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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  • 616 Croft Ave., LLC, v. City of West Hollywood

    The Supreme Court of the United States may soon consider whether inclusionary zoning is in fact unconstitutional.

    A pending petition by the developer of an 11-unit condominium project in the City of West Hollywood is asking whether a $540,393.28 “affordable housing fee” – which is being imposed as a mandatory approval condition – is “subject to scrutiny under the unconstitutional conditions doctrine” set out in previous cases.

    The petition is supported by a collection of researchers and academics from Yale University, George Mason University, as well as many other institutions.

    More specifically, the question asks whether a “mandated permit condition” satisfies the “essential nexus” and “rough proportionality” tests established by the following decisions: Koontz v. St. Johns River Water Management District, 133 S. Ct. 2586 (2013); Dolan v. City of Tigard, 512 U.S. 374 (1994); and Nollan v. California Coastal Commission, 483 U.S. 825 (1987).

    To put it crudely, the nexus and proportionality tests essentially state that for an exaction to be constitutional, there needs to be a reasonable relationship between the ask and the adverse public impacts that can be directly attributable to the project in question.

    Here is an excerpt from the petition:

    Together, the nexus and proportionality tests hold that the government cannot condition approval of a land-use permit on a requirement that the owner dedicate private property to the public, unless the government can show that the dedication is necessary to mitigate adverse public impacts caused by the proposed development.

    In the case of 616 Croft Avenue, the argument is that this 11-unit condo project is not directly responsible for the lack of affordable housing in the city. In other words, the need for affordable housing exists independently of this project. So it fails the test.

    Another excerpt:

    Accordingly, the City
    provided no evidence of nexus and proportionality,
    admitting on the record that the in-lieu fee was not “intended to mitigate impacts caused by development.” Instead, the City explained that the fee was designed to meet “needs for affordable housing that exist independently of the Applicants’ residential
    development project.

    The petition also gets into the fact that, irrespective of this test, inclusionary zoning has not necessarily been shown to have a meaningful impact on affordable housing supply. And it may actually increase housing prices because of a reduction in overall supply and because the cost burden typically gets shifted over to the market rate units. More reading here.

    What do you think of this argument? It will be very interesting to see how this one plays out.

  • Canada 150(ish)

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    Today is Canada Day. And I love my country. (If you’re reading this via email subscription, then: Yesterday was Canada Day.)

    I recognize that not everyone who reads this blog is Canadian. In fact, 50% of my email subscribers and 36% of the users who read this blog on the web are actually from the United States. More Americans subscribe to this blog than Canadians.

    But today isn’t your average Canada Day. It’s the sesquicentennial anniversary of Canadian Confederation. Canadians all across the country and world are and will be celebrating. 

    The CN Tower will put on a pyrotechnics show this evening at 10:30pm and I’ll be watching. There’s even the world’s largest rubber ducky bobbing around in Lake Ontario. I’m missing the connection on this one, but a 6 storey rubber ducky is definitely worthy of an Instagram post or two. Perhaps we should have gone all out and staged a complete bathtub scene in Toronto’s inner harbor. That would have been fun.

    But as much as 150 years of Canada sounds and feels great, I’d like to talk about a different moniker today: Canada 150(ish). And I have two reasons for saying this.

    One the most effective ways to explain the difference between Canada and the United States is to talk about how we became independent.

    In the U.S. it was a “decisive declaration” leading to war. Americans fought for their independence and July 4, 1776 has become a clear temporal marker. They were dependent before and independent after.

    In Canada, our day of independence is less decisive. Instead of complete autonomy, it marks the beginning of a long and gradual process of becoming less and less British, one which arguably didn’t fully conclude until the Canada Act of 1982. 

    So might we call today Canada 35?

    One could also argue that this process isn’t fully complete. I don’t know about you, but our lingering connections to Britain – however benign they may be – actually weaken the Canadian story for me.

    The second reason why I’m throwing out Canada 150(ish) is because I want to acknowledge the fact that there are people in this country who feel excluded from the solidarity that “Canada 150″ is trying to instil. Here is an excerpt from a New Yorker essay by Molly Worthen that was published early this morning:

    Of course, the story of Confederation is largely a story of white men who mostly spoke English. This summer, the few Canadians who are eager to talk about history and reexamine the details of their constitution are those who feel excluded from the standard narrative of Canadian unity and progress: indigenous people and Francophone Québécois.

    Now that I’ve gotten this off my chest, I’m going to get on with celebrating Canada 150 and this incredible place of democracy and opportunity. And for all of the Americans who read this blog, happy 4th of July.

