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.
Michael Bohmeyer is the founder of a Berlin-based startup called “Mein Grundeinkommen” or “My Basic Income.” In the six years since he first asked for donations, his company has given more than 650 people a no strings attached stipend of 1,000 euros a month for one year.
The idea has been to test whether or not a basic income payment could, among other things, improve people’s happiness and improve the way that governments manage their social welfare systems. According to this recent NY Times article, Germany spends almost a third of their GDP on social welfare.
Since founding “My Basic Income,” Michael has gone on to publish a book and also partner with the German Institute for Economic Research in Berlin. And so far, his findings seem fairly positive. Instead of valuing the money itself, people seem to really value the sense of security that it brings.
Few people quit working, because a basic income is exactly that — basic. Instead, people seem to be using it to do things like quit that job they hate in order to find a better one. The payment provides some downside protection and that can be empowering.
This is obviously not a new concept. It’s been tested and even implemented in many places around the world, and it has become increasingly popular as an idea in recent years. So here are some additional data points. If you’re interested in this topic, you may want to check out what Michael has been up to since 2014.
At the beginning of this year (which seems like eons ago), I wrote about a CityLab series that Feargus O’Sullivan was doing on the vernacular home designs of a handful of European cities. Cities like London and Berlin.
Well, after a brief pause, that series is back in the form of a CityLab “storythread.” It’s now called, “The Iconic Home Designs That Define Our Global Cities.” In it, he explores the various floor plans, housing typologies, and tenures that you might find around the world. Everywhere from from Singapore to Reykjavik.
The most recent article is all about Prague’s communist-era apartments. Apparently people call these paneláks because they were initially built using some sort of collection of prefabricated panels. They were a quick and dirty housing solution for a city and country that were rapidly urbanizing starting in the late 1950s. (See, prefab works.)
But what I find most interesting about the story of these paneláks is how their reputation seems to have changed and evolved over time. They proved to be a far more adaptable form of housing than you might initially think, going from written off and ready for demolition, in some cases, to then becoming a form of aspirational housing.
Part of this allegedly had to do with a handover from state ownership to private ownership, which maybe goes to show you that architecture and design, alone, aren’t enough when it comes to housing innovation. You really need to consider the whole picture.
But regardless, it is clear to me that tastes do change, and housing is no exception. Renewal is an integral part of urban life. And one generation’s trash might be another generation’s treasure.
Who needs to travel when you have, this? This, is a site called Drive & Listen, which allows you to drive around cities — well, watch vides of people driving around cities — while listening to local radio stations. It’s oddly fascinating in an I-spend-hours-on-Google-street-view kind of way. (It’s okay if you do that too.) A colleague sent out the link this morning and I thought it was a pretty clever idea, particularly right now, when many/most of us are yearning to travel, but can’t. The first cities I visited were Buenos Aires, Tokyo, Sao Paulo, Lisbon, Berlin, and, of course, Toronto.
I came across this stack of old Wallpaper city guides while reorganizing a few things over the weekend (because that’s what happens on the weekends now). They are pretty beat up and color faded from travel. It looks like these guides are still being published by Phaidon (along with an app), but it’s been well over a decade since I bought one.
I know the exact time period of the above books because I used to do really nerdy things like date and location stamp them when I got them. The Rome book was July 2007 and I picked it up in Dublin, while I was there working for a real estate developer before the global financial crisis. I also discovered old phone numbers and email addresses written inside of them. Usually it was a Hotmail address.
What I liked about these guides is that they were fairly condensed — good for a long weekend — and they were generally design-focused — perfect for architecture nerds like me. Their restaurant, bar, and club selections were also just fine as a jumping off point. After that it was up to you to make your own adventure.
I sent this photo to my friend Alex Feldman over the weekend — he also went without any sleep in Berlin — and he reminded me what it was like at this time. This was 2007. The first iPhone was just being released. Its map functionality was nowhere near what it is today (or didn’t exist). And I certainly didn’t have one. I had a Blackberry with a plastic wheel on the side. It was basically a giant pager.
To navigate a city at this time meant using a physical map. It also meant getting repeatedly lost and having to ask real people where to go. Alex also reminded me that I made him wander all around Berlin so that I could buy a new pair of glasses. What can I say, this was pre-laser Brandon and I needed cool architect glasses. They ended up being red.
As frustrating as this must have been at times, there’s something nice about traveling without knowing each and every step and without being able to summon an Uber at any point in time to take you exactly where you want to go. In fact, this is probably the central ingredient of all good travel: you need to allow yourself to be open to new experiences.
One of the great lessons of Anthony Bourdain was that you have to get out of your comfort zone. Cities have both highs and lows, but there’s real value and authenticity in the lows if you’re willing to engage beneath the surface. Perhaps that is the irony of old fashioned guide books in the pre-smartphone era. They were supposed to tell you exactly where to go, but they actually helped you find the opposite.
The only city that I never actually got around to visiting from the above stack is São Paulo. As you can tell, Brazil has been on my list for many years. I did make it to Rio de Janeiro a few years ago and São Paulo was supposed to be October 2020. But I’m pretty sure that trip will need to wait. Maybe I should leave my phone at home.
I just subscribed to Kirsten Dirksen’s YouTube channel. She makes videos about simple living, self-sufficiency, and small homes, among other things. She has nearly 1.3 million subscribers and her videos have almost 500 million views. I think many of you will really enjoy her channel.
