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.
We are in West Virginia now, where the only kind of housing that we have come across is — not surprisingly — low-density, detached, and single-family.
Indeed, approximately 75% of the residential land across the entire US is estimated to be zoned for detached single-family homes. Using data from UrbanFootprint, the NY Times recently published a series of city maps outlining the percentage of land dedicated exclusively to this housing type.
In some cases, such as on residential corner lots in Portland, duplexes are allowed. But generally speaking, the pink corresponds to detached single-family housing. About 15% of residential land in New York City is zoned for this, compared to about 94% of the land in San Jose.
Interestingly enough, none of the residential land in Manhattan is zoned to accommodate detached single-family housing.
I have been writing about algorithmic home buying on the blog since Opendoor launched back in 2014.
I don’t have anything new to report on that today, but this recent article from the WSJ is interesting in that it talks about why Phoenix, in particular, has become ground zero for algorithmic home buying, as well as for institutional investors looking to buy cheap rentals.
Across Opendoor, Offerpad, and Zillow, nearly 500 homes are now being purchased — largely by software — in Phoenix each month:
One of the reasons why Phoenix is well suited to these platforms is that the housing stock is cheap and fairly homogenous. (The WSJ calls it “stucco sprawl.”) This makes it easier for the algorithms to put a value on the homes.
A big chunk of the housing stock is also relatively new. Just over 36% of it was built in 2000 or later. And it tends to trade fairly often. Below is the percentage of homes in 2018 that were resold within a year of purchase.
It’s also worth noting that Arizona is a non-recourse state, meaning you’re typically not personally liable if you default on your home mortgage. You simply hand back the keys. So it’s viewed as a fairly risk tolerant state, which may be one of the reasons why Phoenix’s median home price chart looks like this:
I’ll end with this quote from the article: “It’s the dawn of e-commerce for real estate,” said Zillow Chief Executive Rich Barton. “Phoenix is ground zero.”
Last week I went for a tour of Sidewalk Labs’ “307” workshop here in Toronto. In it they have a generative urban design tool that allows you to toggle things like density, building shape, building height, the amount of green space, the distribution of green space, and so on.
Perhaps some of you have seen it or used it before. The controls look like this:
After you’re done playing around with the dials, you are then able to provide feedback on the design that you’ve birthed through two very simple feedback buttons. One is a happy face. And the other is a sad face. (I wonder if the placement of these two buttons has any impact on responses.)
What I like about this tool is that it immediately imposes a certain degree of reality and it forces you, the participant, to acknowledge the various trade-offs that need to be considered when you’re designing and planning a city.
For example, if you want lots of parks and public spaces, but you want to hold population density constant — perhaps because you’re trying to make use of an investment made in transit infrastructure — well then you’ll need to accept taller buildings.
A very similar thought process goes into each and every development pro forma as we all try and manage the myriad of competing interests. But I guess this is also true of life in general. There are gives and there are takes.
The 2020 Summer Olympics, which will be held in Tokyo, have added 5 new sports, one of which is skateboarding. As someone who grew up skateboarding as a teenager, and is all too familiar with being chased out of public spaces, this lends a great deal of legitimacy to the sport.
It’s hard to think of a sport that is more closely connected with architecture and, more specifically, public architecture. Curbed’s recent long-form article about “the public spaces that shaped skateboarding” is a good reminder of that. Here is an excerpt (EMB refers to Embarcadero Plaza in San Francisco, which was previously known as Justin Herman Plaza):
When skateboarding debuts at the Tokyo Olympics next summer, some three decades after the first polyurethane wheels hit the bricks at EMB, it will have completed the long, improbable trip from criminal act to social and institutional acceptance. But even as an Olympic sport, skateboarding will remain a direct physical response to the varied terrain of American public architecture.