    Photo by Harry Sandhu on Unsplash

  • What land-use restrictions are doing to our cities

    I have Richard Florida’s recent book, The New Urban Crisis, sitting on my bedside table. I’m only about ¼ of the way through it, but I’m really enjoying it. I’ll write more once I’m done.

    What I instead want to talk about today is a recent (and related) article that Florida published in CityLab called: Did Land-Use Restrictions Save the Rust Belt? 

    In it, he leans on the research of two economists – Chang-Tai Hsieh of the University of Chicago and Enrico Moretti of the University of California at Berkeley – and makes 3 valuable points.

    They are:

    It is estimated that land-use restrictions (which limit development / supply) have reduced overall GDP in the U.S. by about 9% or approximately $1.5 trillion per year. It is also estimated that housing supply constraints alone lowered overall growth by more than half between 1964 and 2009.

    At the same time, these land-use restrictions may have benefited other regions – such as the Rust Belt – that would have otherwise lost more people and jobs to places like New York and San Francisco. The research found that without these land-use restrictions, employment growth between 1964 and 2009 would have been more than 1,000% higher in New York and almost 700% higher in San Francisco.

    The final takeaway is one that we’ve talked about before on this blog. One of the most effective things we can do to counteract geographic inequality is to build great transit; transit that connects both people and land to the most desirable areas of our city.

    And with that, Happy Canada Day weekend all.

    Photo by João Silas on Unsplash

  • Lease vs. Life

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    When I was in graduate school in the U.S., I remember it being a pain having to always sign a 1 year lease. I only wanted 8 months so that I could take off during the summers. Too bad Flip wasn’t around back then.

    Flip is a startup that I just discovered, which is positioning itself as the “easiest way to sublet or get out of your lease.” It’s all about reconciling the conflict between lease and life, which don’t always match up.

    The platform is free to listers. So you don’t get charged to post a lease or to flip a lease. Renters get charged a service fee equal to 5% of one month’s rent.

    It’s interesting to think about the surge in short-term rentals and platforms such as Flip that are effectively helping to reduce lease terms by way of streamlining the “flipping” process. 

    Are millennials ushering in a new era of mobility and transience?

    One feature that I think is neat and that I would like to point out is “Bounties.” The platform allows listers to attach a bounty ($) to any listing. Users are then able to grab a unique URL that can be shared around online. If someone takes over a lease via one of your links, you get paid the bounty. Smart.

    In case you’re curious – I certainly was – here’s a ranking of all 50 U.S. states according to how friendly they are to subletters. It also summarizes how to legally sublet. On the friendly side is New York and on the less friendly side is Wyoming.

    Photo by Dan Gold on Unsplash

  • 76 thumbs down

    A few weeks ago Seth Godin wrote a post on his blog called: What 99% looks like. He used the example of a Turkish vlogger who had posted an interview with him to YouTube that received the following view count, up votes and down votes:

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    The point he wanted to make was that many of us will instinctively focus on that one number: 76. We will say to ourselves that 76 people hated our video, our work, so much so that they felt compelled to give it a decisive thumbs down.

    His message was clear: “Ignore it. Shun the non-believers and ship your work.” 76 people out of 108,605 views is not even 1%. And 76 out of (10,827 + 76) interactions is still not even 1%. You could easily say that this video has a greater than 99% approval rating.

    I love this message, because there will always be naysayers, especially if you’re doing something interesting and unique. In fact, having naysayers is probably a good litmus test to make sure that you are indeed doing something interesting and unique.

    But here’s the thing. 

    The YouTube metrics above make for a rather transparent platform. You can see that the video received 108,605 views and that 10,827 + 76 people felt so strongly about it that they wanted to leave a mark by way of a thumbs up or thumbs down. But most importantly, you can see that way more liked the video than hated it.

    But what if it wasn’t clear that over 10,000 people were fans of your work? What if all you saw was how many people hated it? And what if those voices were amplified? That would be pretty discouraging, considering that many of us are already focusing on that number to begin with.

    I can think of many instances where the fog is thick and we don’t have full visibility. That’s where it gets even tougher, but more critical, to “shun the non-believers.” There may be people out there who truly love your work and what you’re trying to do. You just may not know it, yet.

  • Digitizing fast food workers

    I think I am 1 of only 7 people in the world who actually likes the Filet-O-Fish sandwich from McDonald’s. That said, I rarely go, maybe only after a fancy small plate dinner. You know, the kind where you leave starving and you’re desperately searching for a burger on the way home just so you can go to sleep full.

