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.

Tag: housing

  • Upsizing to a larger apartment in New York City

    This is an interesting story about New Yorkers starting to seek out larger homes. Last month, Manhattan saw 140 purchase agreements signed for homes priced at $4 million or more. In the last week of February alone, 40 contracts were signed, which is apparently a weekly record for this price point that hasn’t been seen since August 2016.

    What’s also interesting is that, in some of these cases, we’re talking about buyers who bought preconstruction and then went back to the developer to swap for a larger apartment. Developer Scott Avram is quoted in the above article saying that 10 buyers have “upgraded their contracts” at 130 William (David Adjaye project) over the last six months.

    As we’ve talked about before, this is likely happening for a bunch of reasons. People have been working from home and want more space. Interest rates are low. And New York saw some softening in prices and now people are jumping back in to seize on those opportunities. At the same time, it is yet another example of people going long on dense urban living.

  • 225 Brunswick Ave is yet another example of why the missing middle is so damn hard to deliver

    Building buildings is really hard.

    It’s hard for countless reasons, but one reason in particular is that it can be difficult to please everyone. Take parking, for example. This is often a primary concern when you’re trying to develop something new. Too little parking and people might be concerned that cars will start flooding the surrounding streets in search of a spot. Too much parking and people might be concerned about traffic congestion. So it can often feel like you’re damned if you do and you’re damned if you don’t.

    I thought of this as I was reading through Alex Bozikovic’s recent opinion piece in the Globe and Mail called, “Yes, in my backyard: How urban planning must shift to meet our postpandemic challenges.” In it, he mentions a small missing middle-type infill project at 225 Brunswick Avenue here in Toronto. A century-old office building located in a residential neighborhood, a small developer has been working (with Suulin Architects) since 2018 to convert it into seven apartments.

    Here are a few photos:

    This is the kind of infill housing that planning staff and many councillors are trying to encourage across the city. And yet, the year is 2021. This developer is on year three in a process that will, maybe, deliver a total of seven new rental homes. There are also many other examples that we can point to in the city that have faced similar challenges, like this one here on Gerrard Street East. While not nearly as interesting architecturally speaking, it would have delivered 10 new homes proximate to transit. Maybe that will still happen. I can’t say for sure.

    I’m not going to get into the specifics of any one proposal, but two things are clear to me: (1) Our city, and many other cities around the world, have a need for more missing middle-type infill housing and (2) our system is greatly flawed if it takes years and years to ultimately green light the delivery of only a half dozen or so new homes.

    Time equals money. And when we make the process this difficult it means that many developers aren’t going to bother (because the math probably doesn’t work) and that the ones who are successful will need to absorb a bunch of unnecessary costs in the end pricing/rents of their homes (i.e. make the homes more expensive than they need to be).

    225 Brunswick is exactly the kind of project that I would love to work on: a small-scale adaptive reuse project where design is clearly a priority. But with a 3-4 year entitlement timeline (perhaps longer?), it’s simply not worth it (though I do commend the efforts of the project team). I’m sure many others feel the same way that I do and that’s unfortunate when you’re trying to build a more vibrant, inclusive, and competitive global city.

  • Future flexibility in multi-family buildings

    It was recently reported that Jimmy Fallon and his wife are selling their New York City Penthouse in Gramercy Park. It’s listed for $15 million. In looking at the photos, it’s pretty much what I would have expected. It’s fun and quirky. And they have a “saloon room” that looks like it could be in Wyoming. But what I also find interesting is how they assembled this apartment over time.

    It started in 2002. Jimmy Fallon was single and he bought his first place in the building — a one bedroom for $850,000. According to the article, he couldn’t really afford it. But as he was nearing the end of his run on SNL, Lorne Michael encouraged him to buy his own place. So he went and did that in Gramercy Park in a building that dates back to the 1800s.

    As life evolved and as Jimmy got married, he and his wife started buying contiguous apartments — three more to be exact. Their penthouse apartment is now about 5,000 square feet and spans three floors in the building. It’s an interesting case study in the flexibility of multi-family buildings. Here is a building that was built in the 1800s and has probably seen a myriad of changes over its lifetime.

    Future flexibility is something that is talked about here in Toronto in the context of new construction. We talk about “knock-out panels” so that someone like Jimmy can grow into a larger suite. I’m not sure how often this actually happens, but I would imagine the frequency is relatively low. But it’s very possible and not just in older buildings like The Gramercy Park.

  • Opendoor launches cash-backed offers

    Opendoor is best known for allowing homeowners to instantly sell their homes online. Enter your address. Get a cash offer. And then choose a closing date. (The commissions are around 5%.)

    Today, Opendoor announced something new called cash-backed offers. What it does is help to reduce the friction on the buy side and how it works is that Opendoor literally backs your offer with cash.

