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: housing

  • Thoughts on housing in the Bay Area

    I was out for drinks recently with a friend of mine who is a developer in California and she mentioned a few things to me that I thought were really interesting. 

    First, she talked about how virtually nothing gets built in the Bay Area “as of right.” And so the market is hugely supply constrained. She said, you’re lucky if you can get your entitlements in 2 years. It’s starting to take longer. I immediately said: “That’s Toronto.”

    Second, we talked about Proposition 13, which was timely given this recent post. One of the consequences of Prop 13, beyond helping golf clubs survive, is that longtime homeowners seem to be highly incentivized not to move. 

    Their property taxes are so below market that it can be more cost effective for them to stay put as opposed to downsize – even if they have too much house. This means far less turnover in the housing market.

    Third, there really does seem to be a feeling in the Bay Area that it’s at a breaking point in terms of affordability. When a successful software engineer making $200,000 a year can’t afford housing, people naturally start to look to other cities.

    We hear this refrain all the time in the media, but because I’m not active in that market, it was far more impactful hearing it from a friend.

  • The density delusion

    Joel Kotkin and Wendell Cox recently published a piece in the Orange County Register called, “California’s housing crisis and the density delusion.” I’m sure you can guess where this is going, even if you don’t follow the work of Joel Kotkin. But if you do, you will know that he is an ardent supporter of suburbia and the single-family home.

    Here is an excerpt from the article:

    In reality, the YIMBY’s suggestion that new, dense housing will improve affordability for all is patently absurd. Decades of densification in Los Angeles has seen ever higher rents, displacing low-income, especially minority households. Many former transit customers have been driven to lower-rent areas with less transit service, precipitating a massive decline in ridership, even as billions continue to be spent building new rail lines. The Wiener Bill [my link, not theirs] could exacerbate this trend, and likely increase the need for low-income housing, already well beyond the capability of public coffers.

    I fully appreciate the argument that high-density housing isn’t for everyone and that we shouldn’t be “forcing everyone back to the ‘glory’ days of the city of tenements.” But I disagree with many of their points, including the argument that density doesn’t encourage transit ridership. Density isn’t everything, but it’s an important something.

    The article is definitely worth a read, particularly if you disagree with their positions. That’s how you avoid confirmation bias. I was trying to keep that in mind as I read it. Maybe it worked.

  • Manhattan apartment rents post biggest decline since 2011

    A friend of mine sent me this article earlier today with a sarcastic comment about the relationship between housing supply and rents.

    The article talks about how rents in almost every Manhattan neighborhood have fallen compared to a year ago because of a flood of new apartment supply coming online. The median rent dropped 3.6% (year-over-year) which is the biggest decline since October 2011.

    image

    There has also been a spike in the number of leases with some sort of incentive attached to it (see above). As a landlord you typically want to use incentives, such as free rent, before resorting to lower face rents. Because lower rents mean a lower overall net operating income, which in turns depresses the value of your property.

    But sometimes you have no choice:

    “Landlords have finally realized, ‘OK, we have to adjust these prices because the concessions aren’t doing as much,’” said Hal Gavzie, who oversees leasing for Douglas Elliman. “Customers are looking past the concessions being offered and just looking for the best deals they can find.”

    A few weeks ago I wrote about a similar story playing out in Seattle. It’s almost as if excess housing supply is driving down rents.

  • One year of Inclusionary Housing in Portland

    image

    About a year ago, Portland enacted “Inclusionary Housing” policy requiring new apartment buildings of 20 units or more to offer up a portion of the units at below market rents.

    Developers are able to select from a few different options and the rents are calculated according to a percentage of the city’s median family income (30-80%). I’m not sure how this policy would apply to new condo buildings.

    This is an interesting account by The Portland Mercury of what this policy may be doing to the housing market. I say may because it’s only been a year and there could be other factors at play.

    Between 2013 and 2017, Portland typically built between 3,000 and 6,000 new units per year. Since the IH policy went into effect on February 1, 2017, 682 new units have applied for permit. 

    About half are coming from one developer who appears to be building the requisite affordable units in exchange for no parking minimums. They are now proposing buildings with zero parking.

    Again, in all fairness, it’s only been a year. But already Mayor Ted Wheeler is looking at other incentives to encourage more new construction in the central city. The biggest levers: height and density.

    All of this begins to speak to the very real impact of inclusionary zoning on development feasibility.

    Photo by Zach Savinar on Unsplash

  • Skater’s Paradise: On/Off

    This skateboarding video is incredibly well done. I particularly like the 42 second mark. If you can’t see it below, click here.

    [vimeo 227394921 w=640 h=280]

    It’s incredible from a filmmaking standpoint, but – as I have said many times before on this blog – it also showcases the deep relationship between skateboarding and the urban environment.

    I can’t think of many other sports with that kind of relationship.

  • Revisited: Habitat 67

    Last summer I went to see Moshe Safdie’s Habitat 67 in Montréal. Unfortunately, you can really on experience the architecture from the street. The entire complex is clearly marked as private and you can tell they have to work very diligently to keep the throngs of architecture nerds at bay. I almost called up an agent to see if I could see one of the listed apartments, but decided not to waste anybody’s time.

