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.
I cover a lot of different topics on this blog. It’s hard to write daily for a decade and not meander every now and then. But generally speaking, I do try and keep this forum focused on things that are related to city building — real estate, housing, design, transportation, etc. And I do try and share some of the things that I have learned (and the mistakes that I have made) since I started working in real estate development back in 2007.
But we all have limits, and different perspectives are vital for solving problems. So I’d really like to introduce more Q&A features on this blog, similar to this recent one that I did with structural engineer, James Cranford. If this sounds interesting to any of you, please reach out. I’m open to anyone who touches the built environment: architects, artists, planners (private or municipal), lenders, furniture designers, bollard manufactures … you name it!
On July 1 of this year, a new California bill, called the “Affordable Housing and High Road Jobs Act of 2022”, will go into effect. And the goal of this legislation is to significantly increase the supply of new homes in the state by allowing multi-family construction on lands that are currently zoned for commercial uses.
On some level, it is of course curious that there even needs to be this bill. Because what we are effectively saying is, “hey, we should allow people to build a mix of uses on our main streets and with high enough densities that we might actually be able to support transit.” Why was this not always the case? (Rhetorical question.)
In the words of architect and planner Peter Calthorpe, who was recently interviewed here in ArchDaily, this is a “landmark piece of legislation” that has “received very little attention.” So that’s why we’re talking about it today.
Calthorpe was actively involved in crafting this legislation, and his work apparently started with different scenario land-use models. The first experiment looked at a 43-mile stretch of El Camino running from San Francisco to San Jose (pictured below). And what they found was that this one strip alone could accommodate somewhere around 250,000 new infill homes.
To put this into context, the state of California is currently building about 140,000 new homes each year, through a roughly equal (1:1) split of multi-family and low-rise single-family. Already this represents a shift, as supply used to be slanted (3:1) toward low-rise. (I don’t know when exactly this was the case, but Calthorpe mentions the figure in his interview.)
Moving on from El Camino, Calthorpe and his team then ran a similar exercise for the five-county inner Bay area. And here they found that some 700 miles of commercial land could produce up to 1.3 million multi-family homes at “reasonable densities.” This was then expanded to the entire state of California and the number increased to 10 million new homes.
Of course, as we have talked about before on this blog, not all of this land might actually be feasible for development. Sometimes the math doesn’t work even at a zero land cost; you might need a negative land cost in order to pencil a new development. Meaning, you might need to be paid, perhaps through some sort of subsidy.
So what Calthorpe and the team did was use MapCraft to quickly run development feasibilities on the above sites. They had it run 6 different pro formas using local rents, construction costs, city fees, and so on. And what they determined was that this 10 million number drops down to 2 million when you apply the economic realities of the world.
As a disclaimer, I’m not at all familiar with MapCraft. But I’m going to take this number at face value and say that this is still a lot of new homes. And this is what people are hoping for come July 1 of this year.
I grew up watching Arnold Schwarzenegger movies, and I have always found him to be a super impressive guy. Bodybuilding, movies, and politics — he always seems to have the discipline and the confidence to accomplish his goals. But what some of you may not be aware of is that he actually had an illustrious real estate career before he became a movie star, and that this side hustle made him a millionaire before he ever starred in Conan.
I did not rely on my movie career to make a living. That was my intention because I saw over the years the people that worked out in the gym and that I met in the acting classes, they were all very vulnerable because they didn’t have any money and they had to take anything that was offered to them because that was their living. I didn’t want to get into that situation. I felt like if I am smart with real estate and take my little money that I make in bodybuilding and in seminars and selling my courses through the mail orders, I could save up enough money to put down money for an apartment building.
I realized in the 70’s that the inflation rate was very high and therefore an investment like that is unbeatable. Buildings that I would buy for $500K within the year were $800K and I put only maybe $100K down, so you made 300% on your money. You couldn’t beat that. I quickly developed and traded up my buildings and bought more apartment buildings and office buildings on Main Street down in Santa Monica and so on. The investments were very good and it was just one of those magic decades.
Today you couldn’t do it in that same field. There’s another field in real estate where you can do it, but in this particular field I don’t think you will see those kind of jumps ever again. I benefited from that and I became a millionaire from my real estate investments. That was before my career took off in show business and acting, which was after Conan the Barbarian. In 1982 that movie came out. We shot it in 1981 and in ’82 it came out. From that point on my career took off because people saw that the movie was successful at the box office and then I signed a contract to do Conan number 2 and then that led to a contract for Terminator 1 and then Commando.
To listen to the interview, click here. Or for the full transcript, click here. It’s great.
“On some level, we’re [Toronto] still trying to be a Victorian city.” —Peter Clewes
It is not an exaggeration to say that Peter Clewes, of architects-Alliance, is one of the most important architects working in Toronto today. Over the last two decades, Toronto has built a lot of new condominiums and Peter’s firm has been behind many of them.
