Tag: housing

• 41 million

  It seems like just yesterday that I wrote about Canada’s population surpassing 40 million people. Because today, some 9 months later, we’re already over 41 million.

  Since 2000, we are the fastest growing country in the G-7:

  

  This is, in many ways, a positive thing. But it’s also a serious problem if, among other things, we don’t build enough new housing (source):

  In 2013, Canada ranked 13th out of 170 countries in meeting the basic needs of citizens, according to data tracked by Social Progress Imperative. By 2023, it had fallen to 39th, in large part because of a lack of affordable housing.

  For more on this topic, here is a recent article from Bloomberg talking broadly about Canada’s declining social safety net.

  Chart: Bloomberg

  2024.03.28

• FYI, new home coming soon

  This is not a post about laneway housing. Okay, it sort of is. But there’s a broader point to discuss. Recently, a local Toronto newspaper ran this article talking about how a bunch of people are upset that their neighbor is building an as-of-right garden suite. Here’s an excerpt:

  “The members of the community know that they can’t stop the building of this ‘garden suite’. However, they want to change the bylaw to ensure that future ‘garden suites’ can’t be built without community consultation and an environmental assessment,” said a news release from a number of residents in the area that was sent to Toronto media outlets including Beach Metro Community News last week.

  This raises some interesting questions.

  For one, what would be the purpose of this community consultation? Is it just a “Hey, I’m going to be building a garden suite” and then homeowners go do it exactly how they want anyway? Or, would it be an extensive community engagement process where homeowners would be expected to gather feedback, submit a report to the city, and consider design changes?

  And, would this apply to all low-rise housing? In other words, would all homeowners need to consultant their neighbors and do an environmental assessment before pulling a building permit? What if someone just wants to build a small extension or a shed? Or, are we only talking about laneway and garden suites?

  I’m not really sure what the exact intentions are here — besides delaying new housing — but I can tell you that it’s a terrible idea.

  Laneway and garden suites should never require community consultation and/or an environmental assessment. I mean, this is the whole point of allowing them as-of-right. It’s so you don’t have to do these things and you can go straight to a building permit. This is way too small of a housing type to burden with obstacles.

  In fact, the same is true of larger housing types. In my opinion, conventional mid-rise buildings should not have to go through a full rezoning and they should not have to consult with the community. We already know what these buildings look like. We know that they make for great homes. And yet they’re our most expensive housing type to build.

  Removing barriers (and reducing project durations) is a sure-fire way to make them cheaper. Especially in a higher interest rate environment.

  2024.03.20

• Rear-yard suites and secondary suites built in Toronto over the last decade

  Here is a mapping, from the University of Toronto’s School of Cities, showing the number of “closed” building permits issued in Toronto between 2013 and 2023 for both rear-yard suites (laneway houses and garden suites) and secondary suites (like basement apartments).

  

  A “closed” building permit probably means that construction is complete. However, it is not uncommon for a permit to inadvertently remain open. This happened to me with Mackay Laneway House. The permit was supposed to be closed, but it wasn’t.

  So here’s the same mapping with open (i.e. active) permits also turned on:

  

  Three things immediately stand out:

  1. Secondary suites seem to be somewhat evenly distributed across the city.
  2. Rear-yard suites are heavily concentrated in the older areas of the city, flanking the downtown core.
  3. North Toronto is wealthy and isn’t having either of these housing typologies.

  Looking at these mappings, it probably seems like a decent amount of new housing. But that’s not really the case:

  • From 2013 to 2023, Toronto issued 2,209 building permits for secondary suites (1,525 have been closed and 684 remain open as of December 31, 2023).

  • And from 2020 to 2023, Toronto issued 898 building permits for rear-yard suites (192 have been closed and 706 remain open, which does suggest some increased adoption). Rear-yard suites only became permissible in 2018, which is why the date range is shorter.

