Tag: housing

• Housing doom loop

  This discussion between Patrick O’Shaughnessy and Marc Andreessen is a great follow-up to my recent post about the productization of housing. Broadly speaking it’s about tech, software eating everything, and the future of the world. But if you skip to around the 15 minute mark, Marc talks about the growing divide in our economy between sectors that are changing rapidly and sectors that are changing slowly.

  Examples of the former include things like computers, media, retail, cars, and a lot of the other stuff that we regular consume. Examples of the latter include things like healthcare, education, and housing (you know, the pillars of the American Dream).

  The noteworthy problem with this divide is that the fast changing sectors are producing things that have been getting more affordable over time. The specific example that he gives is televisions. Think about how much more TV you can get today compared to when they were first introduced.

  In contrast to this, things in the slow changing sectors keep getting more expensive. The same university education is exponentially more expensive today than it was a few decades ago, even though it’s far more important for people to have an education than to own TVs.

  A similar thing can be said about housing. How much has really changed in terms of the way we build new homes?

  One of the common threads across these slow change sectors, Marc argues, is strong government intervention. We restrict supply such that we can’t meet demand. We then respond to higher prices by trying to subsidize demand, but this only drives prices up even further. Because, at the end of the day, we haven’t addressed the underlying issue.

  The result is a doom loop.

  If you can’t see the embedded podcast above, click here.

  2022.02.07

• Informal settlements are the desire lines of housing

  Toronto’s new garden suite (accessory dwelling unit) policies are headed to Planning and Housing Committee this week for approval. If you’d like to leave a supportive comment, you can do that over here by clicking “submit comments” at the top of the page. I just finished doing exactly that.

  Given that this is happening, I figured I would share this related article from the New York Times talking about ADUs and informal housing in Los Angeles. I discovered it through this Strong Towns article by Jay Strange. And I love how he refers to informal structures as the “desire paths” of housing.

  Desire paths, for those of you who may be unfamiliar, are the naturally formed paths and lines that get created when people just walk where they want to walk. Usually these are the shortest and/or most logical routes and, by definition, they don’t align with any designed paths or walkways.

  Jay’s point with informal housing is that it is similarly what people actually want to do, but maybe can’t, usually because of restrictive zoning and/or building codes.

  The New York Times gives the example of a family that illegally built an accessory dwelling unit at the back of their house in the 1990s. It was rented to friends and family, and it helped them get through some difficult financial times. But again, it wasn’t lawful.

  According to some researchers at UCLA, Los Angeles County is estimated to have some 200,000 informal units. Many are forced into demolition, but many, like the above example, manage to sneak under the radar because lots of other people are building them and nobody in the community wants to disrupt things.

  Of course, Los Angeles now allows backyard cottages. And so what was once illegal is now not only permitted, but encouraged. Funny, isn’t it? I don’t know if it was the “desire housing” that ultimately made it happen. But it is clear that many people wanted it and they were voting with their actions.

  2022.01.10

• Londoners bought a record number of homes outside of the city this year — or did they?

  

  The Financial Times published an article this week talking about the record number of homes that Londoners bought outside of the boundaries of the city this past year. The total was about 112,780 homes worth some £54.9 billion — again, it was a record in terms of total value.

  The argument is that this pandemic continues to fuel decentralization, flexible working arrangements, and greater demand for larger spaces. Housing preferences have permanently changed. And the suggested takeaway is that this dynamic might have “serious consequences for the city’s population and housing market.”

  But of course, I’m going to question whether this is really the case. The ~£55 billion number is clearly a new high according to the article. The previous record was £36.6 billion back in 2007. But that doesn’t give you the full picture because homes cost a lot more today than they did back then.

  If you look at the total number of homes purchased outside of the city by Londoners, the record still belongs to 2007 with approximately 113,640 homes. When I see this number it makes me pause.

  Because here we are living through a global pandemic and the largest work from home experiment in modern history, and yet the total number of homes purchased outside of the city this past year is still comparable to that of the last housing cycle.

  Did this moment in time really create an anomalous and irreversible shift in housing preferences?

  Photo by Fineas Anton on Unsplash

  2021.12.27

• The world’s first 3D-printed home, kind of

  Habitat for Humanity recently announced that they have completed, in partnership with additive construction company Alquist, the first 3D-printed owner-occupied house in the world. I’m pretty sure that I’ve seen other 3D-printed homes kicking around, but this is still a big deal and one of the first of such homes for Habitat for Humanity. (It also 3D-printed a house in Arizona this year, but I guess that one wasn’t owner-occupied.)

