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.
This week, I received a notice in the mail that a neighbor to Mackay Laneway House is seeking variances for their own laneway house. I immediately thought to myself, “oh, the hypocrisy.” Here is a neighbor that vehemently opposed my Committee of Adjustment application back in 2017 and now wants to do something similar.
It’s also not like you need minor variances in order to build a laneway house today. They are, as many of you know, permitted as-of-right. That’s how MLH was ultimately built. We went straight to building permit. But in this case, the request is for 7 variances to the current by-law. The build aspires to go above and beyond.
As I’m sure you can imagine, there’s part of me that wants to be a real asshole here. But of course, that would run counter to many of the objectives that we regularly cover on this blog: more housing, revitalized laneways, and so on. So I can’t do that. It’s directionally the right city building move, and they have my full support.
It was for a class on laneway housing and, as it turns out, some of the students had been using MLH as a case study. That’s pretty cool, although the primary lesson is probably “don’t build next to large trees.”
Following the presentation, we had a good discussion about laneways, and it reminded me of some of the things that I believe to be true. More specifically, it reminded me of what I think will happen in the future:
Bona Fide Streets: Laneways will become bona fide streets. Meaning, they’ll get real names (most don’t have one today) and they’ll get serviced. Today, laneway suites are typically serviced via the main/existing house.
Severable Lots: Laneway lots will become severable. Right now this is strongly discouraged, because the intent is to create new rental housing and not new for-sale housing.
Market Inversion: Once these lots become severable, the market will then be able to decide which frontage is most valuable — the current street side or the laneway side. Maybe some get split right down the middle (50/50) or maybe some get biased toward one frontage. Either way, I think it will become common for the laneway frontage to be more desirable given its intimate scale and pedestrian orientation.
Mixed-Use: Non-residential uses will become allowed.
I have no idea when all of this might happen, but I believe it will happen. So I wanted to write it down publicly.
The City of Vancouver recently published this video talking about missing middle housing. For those of you who are following this trend (and reading this blog), there won’t be a lot that is new in the video (although Uytae Lee is great). But I’m sharing it here, anyway, for three reasons. One, it’s an example of Toronto being ahead of Vancouver, which wasn’t the case with laneway housing. Vancouver started allowing these first. Two, it is further evidence that this shift toward intensifying low-rise residential neighbourhoods is really happening — and gaining momentum — all across North America. And three, the City of Vancouver is about to bring forward new multiplex housing policies. So now is a good time to get involved and say things.
As some of you will know, MLH took over a decade to get built. I first did a design for the house back in 2009. Laneway housing seemed like such an obvious opportunity, and so I designed a compact house that could fit neatly within the confines of my 25-foot-wide backyard.
Technically, it was perfectly workable. But I could tell I was too early. After speaking with city staff, I immediately got the impression that this thing was not going to get approved. At least not now. So I shelved the project until 2017.
By this time, it was clear that laneway housing was on its way to becoming a reality in Toronto. It was simply a matter of time. And so Gabriel Fain and I decided to come up with a new design and try our luck at the Committee of Adjustment (we needed, I think, over a dozen zoning variances).
But it turns out that we were still too early. The project was immediately refused. After the decision, I had a few planning lawyers reach and offer to help me with a pro bono appeal. But I decided to wait until the new laneway policies came into force and the home could be built without any variances.
And that’s exactly what we did. In the fall of 2020 we submitted for a building permit, and about 6 weeks later it arrived. The home was then built that winter and it went up on the market for rent in March 2021. It rented right away, even in the midst of intermittent COVID lockdowns.
At this point, it’s hard to imagine that this form of housing was once illegal. Hundreds of permits have already been issued and this number is only going to increase. In fact, I believe that the humble laneway house is destined to become a defining characteristic of Toronto’s urban landscape.
We talk a lot on this blog about laneway housing and ADUs, including, of course, the one that Globizen built earlier this year. But beyond being exceedingly cool (see above), what has this policy change meant at the macro level? To what extent is it actually helping housing supply? Let’s consider Toronto.
As a reminder, “laneway suites” became permissible in the former/old City of Toronto in 2018. The policies where then expanded to the entire city of Toronto in the summer of 2019. So we’ve had just over 2 years of this housing type being fully allowed city-wide.
