls it fractionalizing home equity.
Today, Monocle announced a new “City Series,” which will take the form of a focused half-day summit. The objective is to explore the urban issues facing mayors, developers, investors, and citizens. The first summit will take place this November 4 (2019) in Chengdu — the capital of the Sichuan province in China.
For those of you who aren’t familiar with Chengdu, it’s a modest Chinese city with over 14 million people in the administrative area and over 10 million people in the urban boundary (2014 figures). It is the 5th most populous agglomeration in China.
I can’t vouch for the quality of this new series, since this will be the first one, but Monocle has been running a longer, multi-day, quality of life conference for a few years now. Mostly, I am intrigued by the selection of Chengdu as the inaugural city for this new series. I take it as evidence that interesting things are happening there.
Transit City in Vaughan is providing direct access to an adjacent Buca restaurant. 55C in Yorkville is providing refrigerated storage space for perishable deliveries. And Junction House is incorporating a co-working space on the ground floor overlooking Dundas St W. We wanted it to have real utility (a place to work and hang out), but also serve to foster a sense of community within the building.
I have long been a fan of hotel lobby bars. They’re a place for social interaction, as well as a place for chance encounters. One of the best in the city is perhaps the Lobby Lounge (or “urban living room“) at the Shangri-La.
Of course, part of their success is aided by the fact that hotels are, by their very nature, transient places. And that transience can often encourage people to be more open. That makes the spaces more social. You also have the benefit of an operator (i.e. a bar/restaurant), which is what Transit City is leveraging with Buca.
Residential lobbies aren’t quite the same, but there are lessons to be learned. Oben Flats has been programming the lobbies in its rental buildings for years and they are doing a great job. And with the growing interest in co-living arrangements and small space living, I am sure we’ll be seeing more, not less, lobby rethinking.
On September 8, 1949, Toronto held a groundbreaking ceremony at the intersection of Yonge & Wellington to celebrate the start of construction for its very first subway line. (Formerly known as the Yonge line, now called line 1.)
The scene looked like this:
Some of the buildings in these pictures still remain, but many do not. The first picture is looking north. And the second one is looking south toward the lake. You can see the rail corridor in the background.
There’s something very urban about these images. The storefronts look active and the streets are full, though no one appears to be live tweeting the event and this clearly pre-dates Toronto’s transformation into the most diverse city in the world.
But my favorite bit of these photos is the people hanging out on the exit stair, watching the march toward modernity. It’s an image that no longer correlates to Toronto.
I took the above photo on my Fujifilm X-T3 at the Museum of Contemporary Art here in Toronto. Obviously, it is a cast of David Bowie’s head. I’ve been using Fujifilm’s X cameras for exactly 3 years now and have already gone through 2 different models. I love them. But Om Malik’s recent post on why the future belongs to computational photography is, in my opinion, entirely accurate.
For most people, taking photos on a standalone camera and dropping them into Lightroom is not only far too much work, but also unnecessary. Here is a chart from Om’s post showing total worldwide digital camera unit sales (in millions). Sales have fallen off a cliff from about 10 years ago and now look to be on the verge of dying.
What is obvious is that we are all now just taking photos on our phones. Thanks to better chips, sensors, and software, the future of photography looks, again, destined to be computational. Apple is set to announce its new iPhone 11 (or whatever it will be called) this week and already the rumors point to a dramatically improved camera.
This change in hardware has also changed our relationship to the photograph. We now take photos for the purpose of real-time sharing, which is another point that Om makes. When I post photos of things that have happened in the past — as I often do — people are commonly confused: “Where are you? When are you back in Toronto? Wait, is this a #latergram?”
This has made photographic memories feel ephemeral. Once the moment has passed, we forget about them. They get drowned out in new real-time images and shares. As a society we are taking more photos than ever before. Not surprisingly, this lowers the gravitas of each individual one.
