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.
The Junction House team is excited to announce that construction will start this fall and that our ground breaking ceremony will be held at 11AM on Saturday, October, 19th. Mark your calendars.
It will take place at our Sales Gallery — 2720 Dundas St W. This will be one of the last opportunities to see the award-winning Junction House Sales Gallery before it is demolished in preparation for construction.
There will be photo opportunities for everyone in attendance, and so we encourage you to bring your phones/cameras. You’re welcome to extend this invitation to family and friends, but kindly RSVP by sending an email to info@junctionhouse.ca.
This week, RBC Economics published a study on Canada’s rental market where they argued that the pace of new supply needs to at least double in markets like Toronto in order to meet future housing demand and balance the market. Similar things, I’m sure, could be said about many other housing markets around the world.
The report pegs the current rental housing deficit in Toronto at about 9,100 units:
And because they believe that the cost of ownership is pushing more people into rentals, the number of renter households is expected to grow at an average rate of 22,200 units per year in Toronto.
If you take 22,200 units per year over the next two years, and add in the current deficit of 9,100 rental units, you get to a total count of 53,500 rental units. This is what RBC Economics believes must be delivered to the market in order to restore equilibrium, and decrease the upward pressure on rents.
Rental units are, of course, delivered to the market in two main ways. There’s purpose-built rentals and there are for-sale units that end up as rental housing. But even if you amalgamate both of these tenures, we are not building enough housing.
Against this backdrop, I find it curious that developers are so often vilified. Earlier this week, I saw Jennifer Keesmaat tweet out that — as we ready for this fall’s federal election — any sensible housing plan must move away from our current for profit housing delivery model.
Who, then, will build these 53,500 rental units? That part wasn’t clear to me.
A colleague of mine sent me this Bloomberg article today and said, “Here’s an article about things you already know.” The article cites a recent report by Altus Group that compared government-related fees on new housing across Canada and the U.S. What they discovered will not surprise any of you who are in the industry: Toronto has some of the highest government-imposed charges on new homes.
For new condo apartments, the report found that government charges can add up to as much as C$124,582 per unit. That’s about 50% higher than the average unit in the U.S. and about 30% higher than the average unit in Canada (see above chart for the list of cities). While all of us in the industry can appreciate this, I don’t think most homeowners and tenants understand this. Hopefully they’re reading this post.
This week, Matthew Yglesias of Vox makes the case for raising kids in the city. Spoiler: Driving sucks. Cities have lots to do. And parks can be better than lawns. However, he also talks about why this proposition is becoming increasingly difficult for many families. Here are a couple of excerpts:
Now the father of a 4-year-old son, I live in Washington, DC, a city that is, mercifully, marginally more affordable than New York, and I wouldn’t want to raise a family any place other than the city.
But unfortunately, families are disappearing from American cities even as city living in general has become fashionable again for those who can afford it.
Children cost money. And they take up space. And urban space has become much more expensive — repelling growing families. This suits the proclivities of smug suburbanites just fine, but as someone who grew up in a big city in the 1980s and 1990s when city living was both less fashionable and more affordable, it seems like a tragedy to me.
I didn’t grow up in the city. Though, I spent time in apartments and other higher density housing. And I don’t have kids. But I find this topic interesting. It’s also an important one. I don’t believe that the childless city is a good thing.
Randy Shaw is the Editor of Beyond Chron, Director of San Francisco’s Tenderloin Housing Clinic, and author of, Generation Priced Out: Who Gets to Live in New Urban America.
In his recent piece in Beyond Chron, he makes the argument that, from San Francisco to New York, homeowners who oppose new multi-unit housing are in fact the ones driving gentrification.
He admits that there are some exceptions and cites San Francisco’s SOMA neighborhood as a place that became upscale because of new development. (I think it’s more nuanced than that.)
But the key point is that there countless examples of neighborhoods changing their socioeconomic position without the presence of new development. (There’s investment, but at a smaller or individual scale.)
Here’s an excerpt from Shaw’s article:
Banning apartments from single family home neighborhoods limits new residents to those who can afford to purchase a home. Banning new multi-unit construction also artificially reduces supply, driving up home prices for existing owners.
That’s how most San Francisco neighborhoods, and those in other high-housing cost cities, gentrified. It happened with little or no multi-unit construction. Yet homeowners have adeptly shifted blame for the gentrification of urban neighborhoods from their own land use policies to builders—even when no building has occurred.
But in the end, do these details even matter? What we have here are competing self-interests. Developers, obviously, want to build. And many people benefit when this does happen. But others don’t see it that way.
Adrian Cook’s recent blog post about parking got me thinking about a few driving-related issues. Adrian points out that most condo buildings only allow owners to rent out their parking spots to people who already live in the building. But oftentimes, that’s not the customer. The people in the market for a downtown spot are the ones who commute into the city. And so what we are seeing in many downtowns is an oversupply of parking. Municipalities need to adjust their requirements.