  To be fair, I would imagine that many secondary suites get built without a building permit. So I think the above number is probably underestimating actual supply. But even still, it doesn’t change the conclusion: A lot more needs to be done to increase the supply of new housing in Toronto.

  2024.01.23

• An overview of rental housing in France

  Rental housing in France is both heavily regulated and supported through dedicated public funds. Here’s a high-level overview of what that means (via this 2021 Brookings case study by Arthur Acolin):

  • Homeownership rates in France went from 35% in 1954 to 56% in 2001
  • As of 2018, 58% of French households own, 40% rent, and the remaining 2% supposedly get free housing from either their employer or a family member
  • Not surprisingly, younger households are most likely to rent (the figure is > 60% for people aged 18-29)
  • Household size seems to play a major factor in how likely people are to live in public housing

  

  • France has some 4.5 million public housing units and 17% of all households live in them (which represents about 43% of all renter households)
  • Within the unsubsidized rental market, 93.5% of households live in homes owned by individual investors (this is as of 2013) and only about 3.5% live in homes owned by institutional investors
  • This is pretty typical of Europe, where multi-family isn’t an established real estate asset class like it is in North America; so for those of you who like to hate on individual condo investors, check out France
  • In the decade between 2010 and 2020, 28 metro regions in France adopted some form of rent control and, in a few markets, like Paris and Lille, there are also maximum rents that can be charged for specific housing types

  If you’re interested in rental housing, Brookings also has articles covering the US, Germany, Spain, Japan, and the UK. They can be found here.

  2024.01.22

• Are short-term rentals really a zero-sum game?

  The prevailing view on short-term rentals right now seems to be this:

  

  That is, it’s viewed as a zero-sum game between residents and tourists. There are only so many homes within a city, and so if any of them are to turn into short-term rentals, then it is a direct reduction in the supply of available long-term homes. This can also happen very quickly given the asset-light nature of Airbnb and the fact that these spaces aren’t usually purpose-built.

  It is for this reason that many cities have enacted strict short-term rental laws that basically only allow you to rent out your principal residence when you’re not around or if you happen to have extra space. In the case of New York, you have to be physically present when the dwelling is being rented, and so the use case is exclusively “I have extra space for you.”

  Either way, the basic idea is to stop people from removing homes from the long-term market. I do, however, find it curious that reductions in housing supply seem to be generally viewed as bad, but that increases in housing supply are often met with skepticism. Doesn’t housing supply work in both directions? Why aren’t more people clamouring for new homes to be built?

  Where my head is at on this issue is that I don’t see it as a zero-sum game. I believe that there should be rules and regulations around short-term rentals, but that they shouldn’t stamp out all use cases other than “here’s an air mattress in my living room.” At the same time, I think we should be viewing this as an opportunity. Clearly we need more homes, more hotels, and more short-term rentals.

  It’s only zero-sum if we make it that way.

  2023.12.22

• This is how many more people Toronto could house if it increased its population density

  As a follow-up to yesterday’s post about infill housing and overall urban densities, let’s look at some basic math.

  The City of Toronto has an estimated population of 3,025,647 (as of June 2023) and a land area of 630 square meters. That means that its average population density is about 4,803 people per km2. Obviously this number will be higher in some locations, and lower in others. But overall, this is the average.

  Now let’s consider how many people we could actually fit within the existing boundaries of the city (city proper not the metro area) if we were to simply match the average population densities of some other global cities around the world.

  

  Again, what this chart is saying is that if we took the same physical area (Toronto’s 630 square meters) and just increased the population density to that of, say, Paris, we would then have a total population of over 13 million people and we’d be housing an additional 10,011,573 humans on the same footprint.

  I am not suggesting that this is exactly what should be done. (Though, you all know how much I love Paris.) What I’m suggesting is that calling a place “full” isn’t exactly accurate. How would you even measure that? What someone is really saying is that they are content with the status quo in terms of built form and density.