    I have, however, been noticing the introduction of their digital ordering kiosks, which are part of the McDonald’s Experience of the Future strategy. The plan is to replace human cashiers in at least 2,500 U.S. locations by the end of this year and in another 3,000 locations by the end of 2018. By 2020, the majority of U.S. locations should have “EOTF” in place.

    Because of this, analysts are raising their price targets for McDonald’s. They are also attributing its surging stock price to these new operational efficiencies. MCD is up about 26% YTD. And you can bet the ROI math on these kiosks only looks better if/when minimum wages increase.

    This isn’t necessarily groundbreaking news, but if you’d like to dig into some of the math behind why customer-facing fast food workers are clearly going to become a thing of the past, you can do that here.

    I did want to single out one stat that I came across when researching how I will be experiencing Filet-O-Fish sandwiches in the future. 

    More than 70% of all McDonald’s sales in the U.S. happens via drive-thru. This stood out to me as being an extraordinary number, not because I don’t believe it, but because it very clearly speaks to urban-suburban form. It is saying that more than 70% of sales are happening in geographies where it’s actually feasible to have a drive-thru window.

    That’s not possible at the corner of Queen and Spadina.

  • The “R” word

    Albert Wenger recently penned an interesting post about the “R” word.

    It’s about health insurance and why redistribution is a toxic word in U.S. politics, but also why much of what we do as a society – from public roads to insurance – is actually about redistribution. What I like about the post is that he cuts through a lot of the noise and gets right at the crux of things.

    Here’s part of his conclusion:

    So what should you take away from this? There always is some element of redistribution to insurance – at a minimum ex post and generally also ex ante. The “why should I (usually some healthy person) pay for x (usually some payment for someone from a different demographic)” objection to health insurance is about redistribution. We should acknowledge this openly and not pretend that it is otherwise, because then we can move forward and say “you should, because that is your contribution to how our society works.”

    The point of his post, which he reiterates in the comment section, is that “insurance is a commons more than it is a market.” Too much individual choice – for instance, rich people opting out because they don’t need it – actually weakens the system.

    But you should really read his entire post. It’s good.

    Photo by Jamie Street on Unsplash

  • Should Uber be shut down?

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    Last week Travis Kalanick – the cofounder who built Uber into the most highly valued privately held startup in the world – stepped down as chief executive at the request of his investors. This was the culmination of months of controversy related to the company’s toxic corporate culture.

    So what’s next? 

    Benjamin Edelman, associate professor at Harvard Business School, recently argued that this is it for the company: Uber Can’t be Fixed – It’s Time for Regulators to Shut It Down. I discovered the article through a good friend of mine who has felt similarly since the beginning. Uber’s business model is predicated on illegality and that should not be misconstrued as “innovation”.

    I have a few thoughts on this.

    But let me start by saying that this post is not a comment on the company’s corporate culture or its internal practices related to lobbying governments. I have not really been following what’s going on internally and I’ll leave other, more informed, people to comment on those matters.

    With that said, here are 3 thoughts.

    One, shutting down the company feels like an extreme case of throwing out the baby with the bathwater. Lots of companies go through restructuring, assuming that’s needed, without completely capitulating.

    Two, before Uber came along it was still challenging to pay for a taxi in Toronto with a credit card. More often than not the driver would tell you that the machine was broken or ask that you instead pay with cash. At that point, I would have accepted a clunky payment machine mounted to the rear of the front seats as an innovation.

    To say that Uber’s technological innovations were all banal things that its competitors were already about to introduce is downplaying so much of what the company has done outside of its beneficial cost structure. 

    We got perfect information: Where is my car right now? We got full pricing transparency before even accepting a ride: Should I take an Uber or transit or should I drive? We got the ability to get in and out of a taxi without pulling out our wallets: I’ll quickly jump out at this red light. We got dynamic ride pooling and cost sharing: Let’s split this ride 3 ways to bring the fare down. And we got clean cars that didn’t smell.

    Why weren’t any of the incumbent taxi companies do this?

    Three, I fully agree that Uber (unfairly?) benefited from a meaningful cost advantage by operating in the unregulated side of the market. This was a huge boon for the company because, as the data suggests, the demand for taxis is highly elastic.

    But I also believe that the incumbent taxi companies were perpetuating a marketplace that was anything but free enterprise. It ensured that the status quo was maintained and that those who historically benefited from the system continued to benefit from the system.

    Because of this, I’m not sure that we would have seen the innovation that we saw without a company like Uber deciding to operate within a gray area and not ask for permission. Protectionism may have stomped it out. This may be why Hailo – which operated in the regulated side of the taxi marketplace here in Toronto – ultimately wasn’t able to survive.

