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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Tag: development

  • The definitive but crazy guide to creating more affordable housing

    Okay, so maybe this isn’t an entirely definitive guide. But the intent is to make this post a kind of working post. As new ideas emerge (from my end or from your ends), I will endeavor to update it, so that maybe one day it will become a bit more definitive. I also think it’s important to keep it a little crazy. Because housing affordability is clearly a tough problem to solve, so unless we start thinking differently and acting boldly, we may not get there.

    Here goes.

    • Encourage new housing at all scales (low, mid, high)
    • “Upzone” all major streets and transit station areas
    • Allow multi-unit dwellings in low-rise neighborhoods and ensure that any applicable codes and/or policies are not creating unnecessary obstacles to building at this scale
    • Work to make the largest possible housing scale permissible on an as-of-right basis — that is, remove the rezoning process wherever possible and allow builders to go right to a building permit (a lengthy rezoning process can cost millions)
    • Avoid the use of inclusionary zoning policies that do not provide an equal offset or subsidy (such as a density bonus)
    • Ensure that any development charges and levies are commensurate with the burdens created by new housing and that existing property owners are funding their fair share through property taxes
    • Identify the areas that are NOT seeing new housing and then create incentives to make development feasible
    • Search for underutilized land and other opportunities to add new housing — no land parcel should be considered too small
    • Incentivize small-scale prototypes as a way to test out new ideas and foster innovation — specifically with respect to climate change and construction productivity
    • Eliminate all parking minimums – no ifs, ands, or buts
    • Depoliticize the planning process as much as possible — local politicians are not generally incentivized to encourage new housing
    • Eliminate the ability for individuals to block or significantly delay new housing
    • Ensure that there are enough staff to expeditiously review and process development and building permit applications — if builders are hiring “expediters” in the hopes of moving these things along, it means something is broken
    • Put in place strict response and issuance timelines for building permits
    • Bonus city staff (and anyone else who touches housing supply) based on the number of housing units approved and permitted each year
    • Design smaller and more urban-friendly garbage trucks so that less space is lost in every new housing development
    • Reduce/eliminate complex urban design guidelines, such as Toronto’s widely used 45-degree angular plane guideline

    What is missing from this list? And/or what did I get wrong?

    Last updated: July 25, 2022

  • The pre-meeting is often better than most panel discussions

    When you’re preparing for a panel discussion, one of the things you usually do is have a pre-meeting with all of the participants. The purpose of this meeting is, of course, to get to know everyone and decide on what you’re going to talk about. Everything then gets buttoned up and you have the actual panel.

    But one of the things I’ve been feeling lately is that oftentimes the pre-meeting is more interesting than the actual panel. And that’s because everyone is more relaxed and everyone is engaged in a genuine discussion that hasn’t been pre-meditated. Nobody wants to hear boring and overly-scripted answers. Natural and free-flowing discussions are so much more engaging.

    So I’m going to try and keep this in mind and not put on a sucky panel next week at the land & development conference (which, by the way, will be in person). I’m moderating a panel on innovations in project design, delivery, and building operations. If you’d like to join, you can register over here.

  • We’re hiring, again

    The development team at Slate is hiring once again for our Toronto office. We are looking for a coordinator/analyst to join the team and work on all aspects of our projects (which span the full lifecycle of development and are pretty cool if you ask me). If you’ve read some of my past hiring posts (examples here and here), there isn’t a lot more that I can say about our company, our culture, and our approach to development.

    But what I would emphasize is that our culture is paramount. I am biased, but I think we have a great team that works well together and that cares deeply about what we do. All of this is important, which is why in the past I have encouraged candidates to go beyond their resume and share something else like their online presence or a link to something that would help us get to know them a little better.

    If you would like to learn more about the position and/or apply, please do that over here on LinkedIn. And if you have any questions, feel free to reach out to me on Twitter.

  • Being a real estate developer means asking a lot of questions

    I was having coffee with a developer friend of mine this morning and we got onto the topic of asking a lot of questions. We joked that that’s what we do all day.

    Development projects happen because of teams of very smart people all working together toward a common goal. It’s a beautiful thing. And as a developer, there are certain expertises and competencies that you should have.

    But for the most part, we usually sit in rooms as the least qualified person. We are not structural engineers. We are not geotechnical engineers. We are not architects (though I sometimes pose as a fake one). We are not planners. And we are not façade specialists, among many other things.

    But we are the ones taking on most of the financial risk and trying to bring everything together. And what that means is that you end up asking a lot of questions. You collect information, you try and consider what could go wrong, you lean on past experiences, and then you make a decision — often without perfect information or 100% certainty.

    This is how projects move forward. You have to rely on others and you have to make decisions. Because not making a decision is even worse. It burns time, which is why too many cooks in the kitchen can be the kiss of death for development projects.

    I’m sure the same thing can be said for many other things in life.

  • No-cost affordable housing in Toronto

    It upsets me when I read things like this (click here if you can’t see the embedded tweet above). I think it creates a false sense of a free lunch and ignores all of the nuances and complexities associated with inclusionary zoning.

    IZ is an obligation to provide a certain number of affordable units in new housing developments. There’s a lot of detail and debate around where this should apply, how much needs to be provided, and at what degree of affordability.

    But at the end of the day, it’s important to keep in mind that at meaningful levels of affordability, these IZ homes are going to be built at steep losses. More info on the economic impacts of IZ can be found here.

    The simple math is that the costs to build these homes are going to be greater than the revenues that they bring in. Which is why developers aren’t out building affordable housing everywhere. There’s no margin.

    In order to build, somebody or something needs to provide a subsidy so that this revenue-expense shortfall can be made up. How this works its way through the market is where I have tried to focus the discussion when writing about IZ. There are complexities. Some lessons from Portland, here.