Interestingly enough, one could go on to argue that the history of skateboarding is really steeped in the adoption of public spaces that had, in many cases, failed to serve their intended purpose. In other words, skateboarders were often the only people using these urban spaces:
“What made Justin Herman Plaza attractive to skateboarders and work for skateboarders was its inappropriateness to the traditional city scale and function,” King says. “You had all these planners and architects in the 1950s and ’60s saying cities need these grand, celebratory spaces—and they really didn’t.” But apparently skaters did.
Welcome skateboarding to the 2020 Summer Olympics in Tokyo.
121 East 22nd — which is OMA’s first ground-up project in Manhattan — recently finished up construction at the corner of E 23rd St and Lexington Ave (the site continues through to E 22nd St, where there is basically a 2nd building). I wrote about the project over two years ago, here.
The defining feature is its “prismatic corner”, which, I understand from this interview with David Von Spreckelsen (President of Toll Brothers City Living), was largely an outcome of the site’s restrictive zoning. There was a requirement to have constant street walls. That minimized what could be done architecturally on the project’s main elevations.
The solution is two contextual street walls — the punched windows are designed to match the rhythm of their adjoining buildings — coming together and creating dramatic visual interest only at the point where they intersect. Below is a rolled out elevation from OMA. Note the gradient created by the windows as they converge toward the corner (center in the drawing below).
The other interesting thing about this project is that it reminded me just how different the built form of Manhattan can be compared to Toronto. In the case of 121 East 22nd, the streetwalls rise 150 feet without any stepbacks. There is then a 10 foot stepback before the building rises another 60 feet — similarly without any additional breaks.
Mid-rise buildings tend to attract more end-users because of their boutique scale. That is, they attract people who plan to move into the building once it is built, as opposed to buyers who plan to rent out their unit. We are certainly seeing this with purchasers at Junction House.
Because of their generally smaller scale and because they are often built in mature neighborhoods with few opportunities for new construction, supply of new mid-rise housing also tends to be limited. That bodes well for future price appreciation.
Here’s a quote from Shaun Hildebrand (President of Urbanation), taken from the above Globe article. (Sorry, it’s behind a paywall.)
“Price growth between the two building types [mid-rise and high-rise] began to converge in 2018, and in Q1-2019, buildings under 12 storeys saw average resale prices per square foot grow 10 per cent year-over-year, compared to 6.5 per cent for buildings of 12 or more storeys,” Mr. Hildebrand said. “We may be now entering back into a period of outperformance of mid-rise buildings as the market is shifting.”
Being a sports fan is like having a bipolar disorder. The highs are high. And the lows are low. But right now — with the Toronto Raptors having clinched their first ever NBA Finals appearance — we are all on a high. Though the job is far from over, this city has waited 24 seasons for this moment. Turns out, all we were missing was one of the greatest basketball players of all time.
It’s pretty amazing to see how far we have come both as a franchise, and as a global city. When Scotiabank Arena was completed in 1999, it, and the surrounding area, looked like this. On Saturday night after the win, it looked like this, a veritable “sports alley.” I have long thought that Bremner Boulevard should be placemade into a sports alley connecting Scotiabank Arena (on the east) and the Rogers Centre (on the west).
From now until this Thursday, all is right in the world. Enjoy it Toronto, and Canada. Masai Ujiri made a bet that I think most, if not all, of us would agree has paid off. Had it not, Raptors fans across the country would be criticizing him for trading away our franchise player. But that’s par for the course in this bipolar world of sports fandom.
San Francisco recently became the first city in the US to ban the use of facial recognition software by city agencies. (There’s a second vote next week, but it is considered just a formality.) A similar ban is also making its way through the system in Boston.
I thought the following quote by Aaron Peskin in the New York Times was an interesting one, because it speaks to some of the growing tensions between tech, policy, and city building:
“I think part of San Francisco being the real and perceived headquarters for all things tech also comes with a responsibility for its local legislators,” Mr. Peskin said. “We have an outsize responsibility to regulate the excesses of technology precisely because they are headquartered here.”
I can appreciate both sides of this argument.
For those concerned about crime and safety, facial recognition promises more effective policing. That’s why this technology is already used at many airports, including SFO. (Because it’s under federal jurisdiction, it won’t be impacted by this ban.)