    Though I suppose you could argue that Hailo’s failure (at least here in Toronto) strengthens the argument that Uber was only able to thrive because of its illegal cost structure. 

    However, it’s important to remember that Uber got its start by actually charging more than traditional taxis. At the outset it didn’t have enough liquidity in its marketplace to compete based on speed and/or price, and so it decided to offer a premium experience. 

    UberX didn’t introduce steep discounts until later on and even today many people will gladly accept surge pricing at multiples of a regular taxi fare. Clearly customers are deriving some other benefits from the app.

    Edelman ends his piece by referencing Napster as an example of another startup that defied legality and was ultimately forced to shut down. Again, shutting Uber down seems extreme to me, but I do agree with his conclusion. Regardless of what happens, the lawful innovations that Uber introduced are here to stay.

    Photo by Carl Joseph on Unsplash

  • Why you should sometimes ignore your customers

    In business we are told to listen to our customers. Be customer-centric. In city building we are told to listen to the community. Be community-focused. And there’s no question that these mantras exist for a reason. They are paramount.

    But when should you not listen?

    I watched a Chef’s Table documentary last night on Massimo Bottura (pictured above), who is the owner and operator of Osteria Francescana in Modena, Italy. Osteria Francescana is a 3 star Michelin restaurant and widely ranked as one of the best restaurants in the world.

    But it wasn’t easy for Massimo at the beginning. His goal was to bring the Italian kitchen into the 21st century and so his plates are often creative takes on classic Italian dishes. His restaurant blends the old and new; food and contemporary art.

    This approach upset a lot of people at the outset. Massimo was seen almost as a traitor who was turning his back on traditional Italian cooking within provincial Modena. Don’t mess with centuries of tradition they would say. Grandma knew best, son.

    Because of this, his restaurant sat empty in the early years, to that point that he was ready to close its doors. The only reason he kept it open was because his wife encouraged him to give it one more year. She said: This is the kind of food you want to make. If you don’t try, you’ll regret it.

    So he gave it another year and luckily he got a few breaks, including a glowing review by a well known food critic from out of town. Once this hit, the Modenese started to quickly rethink their distaste for Massimo’s idiosyncratic dishes. Before long, his restaurant was full.

    So what changed? It wasn’t the dishes. It was perception. The out of town critics and positive reviews gave people permission to like the dishes. This is critical because nobody needs permission to like tradition. It’s tradition, after all. There’s little risk in that.

    But there’s risk in liking something new that hasn’t been done before. Change creates uncertainty. And if Massimo’s wife hadn’t encouraged him to stick with it just a bit longer and ignore the naysayers, the world may not have one of its top restaurants.

    Sometimes we don’t know what we like and want until we are shown.

    Image: Osteria Francescana 

  • Laneway housing represents 19% of all new single family and two family dwellings in Vancouver

    One of the criticisms surrounding laneway housing is that – while great – there is no way for this housing typology to have a meaningful impact on the overall housing supply equation.

    I’ve previously written about the impact of laneway housing in Vancouver. But I wanted to revisit some of the data following this tweet by GRIDS Vancouver, where they link to a spreadsheet they prepared using the City of Vancouver’s building permit data.

    Laneway housing was first allowed in Vancouver in 2009. In that first year, only 18 building permits were issued. But since then the number has grown steadily. In 2014, they hit 377. And in 2015 (up to September), they hit 360. So for the full year, it is highly likely they will show yet another year-over-year increase.

    Since laneway houses became permissible (and up to September 2015), a total of 1,885 building permits have been issued. During this same time period, 8,239 permits were issued for other low-rise housing, up to and including duplexes. This includes single family dwellings, single family dwellings with a secondary suite, and two family dwellings.

    So for a period of almost 8 years, laneway houses have represented on average 19% of all new single family and two family dwellings in Vancouver. If you include low-rise multifamily product into this equation (more than 2 units, but 3 storeys or less ), the percentage is still slightly above 17%. This is something. It’s not everything, but it is certainly something. 

    More conventional low-rise housing still represents a greater number and, of course, most of the new supply is coming in the form of condos, apartments and other higher density housing. But 17-19% are still meaningful numbers when part of the affordability problem is clearly a lack of supply.

    It is for reasons such as these that I, along with many others, want to bring laneway housing Toronto. If you feel similarly, please consider supporting my prototype project by signing your name here.

    Update: A previous version of this post stated that 19% of all new low-rise housing in Vancouver had become laneway housing. This number was calculated on all low-rise housing up to and including duplexes, but excluded low-rise multifamily product. The above post has been updated to lend more precision to my understanding of the data.