    But to just assume that these costs will get magically absorbed by housing developers, with no other knock-on effects or distortions to the market, is incorrect.

  • Innovation in real estate development

    I am moderating a panel at the Toronto Real Estate Forum later this year (it’s on December 2 to be exact). The topic is innovation in development. There is a great panel of speakers (more info here) and the plan right now is to cover everything from new design and construction approaches to the rise of crypto and blockchains. Topics that are all near and dear to this blog.

    But we are still in the early stages of planning and I haven’t yet figured out what the questions to the panel will be. So I thought it would be interesting to hear from all of you: What would you say are the most important topics to cover when it comes to innovation in development? What’s next for our industry, or what should be next for our industry?

    If you have any thoughts, please leave a comment below. That way everyone can see them. Supposedly this is one of the most asked for topics at the real estate forum, and so it’s clearly top of mind for many people.

  • Urban China’s empty homes

    China Evergrande Group has been in the news lately for being one of the most indebted property companies in the world. The company is now looking to raise some $5 billion by selling a stake in one of its business lines. That seems like a lot of money, but apparently it has upwards of $300 billion in liabilities. As I was reading about the company (in this WSJ article) I was surprised by some other stats about China’s housing market. According to some sources, nearly a third of the country’s GDP can now be tied back to real estate-related activities (see above chart). On top of this, about 21% of homes in urban China were thought to be vacant as of 2017. This equated to about 65 million empty homes. I don’t know what the exact numbers look like today, but these are staggering figures that speak to overbuilding.

    Chart: WSJ

  • Pretextual planning

    Strong Towns recently published an interesting set of articles talking about something they refer to as “pretextual planning.” Articles here and here. What they mean by this is that sometimes we create planning rules not necessarily because we think they are the right thing to do, but because they serve as good bargaining chips when dealing with developers and builders. For example, let’s not eliminate parking minimums but instead concede on it during the entitlement process. This, the articles argue, is not good practice. And I would of course agree with that.

    But here is another very valid point that is made: when you make building so painfully complicated you end up creating a whole bunch of negative externalities. Not only does the cost of housing and building go up, but you also 1) make it more difficult for smaller builders to participate in the market and 2) you end up increasing the minimum size of new developments. And that is because as projects get more complicated and expensive, you end up needing larger and larger projects to amortize / justify the development expenses.

    It’s really too bad.

  • Development as a leading indicator

    Building new buildings takes a really long time. It is not uncommon for development timelines to to span 5-10 years, and sometimes even longer. It is particularly frustrating when you see unnecessary roadblocks and delays throughout the process. But that’s a topic for another post.

    Perhaps one of the positives of these timelines is that they force you to think well into the future. Take for example electric vehicles. Most car manufacturers have already announced aggressive electrification targets for the year 2030.

    What that means is that if you’re starting a new project today, you have to assume that it will be completed into a world where many more people will be coming home and plugging in their car. Perhaps it will be the majority of people. So you probably need to plan for that.

    Another way to think about development is that it is a leading indicator for what’s coming. If we stick with the example of cars and parking, I think it’s pretty clear that parking is becoming increasingly scarce in our biggest cities. The pressures are simply too great.

    In all of our Toronto projects, we are currently building no more than about 0.4 parking spaces per suite. And there’s pressure to bring this number down even further. There are lots of examples of zero parking. The biggest reason is costs, but we also know that big cities don’t function well when everyone is driving around.

    This is also not a new trend.

    If you look at the multi-family buildings that Toronto completed in and around the 60s and 70s, many will have parking ratios in the range of 1-2 parking spaces per suite. This is totally untenable in today’s environment (except for a small subset of the market) and I bet you that a lot of this parking is now sitting vacant.

    Things change. Development can sometimes tell you what those changes might be.

    Photo by Michael Fousert on Unsplash

  • Risk and architecture

    Building things, as we all know, is a risky endeavor. I think of myself as an optimist, but the reality is that there are countless things that can go wrong. There’s approvals risk, political risk, market risk, construction risk, design risk, and many other kinds of risk, some/many of which will be entirely unforeseen. If you asked me two years ago, I wouldn’t have listed pandemic risk as being all that high up on the list.

    So one way to think about the process of building/developing is that it is an exercise in risk mitigation. This makes it sound a lot less sexy than “city building.” Given this, there can be a natural and understandable tendency to want to repeat what worked the last time around. Why make a change and introduce more risk into the system if you don’t have to, right? This is arguably one of the reasons why it is often said that the real state industry isn’t all that innovative. Too busy managing risk.

    To give a specific example, let’s say you’re really focused on managing design risk. In this case, you might make the decision to always work with the same architect. This way you can establish a set of typical approaches and a standard spec. You know how to work together and you know what you’re getting when it comes to working drawings. Rinse and repeat as best you can.

    There is also something to be said about a kind of product-driven or branded approach to development. In this case you want some consistency to help build a specific brand and experience. And just because you’re using the same firm, doesn’t necessarily mean you can’t innovate and be design forward. This is what great architects do. Think Foster + Partners and Apple. Their stores are powerful brand symbols but also wonderful and highly site specific.

    An alternative approach might be to continually use different (design) architects. And maybe partnering with an array of celebrated firms is part of your brand story. You introduce a certain degree of design risk because you’re now trying out and building new relationships, but you could perhaps argue that you’re mitigating other risks. Does using a brand name architect help to reduce market risk, for example? In some markets, it’s almost essential.

    I don’t think there’s a right or wrong approach here. Use the same firm, or don’t. Use international starchitects, or don’t. The point is simply that development is fraught with risks that need to be managed. Design is one of many. How you choose to do that depends on what you’re trying to do and what you’re after.