    If for whatever reason you can’t come up with suitable financing, Opendoor will buy the home themselves and you’ll have 240 days to figure out your affairs and buy it back from them for the same price and at the same terms.

    The idea is that it helps to improve the attractiveness of your offer, which is particularly useful in competitive low interest rate environments, such as the one we’re living through right now. (Already about 36% of the market in the US is compromised of all-cash homes sales.)

    Opendoor started by dramatically reducing the barriers to selling a home (supply). And now they’re trying to make things easier on the demand side of the marketplace. At the same time, the process is going digital. I think this is great for consumers.

    For more on the trends shaping home buying in the US, check out this report that was published by Opendoor last month.

    Full disclosure: I am long $OPEN.

  • What will be the new New York City?

    Peggy Noonan argues, in this recent WSJ article, that the world has changed forever. A human habit was broken during this pandemic and city life, including office life, will never be the same in New York City. She qualifies this by saying that some people will return to offices, potentially in significant numbers. (People like being around other people.) But that things will never be what they once were. We’ve learned that we can decentralize and still get work done.

    As many of you know, I am bullish on cities and I am bullish on offices. So I found myself disagreeing with many of her arguments. But Peggy does raise some valid concerns: How are cities going to pay for what just happened over the last 12 months? According to the Partnership for New York City, the city lost about 500,000 private-sector jobs since March 2020. About 300,000 residents from high-income neighborhoods also filed for a “change of the address” during this time period.

    Given that the top 5% in New York represent about 62% of the state’s income tax base, the movement of people to low-tax states (and warmer places) is something to watch. It’s also a trend that existed well before this pandemic.

    At the same time, I’m not necessarily convinced that (at least some of) these fleeing rich people aren’t coming back. I was speaking with a real estate agent over the weekend who is based in a popular US resort/recreation market and while he told me that, yes, he’s seeing a massive influx of people from expensive coastal markets, these people are largely choosing to rent. They want to take the lifestyle for a test drive and they are also waiting to see what happens with the world once city life returns.

    There will be real financial challenges coming out of this. But as I’ve said time and time before, cities are remarkably resilient. And as Jack Shafer argued in this recent article about “memorializing the pandemic,” humans tend to have short memories, especially when it comes to bad things. The Spanish Flu has been regarded by many as a forgotten pandemic. We moved on and the same will happen this time around.

  • What’s next for Canada’s housing market?

    Rachelle Younglai’s recent piece in the Globe and Mail does a great job summarizing Canada’s COVID-19 housing boom. The title of the article is, “How Canada’s real estate market defied expectations in the COVID-19 pandemic.”

    Non-mortgage debt is down. Mortgage debt is up. Money is cheap. And people are clamoring for drivable vacation homes. Average home prices in places like Prince Edward County and the Kawartha Lakes (both outside of Toronto) are up ~30% from Jan 2020 to Jan 2021.

    But after I sent this article around this morning, I was reminded that this is a good summary of what has just happened. It, for the most part, does not speak to what might happen going forward.

    None of us can travel anywhere. We’re stuck at home. And immigration volumes last year were down some 48% in Toronto, 43% in Vancouver, 40% in Montreal, and 46% in Calgary. The Toronto region went from about 120,000 new permanent residents in 2019 to about half that last year.

    The behaviors and market outcomes that we have seen over the last 12 months, therefore, make intuitive sense. But how about the next 12 months or the next 5 years? I would prefer to use this latter time period for decision making right now.

    Chart: The Globe and Mail

  • Net new housing units in New York City since 2010

    Here are a few interesting stats from a brief report that New York City published this month about their supply of new housing units:

    • From January 1, 2010 to June 30, 2020, New York City delivered 205,994 net new housing units across the five boroughs.
    • This total includes 202,956 units from new construction and 29,161 units from the alteration/conversion of existing buildings. However, it also factors units that were lost as a result of demolition (-17,400) or alteration (-8,723).
    • Brooklyn saw the most supply, followed by Manhattan. The four highest-growth Community Districts were responsible for 1/3 of all new housing additions. These CDs are all formerly non-residential areas that were rezoned to allow living.
    • Manhattan saw the greatest loss in housing units as a result of alterations (people combining units). This was most prevalent in wealthy neighborhoods such as the Upper East Side, Upper West Side, and Greenwich Village.

    What is interesting about this last point is that it shows you that cities are far from static. New York City lost 26,123 housing units during the above time period, with 8,723 units being lost to alterations and people combining units.

    The orange areas on the above map are neighborhoods which actually became less dense over the last decade. And of course, this phenomenon is not unique to New York City. We are seeing the same thing play out in some/many neighborhoods in Toronto.

    What this mean is that the role of new development is really twofold. It allows a city to grow (i.e. house new New Yorkers), but it also replaces lost housing and relieves some of the pressures on the existing housing stock. I don’t think many people appreciate this dynamic — or perhaps they don’t care.