  The 1,200 square foot three-bedroom home is located at 129 Forest Heights Road in Williamsburg, Virginia. And it was “printed” in just 22 hours, which Habitat and Alquist are claiming reduced their construction schedule by approximately weeks compared to a traditionally framed house. Overall, this translated into an estimated savings of 15% on the total construction costs. (Again, according to Habitat and Alquist.)

  These kind of savings are particularly important in many rural communities where it is not uncommon for homes to sell below their replacement cost. Not surprisingly, when you have a market dynamic like this, there’s zero incentivize to build new. I mean, why would you when you can just buy something that already exists for less money, and with less risk.

  Alquist uses a patented concrete to print its homes. The concrete can be left exposed, or it can be finished with traditional building materials. For any load-bearing or structural walls, I understand that they print two walls with a cavity and then use typical reinforcing bars. I would imagine that this approach is particularly helpful when lumber costs are high, but there’s an obvious question around embodied carbon (concrete in lieu of wood).

  Still, it’s hard not to believe that we will be seeing more, rather than less, 3D-printed homes in the future.

  2021.12.25

• We should build more nice places to live

  Nice places to live — however you want to define that — tend to be expensive places to live. There are all sorts of reasons why this might be the case. Perhaps it’s on a body of water, next to a park, or it has some other redeeming qualities.

  Daniel Herriges of Strong Towns makes a cogent argument, here, that when it comes to nice and desirable places it usually comes down to one thing: scarcity. Demand > supply. But on top of this, he argues that in most cases, the supply constraint is artificial.

  Here’s an excerpt:

  In fact, our shortage of nice places is almost totally self-imposed. And it’s precisely because 98% of the North American built environment is so blah that the 2% of places that are really well-designed environments quickly get bid up by the rich and become inaccessible to the rest of us. The solution to this isn’t to stop creating such places, but to create vastly more of them.

  He goes on:

  The same story applies to the countless row house neighborhoods of the Northeast, Chicago, and San Francisco. In city after city, the mass-market, working-class housing of its time has acquired a distinctly bourgeois reputation today. In all cases, the reason lies in economics, not design. What’s abundant becomes culturally coded as middlebrow; what’s scarce becomes culturally coded as elite.

  We have talked before on the blog about how tastes change over time and how housing that was previously undesirable can sometimes/oftentimes become desirable given enough time.

  My sense is that there are a number of factors at play here and it’s perhaps a bit difficult to decode where new “cultural coding” truly starts. But I very much appreciate Daniel’s scarcity argument. Scarcity drives so much in markets (just look at the NFT art market right now and the fixation on rarity tables).

  But let me be the devil’s advocate. If we were to be successful at building no blah and all nice stuff, wouldn’t the rich just seek out a new 2% rarity? And if so, would the 98% still seem just as nice?

  Either way, more nice places to live should always be the ambition.

  2021.12.10

• The Tower — NFT Residences of Solana

  I am not counting on my nascent NFT collection to fund my retirement. At least not yet. But I have enjoyed collecting them this year and using them to learn about and get involved in the crypto space. Playing around and experimenting is one of the best ways to learn.

  I recently discovered a project called The Tower (DAO) and I think that many of you, particularly those in the real estate community, might find it interesting. In its simplest form, it is an NFT project where you buy “residences” in a virtual metaverse tower. They look something like this:

  

  The tower has 500 floors and 20 units per floor. And so there are 10,000 units in total. Each is unique.

  When you buy a residence, you get, among other things, a profile page on the web that allows you to show off your residence and all of the other NFTs in your crypto wallet. You can also see who else owns on your floor.

  Of course there are plans for a lot more. As part of The Tower’s roadmap, the team wants to direct some of the funds that it raises toward real-world affordable housing. There’s also a roommate model in the works where, presumably, people can share their residences and earn tokens.

  Now, I have no idea how a project like this ends up evolving or what it ultimately becomes. But I think it’s a fun example of the kind of creative projects that are being developed as a result of the fact that we can now all take ownership over scarce digital assets.

  Many of these “assets” will likely end up going to $0. But others, as we have seen, will come to be worth a lot.

  2021.11.19

• Hong Kong needs bigger apartments

  CityLab recently published this article about “why Hong Kong is building apartments the size of parking spaces.” It’s about the city’s “microflats” which are typically in the range of 150 to 300 square feet. Supposedly there about 8,500 of these apartments across Hong Kong and in 2019 (this was apparently peak microflat) they represented about 7% of all new residential construction.