I mean, I currently live in a building designed by architects-Alliance. My mom lives in a building designed by architects-Alliance. And the first condominium I ever lived in around 2005 or so, was naturally also designed by architects-Alliance.
Peter’s work is everywhere. And it has been instrumental in helping to define this new Toronto. But what is this new Toronto? It’s hard to say really.
Toronto may have built a lot of new things and added a lot of new people over the last two decades, but it has done so almost begrudgingly and without the confidence to say, “we are building this way because this is the kind of global city we want to become.”
I think Peter gets a lot right in this excellent interview with Azure about Toronto, condominiums, and city building. Despite everything that has changed, on some level, we are still trying to be a Victorian city.
Of course, we are no longer that city. It’s long gone. Time to think much bigger.
CIBC Deputy Chief Economist Benjamin Tal was recently interviewed by Larysa Harapyn of the Financial Post about the state of the housing market in the Greater Toronto Area. The message he delivers is pretty clear: “If you think that Toronto is unaffordable now, you wait.” The long-term fundamentals in this market remain strong. Demand is outstripping supply and will likely continue to do so, which is why Tal also stresses the importance of delivering more purpose-built rental housing. If you can’t see the video above, click here. (And with that, I think it’s time to switch topics for tomorrow’s post. That’s enough Toronto housing for one week.)
Bill Gates recently spoke with David Rubenstein at the Economic Club of Washington, D.C. Full video, here.
The bit that got a lot of attention is his admission that Microsoft should have dominated in mobile (in lieu of Android). The core competencies were all there and the company was in investing in mobile at the time.
The technology discussions in general are interesting, but I also really enjoyed hearing about his efforts to address climate change. He spends a good chunk of time talking about that. Strongly recommend. (Related link: Breakthrough Energy.)
On a somewhat unrelated note, this is also the first time I’ve seen every question and answer neatly transcribed below a video. This makes it very easy to find the parts that may be of interest. All video discussions should have this.
Bertaud has worked all around the world from Yemen to China and his experiences, particularly in places that were transitioning to market economies, lend an interesting perspective.
I like this bit on designing in China:
I quickly realized that if you do not have prices to guide you, you end up relying on arbitrary norms. For example, in China, the central government decided that every home must have one full hour of sunshine each day. So you would plug in the height, latitude, and angle of the sun at winter solstice for your site, and that would formulaically spit out the permitted density of housing.
And I like the comparison he makes between food and housing supply:
I compare it to food: You can’t solve a famine by simply mandating that everyone eat 2,000 calories a day. That’s absurd. You have to bring in more food. In the same way, cities like San Francisco have to increase the supply of floor area, and let consumers determine the size of units.
My friend Ben Stevens runs a blog called Skyline where he interviews people involved in the built environment (architecture, real estate, planning, and so on). You might remember that I did an episode with him about a year ago where we talked about the overlap between architecture and development.
His most recent episode is with San Diego-based architect-developer Jonathan Segal. I’ve mentioned Segal before on this blog and that’s because he is well known and admired in certain circles for (re)creating a process that places the architect in the position of “master builder.”
He is singularly driven by one goal: to have ultimate control over the architecture that he creates. Making money is secondary. It is a byproduct of goal number one.
To achieve this, he has worked to cut out every conceivable middle person. Design is in-house. Construction management is in-house. Property/asset management is in-house. He even avoids bringing on investors for his projects, out of fear that they will start to dictate what he can and can’t do.
If this approach resonates with you, I definitely recommend you watch the interview. Click here if you can’t see it below.
I’m listening to The Foreign Desk this morning while I have my coffee. Steve Bloomfield is interviewing two different politicians: one who believes Britain should remain in the EU and one who believes Britain should leave the EU.
(Each interview is about 15 minutes short.)
The back and forth is largely centered around two things: the economy and immigration. Will the British economy be better off in or out of the EU? And on the immigration front, will “in” translate into millions of Turks flooding into Britain should Turkey join the EU?
My general view is that a strong economy should trump concerns over foreigners. But I don’t feel as if I know enough about this precise topic to take a firm position.
Regardless, I very much enjoyed The Foreign Desk episode this morning and I would be open to discussing this issue in the comments below if any of you are also interested.
I just got home from Christmas dinner and I am so full that I can barely keep my eyes open. So rather than attempt to write something insightful, I am going to share a 2 minute interview with designer Marcel Wanders.
It’s a short piece, but he covers some interesting topics such as his office culture and the value of Amsterdam for their creative process (specifically the city’s openness and tolerance).
Regular scheduled programming will resume tomorrow.
And sometime before the end of the year I’m going to do a summary of 2015 on ATC and make some predictions for 2016. I haven’t really done the prediction part before, but I think it would be a good practice to start.