  Note: The above population densities were all taken from Wikipedia, except for Toronto’s figures, which were taken from here.

  2023.12.16

• Creating homes for people

  Bill Gairdner of Gairloch Developments sent me this message the other morning:

  

  He is talking about Junction House and he is, of course, right. It is a very cool feeling to create homes for people.

  It’s not easy building buildings. People get upset at you. They tell you that you’re ruining their community. And broadly speaking, it can feel like every imaginable obstacle has been placed in front of you to make things more difficult.

  But at the end of the day, once the dust settles, there will be places to live where places did not exist before. And then people will move into these places and transform them into homes.

  They’ll make them their own, create new memories, and, in the case of the people that Bill was referring to, they’ll raise a family.

  I’m not trying to make this sound more grandiose than it deserves to be. But I am being honest when I say that I know the team feels both a sense of honor and a great sense of responsibility because of the work we do.

  You want people to be happy and you want the city to be a better place. So it’s hard not to feel a little emotional when you see people moving into a place that you’ve worked tirelessly on for several years.

  Yeah, it is a cool feeling, Bill.

  2023.10.30

• Should more people live together?

  We know that, for a variety of reasons, more and more people are living alone. As of 2018, single-person households represented about 28% of all households in the US. This is up from 13.1% in 1960.

  Here in Canada, single-person households became the predominant household type in 2016 (we’re also at 28%) for the first time in Canada’s 150+ year history. And the numbers are even higher for some European countries. In Finland, Germany, and Norway, more than 4 in 10 households are single-person.

  Part of this has to do with people living longer. In Canada, 42% of people aged 85 or older (and living in a private household) live alone. But part of this is also cultural. Japan has one of the oldest populations in the world, but it doesn’t have the highest percentage of single-person households. Although, the number is relatively high and increasing. It’s nearly 40%.

  Whatever the case may be, you could argue that there appears to be some sort of global trend line toward more people living alone. But here’s an important question: Is this a good thing?

  Albert Wenger recently argued in this blog post that, actually, we need new forms of living together. Whether it’s multigenerational living or coliving with like-minded friends, there are clear benefits to living with other people. You get to share resources. You get elders that can look after kids. And you get company.

  There’s also an opportunity to curate your environment. As Phil Levin puts it on his coliving blog Supernuclear: “If your home is filled with motivated people, you will be more motivated. [And] if your home is filled with funny people, you will laugh more.”

  Albert posits that office conversions (which are obviously in vogue right now) could serve as an opportunity to rethink our built environment around coliving. And while this is certainly true, I’m not sure we need it to happen. There are ways we can live together today, within our existing environment, if we want to.

  The question is: do we?

  2023.09.25

• Real estate investors are outbidding people who own strollers

  Here’s a potential scenario:

  “When you have investors competing with first-time buyers who walk in with a couple of [baby] strollers, typically the investor is going to win,” Mr. Pasalis says. “They are well capitalized. They can pay a higher price. And this is why our home ownership rate is declining, because more and more homes are actually going into the hands of investors who rent them out, and amplifying home and amplifying condo prices. We are seeing that.”

  But let’s break this down a little.

  Where are these first-time buyers walking into? Is it a resale home showing or is it a pre-construction showroom? If it’s the latter, then we know it’s going to be difficult / atypical for them to make a buy decision so far in advance. They already have multiple strollers in hand, do they want to wait 4-7 years for their pre-construction home to be ready?

  I would also add that in our current environment — where investor demand for pre-construction homes has waned significantly — the development industry has not seen a marked uptick in end-user demand. Why are they not stepping up now that they’re not being outbid by investors? In my opinion, it’s an ideal time to buy!

  One reason could be that people who own strollers still largely prefer low-rise housing. Maybe it’s for reasons of affordability, maybe it’s a cultural bias, or maybe it’s a genuine preference. Either way, let’s turn our attention to resale homes. In this scenario, who is likely to pay the most?