  Hong Kong is one of the densest and most supply constrained real estate markets on the planet. And so there are very good reasons for these affordability pressures and the push toward smaller apartments. The article gets into a number of them. The concern I have is that the article also seems to blame developers for a number of these problems, without a clear understanding of the economics behind new construction.

  It is not enough to simply say that developers need to be less greedy and build bigger apartments. If a 250 sf apartment currently costs $1 million and you think it should be twice as big, then the price is now also going to be somewhere around twice as big. Is the answer more $2 million apartments? Developers trade in space and more space costs more money to build.

  All of this is not to say that housing affordability isn’t a problem worth addressing. It of course is. I am simply saying that there is a cost structure behind every new development that is driving decision making and driving what ultimately gets built. Understanding it can be helpful when looking for solutions. Believe it or not, not all developers are bad. Some actually want to help build beautiful, sustainable, and prosperous cities.

  2021.11.09

• New Zealand just abolished single-family zoning (for the most part)

  New Zealand has been in the news lately for sweeping housing legislation that effectively abolishes single-family zoning throughout most of Auckland, Hamilton, Tauranga, Wellington, and Christchurch.

  But before I get into how this will all work, here’s a bit of background from an article that Matt Gurney wrote talking about Toronto’s inability to build affordable housing and create safe streets:

  Now it’s time to segue back to the New Zealand thing, and there’s no particularly graceful way to do it, so I’ll just be blunt and inelegant: the federal government in New Zealand intervened on local housing rules because there was a crisis that local leaders were unable or unwilling to address. New Zealand has severe housing-affordability challenges (though Canada seems determined to close the gap). This has been a problem in New Zealand for years, and not enough was done, so the federal government stepped in… The government expects this to immediately spur construction of new housing units.

  It is no doubt a top down approach. But we all know how difficult it is to build anything at all when you start from the other end.

  So the way this new legislation will work is that it forces local councils to allow landowners to build up to 3 homes and 3 storeys on most lots. This is instead of 1 home per lot. The maximum site coverage has also been increased to 50%. And all of this will be available on an as-of-right basis, so no special permissions or variances needed.

  The pitch is that this will unlock as many as 105,000 new homes in already built-up areas. This is, of course, a good thing for a whole host of reasons. It uses land and infrastructure more efficiently, it makes public transit more viable, and it increases housing supply in a highly constrained market.

  I suspect that we will be seeing a lot more of this in the coming years.

  2021.10.26

• Stable low-rise residential neighborhoods are the be-all and end-all

  Toronto city council has decided to defer its decision on legalizing rooming houses across the city one more time. Some of you may remember that this item went to council in the summer and was deferred to this fall. So now a new report is going to be drafted and the item will then make its way back to council sometime in the new year. Perhaps a decision will be made at that point. We will see.

  This is an interesting debate for many reasons, one of which is its divisiveness. Shawn Micallef wrote a searing piece in the Toronto Star over the weekend talking about how city council is showing its contempt for renters in this city and how council’s inaction is both “insulting and cowardly.” Article, here (paywall).

  At the same time, we know that many/most councillors don’t want this to happen. Which is why you get comments like this (taken from Micallef’s article): “…fundamentally what we need to talk about is what we don’t talk about enough at this council … homeowners’ rights. People who invest in this city and who live in stable residential neighbourhoods, the people that pay the taxes in this city.”

  I have already shared my views on this topic in past posts, but these are annoying comments. I live in a multi-family building. I build multi-family buildings as my job. And my next home is already planned to be in a multi-family building. Does that make me a second class citizen because I don’t live in a “stable residential neighborhood?” Am I not adequately investing this city?

  2021.10.13

• Making River City

  My good friends over at Urban Capital recently released a short film about the making of their River City project here in Toronto. (If you can’t see the embedded video above, click here.)

  For those of you who aren’t familiar, River City is a 4-phase development on the east side of downtown that was really the first project in what was known as the West Don Lands area. Urban Capital secured the right to develop the then government-owned lands in 2008 through a public tender process that was run by Waterfront Toronto.

  It’s a tricky and unobvious kind of site in that it’s surrounded by infrastructure and it came with a whole host of development challenges, including flood risk. But the team figured it out and River City has gone on to win a number of awards including the Ontario Association of Architect’s Lieutenant Governor’s Award for Design Excellence.

  River City is an important project for Toronto in that it dared to be different. It’s like no other project in the city, and I’m not just saying this because they’re my friends. I’m saying it because I want our city to be a global leader in architecture, design, and development, and to continue to push the envelope.

  River City did exactly that.

  2021.10.02