What I have found is that most, but not all, cities are now fairly flexible when it comes to urban parking requirements. They recognize the hypocrisy in trying to encourage alternative forms of mobility while at the same time mandating a certain number of parking spots. And so the driver is more typically the market. Empty nesters and families who buy larger suites — at least here in Toronto — still almost always want parking. And it’s a deal breaker for them. Sometimes they want 2 spots.
Of course, there are also many instances where the location and unit mix of a project can support building absolutely no parking. There are lots of examples of the market excepting this, and so my view on parking is that there needs to be flexibility. Parking is typically a loss leader. The incentives are in place to build a hell of a lot less of it. But developers build it because they have to.
Lastly, I find that discussions around car dependency tend to ignore that we have designed vast swaths of our cities to be positively inhospitable to people who aren’t driving. Adrian is right in that if you look at the modal splits for people who live in downtown Vancouver and downtown Toronto, you will find a lot less drivers. And that’s because the environment is much better suited to other forms of mobility. The solution starts with urban form.
Inc. Magazine just did a profile on Opendoor, which is a company that we have, of course, talked a lot about on this blog and that I continue to follow closely.
It’s interesting to read about some of the challenges that they’ve been having as a result of their frictionless open houses. Since all you need is a smartphone, the company has been having the ongoing problem of people camping out in their listed homes. Sometimes for weeks. They’ve been working to address this by restricting the hours (6AM to 9PM) and by installing motion detectors. I am sure they will figure it out.
The company is also having to be careful in terms of how it positions itself alongside realtors. There are many livelihoods at stake here. Here’s an excerpt from the article:
During interviews, Wu has chosen his words carefully when discussing Opendoor’s potential to replace Realtors. “The reality with Realtors today,” he said on stage at the Startup Grind Global Conference in Silicon Valley in February, “is their role is shifting from project management–especially in our ecosystem, where we’re automating a lot of the processes–to advisement.”
Fred Wilson (venture capitalist) has argued many times before on his blog that business model innovation is far more disruptive than technical innovation. I think it’s valuable to keep that in mind in the context of this discussion.
Opendoor continues to charge a commission fee (sometimes a higher one than is typical), but it also makes money on the flipping of homes and it has plans to vertically integrate other aspects of the real estate business.
There’s an interesting debate happening online right now. A recent article by Derek Thompson (of the Atlantic) made the claim that today’s urban renaissance is great for young college graduates, but not so good for kids.
Here’s a quick synopsis:
Cities have effectively traded away their children, swapping capital for kids. College graduates descend into cities, inhale fast-casual meals, emit the fumes of overwork, get washed, and bounce to smaller cities or the suburbs by the time their kids are old enough to spell.
Raising a family in the city [New York City] is just too hard. And the same could be said of pretty much every other dense and expensive urban area in the country.
Michael Lewyn (of the Touro Law Center) responded to this argument with a post titled “the myth of the childless city.” While it is true that the US fertility rate is at an all-time low, the numbers — at least some of them — suggest that cities aren’t all that childless:
Furthermore, not all urban cores are doing poorly in retaining children. Washington, D.C. had just under 32,000 children under 5 in 2010, and has over 45,000 today. In Philadelphia, the number of children under 5 increased from just over 101,000 in 2010 to 104,152 in 2018. Even in San Francisco (which, according to The Atlantic article, “has the lowest share of children of any of the largest 100 cities in the U.S.”), the number of under-5 children increased from 35,203 in 2010 to 39,722 in 2018.
What I would be curious to see is a more granular look at where children are being raised within specific cities, and how that may, or may not, be changing over time. City boundaries can be broad.
I came across this tweet by Sean Galbraith last night. You will probably need to click through to see the full extent of the photos. It is a series of images showing two back-to-back houses. The lands touch one another. But if you were to drive from one house to the other, it would take you about 18 minutes because of the area’s road network. Approximately 7.1 miles.
Back when I was starting my career as a planner in Florida in the years leading up to the housing crash, I worked on sooooooo many projects like this. (Click image to see full extent) pic.twitter.com/H094sdi30X
— 🏭🏘🏢Sean Galbraith🗻❄️🥏 (@PlannerSean) July 24, 2019
This, of course, is far from urban. It would take over two hours to walk this same distance (assuming an average walking speed of 1 mile every 18 minutes). If you’re an urbanist, this is surely galling to you. But I think it’s also important to remember that this is, at least partially, a result of a consumer preference for dead end streets that limit through traffic.
This recent NY Times article — which makes the case that the current protests in Hong Kong are at least partially a result of inequality — has a pair of interesting diagrams that speak to the city’s tight housing market.
The first compares average living space per person in Hong Kong to Paris and New York City. New York City appears palatial compared to the illegally subdivided apartments that are discussed in the article.
The second looks at housing affordability as a multiple of median household income. Hong Kong is over 20x. I am curious what median incomes were used for each of the cities. A small denominator makes the multiples look worse.
In this chart, New York also includes the entire metropolitan area, which would help to improve its affordability ranking. So one could argue that this isn’t really a fair comparison.
At the same time, none of this changes the fact that Hong Kong has some of, if not, the most expensive housing in the world.