Though it’s worth keeping in mind that there are only so many laneways in Toronto (which is why “garden suites” are going to be important and may actually end up being more impactful):
Between the introduction of laneway suites and June 2021, the City of Toronto received 306 permit applications to construct, of which 238 were associated with a unique address (the same address can have multiple permit applications).
During this same time period, 183 permits were issued. 107 were still under review at the time this report was written. 15 were refused. And 1 was classified as “unknown”, which I guess means it got lost in the ether or under someone’s desk.
Some of you will probably argue that this isn’t enough new housing for a city of 3 million people with high home prices, high demand, and high immigration. And I would agree.
But it’s still early days, there will be an adoption curve, and the policies are still being tweaked to further remove some of the barriers associated with delivering this housing type. Of the 238 unique addresses that submitted a permit application, just over a quarter of them had an associated minor variance application, which means that they did not fully conform to the current laneway suite by-law.
The most common obstacles appear to be the 1.5m laneway setback, the soft landscaping requirements, and the required fire access. But I know that there are others too. I could have used another foot or two in height on mine.
But as I mentioned before, there are more areas in this city without laneways than with. And so garden suites are going to be an integral component of city-wide ADUs. This will certainly help the adoption curve.
I continue to believe that these are all steps in the right direction and that this is an exciting time for Toronto. We are in the midst of transforming our laneways. But we’re not done yet. We’re going to have to make many other tough decisions in order to further increase housing supply. I’m positive we’ll get there.
There is a commonly held view that short-term rentals (such as the ones you might find on platforms like Airbnb) are bad for housing affordability because they take long-term rentals out of the market and they help to drive up property values. And there’s evidence for this. A study published in Harvard Business Review found that home-sharing alone might be responsible for about 20% of the average annual rent increases across the US.
Findings like these have encouraged municipalities around the world to put restrictions in place for STRs. But like most policy issues, there are nuances. And the thoughtful answers are rarely as obvious as they may initially seem. This has been part of my complaint around inclusionary zoning. It sounds good when politicians say it: let’s just get developers to build us free affordable housing. But again, there are nuances to consider.
Short-term rentals are similar. A recent follow-up study that was again published in Harvard Business Review has actually uncovered some interesting longer-term benefits to STRs.
Using residential permit data, Airbnb listings, and STR policies across the US, the team found that when you look over a longer time horizon, Airbnb listings actually tend to increase the supply of residential housing. On average, a 1% increase in Airbnb listings led to a 0.769% increase in permit applications. Supply is of course good for a whole host of reasons, one of which is boosting the local tax base.
Conversely, they found that restricting STRs tended to reduce the supply of new housing and renovations. After new regulations were put in place affecting STRs, Airbnb listings fell on average by about 21% and residential permits fell by 10%.
Restrictions also seem to have a direct impact on the construction of things like accessory dwelling units (laneway and garden suites for us here in Toronto). When analyzing data in and around the borders between jurisdictions in Los Angeles County, the researchers found that areas without STR regulations saw 17% more ADU permit applications compared to the areas that had restrictions.
For the 15 US cities that the team studied, they conservatively estimated that STR restrictions reduced property values by about $2.8 billion and impacted tax revenues by about $40 million per year. Some cities, like Chicago, have also found success using STRs as an economic development strategy in distressed neighborhoods, which would further bolster the tax base.
All of these findings suggest that a more nuanced approach to STR policies is probably merited.
I watched a bit of the English leadership debate the other night. Eventually I got frustrated and went to bed, but I understand that housing affordability and overall affordability were important topics.
What is clear, to anyone who cares to look, is that in most big cities we are not building enough new housing. According to the above Economist article (linked in the above tweet), the “rich world” has seen new housing production drop by about 50% (relative to population) since the 1960s.
There are many reasons for this. But part of the problem is bureaucracy. Things move exceedingly slow. And another part of the problem is community opposition. Urban sprawl can be easier to swallow because there’s an out-of-sight-out-of-mind phenomenon at work. Stuff may be happening, but it’s not happening in my backyard.
But now that so much of what we do is centered around intensifying existing neighborhoods, we are faced with a battle between the incumbents (existing residents) and the future residents of a community that don’t have nearly as much say — if any at all.