  If you’re an investor, then you are looking for a specific yield. And so in theory, it should be a mostly dispassionate decision: “Here’s the most that I can pay in order to meet my minimum returns. Do not exceed.” But the question is whether is this is going to be more or less than what a stroller-owning group of people would pay.

  The answer is probably that it depends. However, if the answer is that the investor wins and they then turn around and rent it to people who own strollers, is this actually a problem? And if this same investor happens to own 25 other rental homes and they’re all rented to people who own strollers, is this an even greater problem?

  I suppose it is a problem if you’re worried about Canada’s homeownership rate, which has in fact declined from about 69% (in 2011) to 66.5% (in 2021). But what does this even mean? Is a higher homeownership rate always better? Does Canada have a target number? As of February of this year, the homeownership rate in Switzerland was only about 36.3%. And the last time I checked, it was still a rich country.

  There is nothing wrong with renting. I know wealthy people who have opted to rent their entire life because they enjoyed the flexibility and/or had better places to put their money.

  All of this said, the argument in the above scenario is that, but for investors outbidding people with strollers, these homes would be more affordable and that would in turn increase the homeownership rate. It’s a similar argument to, but for foreign buyers or but for Airbnbs, these homes would be more affordable.

  But in a city like Toronto, we are building very little in the way of new low-rise houses. New supply is virtually non-existent. Similarly in Seattle, they are now building more accessory dwelling units than they are single-family houses. So it is any wonder that demand is constantly outstripping supply and that prices are being bid up?

  In my opinion, a better solution is to rethink how we build our low-rise neighborhoods. And here and here are two good places to start.

  2023.07.08

• Thoughts on Opendoor Exclusives

  My most recent post about Opendoor, the so-called iBuying company, is about how it wants to become the “transaction layer for homes.” What that means is they would like to start facilitating third-party transactions between buyers and sellers, and move away (either partially or completely) from actually owning homes for a period of time.

  The company is still trying to sell homes that it purchased in Q2-2022, which, as we all know, was a very different kind of housing market. So by doing this, Opendoor would be both reducing the market risk that it takes on and making its business model less capital intensive.

  Knowing this, I actually think that “iBuyer” is the wrong moniker for their business. As I see it, the long-term objective is not to just be an iBuyer of homes. The objective is to ultimately facilitate transactions in a capital efficient kind of way. The point of iBuying is/was to seed their two-sided marketplace with sellers.

  As we have discussed before, two-sided marketplaces usually always have a chicken-and-egg problem. No sellers equals no buyers, and vice versa. So you have to figure out a clever way to attract one side. Of course, now that Opendoor has sellers, the company can start to aggregate the demand side (i.e. buyers). And that is exactly what it is doing with Opendoor Exclusives.

  Exclusives works like this:

  • The inventory consists of “off-market” homes that have yet to be listed on MLS
  • The homes are discounted about 2-4%
  • They are available for 14 days
  • You can’t negotiate the price — it’s first come, first served
  • If your appraisal comes in lower, Opendoor will price match
  • And finally, Opendoor will not pay any buyer commissions (which is reflected in the above discount)

  As I understand it, if the home doesn’t sell, it then gets listed on MLS and all of the normal terms and practices would apply. But before that happens, the key objective is to facilitate a quick transaction in one of two ways.

  The first way is for the seller to request an offer from Opendoor’s network of buyers. In this scenario, Opendoor never needs to own the home or perform any improvements (which is usually what it does when it iBuys). It is an intermediary earning some sort of take.

  The second way is for Opendoor to do its usual thing and make an instant offer to buy the home. But here’s the thing. With enough buyers on its platform and by creating a sense of urgency (hey, here’s a lower price!), presumably the idea is that it may never need to close on a number of these homes. It just needs to find another buyer within 14 days.

  If it works, this could be an interesting business.

  2023.03.22