The above video is about an apartment in Lapa, Lisbon that was renovated by architect João Gameiro. Originally constructed in 1819, the top floor space had been pretty badly neglected. João renovated it by striking, what seems to me like, the right balance between old and new.
Last year, the city of Berlin agreed to a five year rent freeze for some 1.5 million flats constructed before 2014. The way it was initially approved is that it would freeze rents at mid-2019 levels and allow for only 1.3% inflationary increases. All of this is being challenged in the courts, but the Financial Times is suggesting that it could still come into force by March 2020. Here is an excerpt from a recent article. (Guy Chazan isn’t holding back about the kind of people that he believes Berlin attracts.)
The legislation, which should come into force by March this year, is City Hall’s response to a lingering housing crisis that shows no sign of easing. Packed out with Brexit refugees, international party people and wannabe tech entrepreneurs, Berlin is in expansion mode, its population growing by 40,000 a year. Yet affordable housing remains scarce. Rents have doubled over the past decade, as new residential construction fails to keep up with soaring demand.
As I mentioned before on the blog, these policies are not intended to apply to new buildings. That would surely choke off new construction, which would only exacerbate the underlying supply issue that Berlin is facing. But not surprisingly, this move has also put a freeze on capital expenditures, according to the same FT article. Local trades are complaining that, “It’s as if someone’s just turned out the lights.”
Feargus O’Sullivan is doing a series in CityLab right now on the “home designs” that define four European cities: London, Berlin, Amsterdam, and Paris. The first one is on London’s classic “two-up, two-down” design, which refers to a two storey home with a living room and kitchen on the ground floor and two bedrooms on the second. It’s a simple design, but one that has supposedly endured.
O’Sullivan argues that for many, or perhaps most in Britain, this is what a “home” feels like. It’s grade-related and there are two floors. Indeed, only 14% of British people live in an apartment, compared to 57% in Germany (a majority). This percentage is much higher in London, with about 43% of people living in an apartment. But about 25% of the population still lives in some sort of attached house.
Home equals house. And for us North Americans, this is of course relatable. But the Germany example is a reminder that this is not necessarily universal. Attitudes toward housing are cultural. And cultures can and do change. I am seeing that happen right now in Toronto. Some of us are becoming less like the British and more like the Germans.
The below graphs are taken from a recent (June 2019) report by Knight Frank on “prime” residential pricing across the world. They define “prime” as generally being the top 5% of each market by value. What these graphs show are the spread between the average price of a prime property and the top price achieved in that market.
The most expensive market is Hong Kong. The average price of a prime property in 2018 was USD 4,251 per square foot (or USD 45,760 per square meter) and the top price achieved was in 2016 at USD 28,154 per square foot (or USD 303,051 per square meter).
Using the 2018 average, a 350 square foot studio apartment would run nearly USD 1.5 million (or almost CAD 2 million), assuming there are “prime” studios available in the market. Remember, we are talking about the top end of the market.
If you’d like to download a copy of the full report, you can do that over here.
Berlin just approved a five year “rent freeze” on apartments in the German capital. The rent caps will be implemented on January 1, 2020, but will apply retroactively to all rental agreements from June 18, 2019 onward (which is when the decision was made). It is estimated that this new law will apply to some 1.5 million apartments.
The move is in response to rapidly rising apartment rents, which grew about 12% in 2017 alone. So I can appreciate where this is coming from.
From what I have read, it will not apply to new construction, which is the first thing I checked when I saw the decision. That would have almost certainly choked off any new apartment construction in the city. With a capped top line, it wouldn’t take long for costs to increase and make new rental construction infeasible.
That said, a similar squeeze is liable to happen for existing buildings. It is one thing to cap rents (revenue), but what about utility, maintenance, labor, and other operating costs (expenses)? As costs rise and operating margins tighten, it can become exceedingly difficult to reinvest in, or even maintain, an apartment building.
Wired’s oral history of how the London startup scene came to be is a good reminder that, typically, a city needs some great big exits (acquisition or IPO) to really kickstart an ecosystem. In the case of Silicon Valley, you could perhaps trace things back to Fairchild Semiconductor (1950s). But a more recent example of this phenomenon would be the PayPal Mafia, whose members have gone on to found Tesla, LinkedIn, YouTube, and other companies that you may have heard of.
Put simply: success begets success. When a startup does really well and the founders and employees of that company get rich, it is likely that many will go on to found/fund other successful companies in that same city. In the case of London, that catalytic startup was arguably Skype (at least according to Wired). Microsoft acquired the company in 2011 for $8.5 billion, giving birth to the Skype Mafia. Of course, that wasn’t the only ingredient, but it sure helped (excerpt from Wired):
Since 2008, according to data compiled by Dealroom.co, the UK has created 60 unicorns (tech companies valued at $1bn or more) – 35 per cent of the 169 created across Europe and Israel. In the past three years, the UK has created more unicorns (25) than France, Germany, the Netherlands and Sweden combined (19). And London has produced 23 unicorns with a combined value of $132bn, compared with Berlin’s eight, worth $32bn.
The world has changed since Skype was founded. It’s now cool to be doing a startup. But given that every city seems to be trying to establish a thriving startup scene, I think it’s valuable to point out just how important a single big exit can be, not just for the people within the company, but for the broader city. Easier said than done, right?