    For a copy of the full report (it’s only two pages), click here.

  • Luxury housing surges in San Francisco

    The story of two markets continues. Median rents in San Francisco are down some 27% percent over the last year. Sales of homes priced under $300,000 are down by about a fifth. And yet, according to the Financial Times, sales are up significantly for homes priced above $2 million. For the top 5% of homes, prices ended the year up about 26.5%. Overall, the median home price in San Francisco was up 16.8% last year. It now sits at $718,000. As we’ve talked about before, much of this can be chalked up to the fact that the financial impacts of this current environment are being unequally felt. But I also see it as evidence that, despite all of the media headlines, many/most people aren’t actually betting against cities.

    Chart: FT

  • Compact housing for the future of our urban spaces

    “Unexpected approaches for the future of our urban spaces.” Publisher Gestalten has a new book out that you can pre-order called, Vertical Living: Compact Architecture for Urban Spaces. The book is not about tall buildings, despite what the title might suggest, but rather about “impossibly slender homes” in narrow and tight urban spaces. As many of you know, I have long been a fan of compact and creative homes. One, they force creativity. It’s like designing a boat (not that I have done that before). Every inch matters. And two, it is about seeing opportunity where others don’t.

    Sometimes we miss these opportunities because of cultural biases. We believe that a home should look and behave a certain way. But these viewpoints are not necessarily universal. They vary across cities and they can even vary within cities. As Toronto and many other cities around the world try and figure out how to deliver the so-called “missing middle,” we are going to need to open ourselves up to some of what’s in this book — namely the unexpected. New housing solutions that don’t fit within certain neat and tidy definitions.

    We’ve done this before with laneway suites. Formerly an illegal housing type, Toronto is now in the midst of what feels like a laneway housing boom. I don’t know exactly how many are under construction or have been completed under the city’s new policies, but I would wager that the uptake has been strong. And over time, this new housing typology is going to reshape how we think about our laneways. They will evolve along with the new uses that are now beginning to flank them. The unexpected will become the expected.

    Shall we try this again?

    Image: Gestalten

  • The most unremarkable streets in Toronto

    Within Toronto’s urban structure you have regular streets and you have things known as “Avenues.” (This is among a bunch of other stuff such as Centres and Employment Areas.) What this Avenue designation does is tell you that it may be a suitable location for a new mid-rise building, which is something that I have written a lot about on this blog. Here in Toronto, this means that you would then need to consult the “Mid-Rise Building Performance Standards.” Indeed, if you dust off these standards and turn to the introduction, you’ll find the following: “The Performance Standards are intended to provide simple, straightforward guidance for those seeking to develop midrise projects on the Avenues.”

    But if you want to find some of the most truly unremarkable streets in this city, you need to look at the arterial roads that didn’t quite make the cut to be an Avenue. I don’t want to generalize, but they are generally exceedingly ugly. You can’t help but feel like Toronto has simply outgrown the low-rise building typologies that, in most cases, still remain on these streets. In some cases, they’re also directly adjacent to a subway station, which is kind of like running a great big movie theater with only a handful of seats inside. Maybe one day they’ll grow up to be Avenues. But don’t hold your breath. So what’s another possible solution? Toronto-based PHAEDRUS Studio has an idea. It’s called the Hi-Lo Hybrid.

    Initially designed for a specific client and a specific site, it also happens to be something that could be deployed all across the city. What they have shown here is a 5 storey infill building on your typical long and narrow Toronto lot. As designed, it could house 4-8 units, as well as some non-residential uses, on a lot that previously only had 1-3 units. It would make a lot of sense for some of the ugly streets that I’m talking about. But let’s be honest: it would be almost impossible to get approved. One of the biggest issues would probably be the adjacency/overlook issue that it generates with the neighboring backyards. It’s probably also too tall.

    One of the main reasons why, I think, laneway suites work and are now permissible as-of-right in Toronto is that they replace existing garages. (ADU’s for the Americans.) They reallocate space that was previously used for cars to humans. And so the incremental height / density is not all that great. They, for the most part, preserve precious neighborhood character. What the Hi-Lo Hybrid proposes is not so incremental. It’s bold. It would be a massive fight. I know that and you know that. But bold is generally what you need when you’re trying to do great things and when you’re trying to shape the future. And so with that, I’ll leave you all with some words from the late American architect, Daniel Burnham.

    “Make no little plans; they have no magic to stir men’s blood and probably themselves will not be realized. Make big plans; aim high in hope and work, remembering that a noble, logical diagram once recorded will never die, but long after we are gone will be a living thing, asserting itself with ever-growing insistency. Remember that our sons and grandsons are going to do things that would stagger us. Let your watchword be order and your beacon beauty.”