What I like about the Economist article is their line of thinking for how to address this dynamic, which, at the end of the day, is rooted in what I will call expected selfishness.
The approach is around aligning incentives. How could we better structure the delivery of new housing so that more stakeholders stand to directly benefit? Because as we have seen with laneway housing here in Toronto, homeowners will gladly build in their backyard when they stand to benefit directly.
As many of you know, Toronto currently allows “laneway suites” across the entire city on an as-of-right basis. What this means is that no variances or special planning permissions are generally required to build. Assuming you meet the by-law, you can go straight to a building permit.
This is how Mackay Laneway House was built and, though it required an extra layer of approvals from the forestry department because of a large on-site tree, getting a building permit was relatively straight forward. I think it took between 6-8 weeks from initial submission.
As part of the City’s efforts to increase overall housing supply, another form of accessory dwelling unit is currently being studied: garden suites. Public consultations are now underway and, from what I have heard, the hope is to make these similarly as-of-right before the end of the year. Hopefully it’ll be earlier.
I think this will be a positive thing for Toronto and so I would encourage all of you to complete the online garden suite survey that the City has open until June 1, 2021. Public consultation is an important part of the planning process and too often it is the voices of a few representing the views of many.
London has a breed of specialist developers that are known as rooftop or airspace developers. What these developers do is build on top of existing and occupied buildings — mostly residential. Firm examples include Upspace and Apex Airspace. According to this recent WSJ article, the city is also making moves to relax regulations so that more of these top-ups can be completed.
Brokerage Knight Frank estimates that in central London alone there are probably 23,000 buildings that could support a few extra floors, resulting in upwards of 41,000 new homes. I have done early feasibility studies for similar projects here in Toronto and they’re not simple to execute. But building structures are typically constructed with a factor of safety and so, in some/most cases, you can build a little on top without doing any additional reinforcing. (Note: I am not a structural engineer.)
In any case, the benefits of airspace projects are obvious. You’re creating additional supply in a tight housing market like London. Similar to Toronto’s laneway housing program, it’s not going to completely solve the larger problem of affordable housing. But every bit of new housing helps, regardless of where it lands on the spectrum of affordability.
One of the drawbacks, which is the headline of the above WSJ article, is that penthouse residents are getting demoted in the process. They’re going from penthouse to sub, or sub-sub, or sub-sub-sub penthouse. They also need to endure a bit of construction right above them. Cry me a river?
But what is also important to point out is that there are lots of buildings out there which are facing capital expenditure shortfalls. They have maintenance and repair demands that simply aren’t adequately funded. Adding additional floors can be a way for these buildings to generate that cash and, in some cases, residents are even partnering with airspace developers to share in some of the profit upside.
Not surprisingly, these sorts of arrangements are seemingly being met with a fair bit of support. Because in these instances, your options are basically as follows: Either you cut a repairs and maintenance check right now or you support a bit of development and then hopefully you’ll be the one receiving a check in the future. I suspect we’ll be seeing a lot more of this, not just in London, but in cities all around the world.
“Unexpected approaches for the future of our urban spaces.” Publisher Gestalten has a new book out that you can pre-order called, Vertical Living: Compact Architecture for Urban Spaces. The book is not about tall buildings, despite what the title might suggest, but rather about “impossibly slender homes” in narrow and tight urban spaces. As many of you know, I have long been a fan of compact and creative homes. One, they force creativity. It’s like designing a boat (not that I have done that before). Every inch matters. And two, it is about seeing opportunity where others don’t.
Sometimes we miss these opportunities because of cultural biases. We believe that a home should look and behave a certain way. But these viewpoints are not necessarily universal. They vary across cities and they can even vary within cities. As Toronto and many other cities around the world try and figure out how to deliver the so-called “missing middle,” we are going to need to open ourselves up to some of what’s in this book — namely the unexpected. New housing solutions that don’t fit within certain neat and tidy definitions.
We’ve done this before with laneway suites. Formerly an illegal housing type, Toronto is now in the midst of what feels like a laneway housing boom. I don’t know exactly how many are under construction or have been completed under the city’s new policies, but I would wager that the uptake has been strong. And over time, this new housing typology is going to reshape how we think about our laneways. They will evolve along with the new uses that are now beginning to flank them. The unexpected will become the expected.