At the same time, there are legitimate concerns related to the large-scale collection of personally identifiable data. And it is this same concern that is fueling the debates here in Toronto around what Sidewalk Labs is up to along the waterfront.
I am not an expert on this particular topic (or many topics for that matter). But if you’re a regular reader of this blog, you will know that I believe in innovation and I believe in progress.
However, I also believe that it is important and healthy for us to be having these debates. Because what I do know is that I wouldn’t want Toronto to become Shenzhen. I wouldn’t want to jaywalk across the street and have facial recognition software automatically send a ticket to my phone and post my photo to a “wall of shame.”
The word on the street is that Sonder — the marketplace for vacation rentals and competitor to Airbnb — is close to finalizing a $200 million investment round that would value the company at $1 billion.
I first wrote about Sonder back in 2016 after I met someone from their business development team here in Toronto. I have yet to stay in a Sonder, but I’ve looked at their rentals a few times.
One of the main differences between Sonder and Airbnb is that the former head leases their rental supply. And they do this by trying to go higher up on the food chain and partner with developers and real estate operators.
In this regard, they are similar to WeWork. And it allows them to sit somewhere in between Airbnb and a conventional hotel. The supply is distributed, but the service offering is more consistent.
Of course, this arguably makes their business model slower (they have to negotiate leases) and more costly (they’re committing to fixed costs). So it becomes a question of: How valuable is that consistent service offering?
Lately when I travel, I’ve been trending more toward hotels, as opposed to Airbnb-like rentals. I like the experiences that many hotels are now focused on creating and I like knowing that if my flight arrives late (in a place like Brazil), I’ll be able to get into my room.
Jens von Bergmann (data analyst and mathematician); Nathanael Lauster (sociologist); and Douglas Harris (law professor) have been working since 2018 on a study of how condominiums are used and occupied across Canada. The goal is to use the results to better inform public and academic debate.
They recently presented some of their early findings at the National Housing Conference in Ottawa and have since made that information public. It is still a work in progress, but already there are some interesting takeaways. To start, here is a chart showing occupied housing units in Canada and in select CMAs:
Not surprisingly, Canada is broadly speaking a nation of single-detached houses. But in our three largest cities — Toronto, Montreal, and Vancouver — apartments/condominiums are doing a lot of the heavy lifting.
Vancouver has the highest proportion of condominiums. It is a geographically constrained metro area and it is one of the first cities in the country to adopt condominiums as a housing tenure. And in Montreal, there are more apartments under 5 storeys than there are single-detached houses. Not surprising. There’s no “missing middle” in this city.
But the really interesting question is, how are these condominiums being used and occupied? It’s a challenging question to answer, which is why it’s so often debated, but here’s what the researchers have found so far:
The owner and renter categories are self-explanatory. Temporary, which is the least common type of tenure, is where the owner has declared their principal residence as being somewhere else. In other words, the condominium is a second home.
The vacant category is effectively that city’s condominium rental vacancy rate. These are condominium units which are empty, but that are at the same time listed for rent. There are relatively few of these. In Toronto and Vancouver they’re virtually non-existent in this dataset (2016).
Finally, we get to unoccupied units. This one is tricky and the researchers aren’t exactly clear on what is driving this number. They chalk it up, at least partially, to the flexible nature of condominiums. For example, it could be empty because the unit is switching from owner-occupied to rental, or vice versa.
That said, it is very interesting to note that Toronto and Vancouver actually have the lowest percentage of unoccupied condominium units. This may be surprising to some of you given the public discourse around investor units in these two cities.
Generally, they found that in Canada’s three largest metro areas, the following rule of thumb seems to apply: For every 10 condominium units built, 6 will become owner-occupied, 3 will enter the rental stock, and 1 will go unoccupied. Does that seem right to you?
If you’d like to dig into the methodology that the researchers used, you can do that over here at Mountain Doodles. All of the charts and data used in this post were taken from there.