    Thankfully, James Brittain has a photography exhibition going on in London right now called Revisited: Habitat 67. The aim of the exhibition is to expose the hidden side of the famous housing complex, which I find fascinating, particularly because I wasn’t able to see anything hidden last summer. You can check out a bunch of his photos over at The Spaces.

    There are many dimensions to Habitat 67. But one aspect that stands out is this idea of conferring the benefits of low-rise single-family housing – things like large outdoor spaces and access to light – onto higher density urban housing. It is something that architects today still explore and something that we consider in basically all of our development projects. Habitat 67 considered this over 50 years ago.

  • Los Angeles Councilman says upzoning near transit is the worst idea he’s ever heard

    Earlier this month I wrote about California Senator Scott Wiener’s bill to increase housing supply and mandate greater land-use intensities adjacent to transit. Here is that post.

    Judging by the comments, many of you seemed to think this was a fairly sensible proposal. I know I certainly did. Senator Wiener called it a housing-first agenda, as opposed to a housing-last agenda.

    So I thought it would be interesting to share how some people have responded to the proposal. 

    Los Angeles City Councilman Paul Koretz called it both “devastating” and “the worst idea [he’s] ever heard.” He went on to tell the LA Times that, within 10 years, people should expect their neighborhoods to be transformed into Dubai. 

    His conclusion: “I don’t think people want to see significant rezoning around single-family neighborhoods whether they’re near transit or not.”

    I don’t agree with his first set of remarks, but I agree with his second one. And that, of course, is the challenge. If you own a single-family home down the street from transit, what great incentive do you have to support intensification?

    Paul is the messenger.

  • Multi-Unit Housing in Urban Cities: From 1800 to Present Day

    I just ordered a copy of Multi-Unit Housing in Urban Cities: From 1800 to Present Day by Katy Chey. I figured this was a book that we should have hanging around our office. I also like to support the Daniels Faculty.

    The book covers the following multi-unit housing typologies:

    • Back-to-backs in Birmingham
    • Tenements in London
    • Haussmann apartments in Paris
    • Tenements in New York
    • Tong lau in Hong Kong
    • Perimeter block, linear block and block-edge in Berlin
    • Perimeter block and solitaire in Amsterdam
    • Space-enclosing structures in Beijing
    • Kyosho jutaku in Tokyo
    • High-rises in Toronto

    In addition to each typology, the book analyzes the connection between the housing type and the city. Why did certain typologies flourish where they did and how have they helped to define their city?

    It reminds me of what I was trying to do with some of my recent posts about Hong Kong’s typical tower plan, albeit with far less rigor than what I am sure has been applied to this book.

    I am also curious to read what has been written about high-rises in Toronto. It goes to show you just how defining the current real estate cycle has been for this city. That’s our multi-unit housing typology.

    Image: Daniels Faculty. My multi-unit home made the book.

  • 2017 was a record year for housing starts in Canada, but…

    According to Bloomberg (using data from CMHC), 2017 was a surprising record year for housing starts in Canada: 219,675 units. This is the most since 2007 and is up from 197,916 units in 2016.

    The explanation: job growth (nearly 400,000 new jobs) and population growth were both more robust than expected.

    Multiple unit project starts are also up significantly with 142,840 units starting in 2017. This is a 15% increase from the prior year. Of these units, 102,516 of them were “apartment-like homes.”

    But all of this is nationwide data. Look at what happened in Toronto and Vancouver:

    The increased activity mostly sidestepped land-constrained Toronto and Vancouver, the country’s two most expensive markets, but was robust in the suburbs and less pricey surrounding cities. Starts in Toronto fell 1 percent to 38,738 in 2017, while declining 6 percent in Vancouver to 26,204 units.

    This is not because of a lack of demand. It’s becoming systematically more difficult and more costly to build new housing in these two markets.

  • California State Senator wants to mandate denser and taller zoning near transit

    California State Senator, Scott Wiener, introduced 3 new bills at the beginning of this year intended to address the statewide housing shortage and continue the pivot from a housing-last agenda to a housing-first agenda.

    Here is a summary of the 3 bills:

    These three bills (1) mandate denser and taller zoning near transit; (2) create a more data-driven and less political Regional Housing Needs Assessment process (RHNA provides local communities with numerical housing goals) and require communities to address past RHNA shortfalls; and (3) make it easier to build farmworker housing while maintaining strong worker protections.

    And here is a bit more information about the first one:

    SB 827 creates density and height zoning minimums near transit. Under SB 827, parcels within a half-mile of high-connectivity transit hub — like BART, Muni, Caltrain, and LA Metro stations — will be required to have no density maximums (such as single family home mandates), no parking minimums, and a minimum height limit of between 45 and 85 feet, depending on various factors, such as whether the parcel is on a larger corridor and whether it is immediately adjacent to the station. A local ordinance can increase that height but not go below it. SB 827 allows for many more smaller apartment buildings, described as the “missing middle” between high-rise steel construction and single family homes.

    The belief is that transit-oriented sites in the state of California have the potential to accommodate up to 3 million additional housing units.

    Fewer barriers to creating new housing. More data. And less politics. You can read more about Wiener’s 2018 housing package over on Medium.