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: richard florida

  • Winner take all, or most, economy

    The world is increasingly spiky. Inequality is growing and it is increasingly geographic in nature. We know that people tend to make more money in urban areas compared to rural areas – even when they possess the exact same level of education. The returns to being smart and educated are simply greater in cities.

    But they also depend on the size of the city. Mark Muro and Jacob Whiton of Brookings recently published data looking at labor market performance – by metro size – from 2009-2015 (right after the financial crisis). What they found is that larger metropolitan areas simply performed better than smaller ones.

    image

    In summary:

    City size matters because it’s a major influence on city prosperity and adaptability as well as local worker fortunes. Bigger cities are more productive. They are more innovative. They draw better-educated workers by offering higher wages.

    The situation is even more pronounced across the pond. According to the New York Times (quote from Richard Florida), a third of Britain’s gross domestic product comes from London alone.

    What is far less clear is what should be done to address the decline of some of the smaller cities in America – cities that are stagnating and feeling left behind. But perhaps the first step is acknowledging what has happened and what remains feasible in today’s global economy.

    Here is another quote from the above NY Times article:

    Mr. Trump’s promise to relieve the pain by reviving the coal and steel industries, by keeping immigrants out of the country and by raising barriers against manufactured imports is only a rhetorical balm to satisfy an angry base seeking to reclaim a prosperous past that is no longer available.

    That rhetorical balm.

  • Houston, the global city

    Houston doesn’t often get a lot of love in urbanist circles.

    Though since Ed Glaeser published Triumph of the City and declared Houston’s unfettered sprawl the secret sauce for housing affordability, it is now frequently held up as the shining example of why housing supply matters.

    But this is a hotly debated topic. 

    Ed Glaeser would argue that increased supply is the key to housing affordability. But Richard Florida would likely be quick to point out that Houston is also one of the most unequal and segregated cities in America. It is not the model we should be following.

    But let’s be positive today on the blog.

    At the bottom of this post is a great talk by Stephen Klineberg called: Houston, The Global City. Klineberg is a Professor of Sociology at Rice University and the founder of the Kinder Institute for Urban Research.

    In this hour long talk, he outlines, among other things, the remarkable transformation of Houston from a one-industry town (oil) comprised predominantly of white people to a mixed economy where every major ethnicity is now a minority.

    He also argues that Houston is at the forefront of the demographic shifts happening all across the country and that, without this inflow of immigrants over the past couple of decades, Houston today would probably look a lot like a decaying rustbelt city.

    It’s a good watch.

    If you can’t see the video below, click here.

    [youtube https://www.youtube.com/watch?v=SJdWYXIr_qE?rel=0&w=560&h=315]

  • North America’s second city?

    image

    Over the weekend Richard Florida sent out a tweetstorm that compared Toronto and New York City, and made the argument that Toronto’s “incredible diversity, density, and industry mix” is making the city feel a lot more like New York and London compared to any other North American city. 

    He even went so far as to say that, even though it may not be the bigger metro in terms of raw population, Toronto increasingly feels like North America’s second city after NYC. I’m obviously incredibly biased in this discussion, so I would be curious to get your thoughts in the comment section below.

    If you can’t see the embedded tweetstorm below, click here. Regardless, you’ll likely need to click through to see the entire thread.

    //platform.twitter.com/widgets.js

  • Crane capital of America

    When people like Richard Florida talk about today’s “superstar cities”, the usual suspects include London and New York for finance, the San Francisco Bay Area for tech, Milan for fashion and design, and so on.

    And you can certainly find the data to back up these claims. For instance, if you look at venture capital dollars invested, many of these same cities reappear near the top: San Francisco, San Jose, New York, etc.

    One city that doesn’t often appear on these sorts of lists, though, is Seattle. 

    However, clearly something special is taking place in the city. For the second year in a row, Seattle has been named the construction crane capital of America. No other American city comes close right now. (However, Toronto is still #1 in North America.)

    At the same time, if you think about all of the companies that have come out of Seattle over the years, you start to realize that maybe VC dollars invested isn’t enough to tell the entire entrepreneurial story.

    Venture capitalist Fred Wilson once said on his blog that if you look at dollars in and dollars out, Seattle outperforms – by a lot. And that’s very interesting to me. Is this simply the lasting legacy of Microsoft? Or are there other – transferable – lessons to be learned here?

  • What land-use restrictions are doing to our cities

    I have Richard Florida’s recent book, The New Urban Crisis, sitting on my bedside table. I’m only about ¼ of the way through it, but I’m really enjoying it. I’ll write more once I’m done.

    What I instead want to talk about today is a recent (and related) article that Florida published in CityLab called: Did Land-Use Restrictions Save the Rust Belt? 

    In it, he leans on the research of two economists – Chang-Tai Hsieh of the University of Chicago and Enrico Moretti of the University of California at Berkeley – and makes 3 valuable points.

    They are:

    It is estimated that land-use restrictions (which limit development / supply) have reduced overall GDP in the U.S. by about 9% or approximately $1.5 trillion per year. It is also estimated that housing supply constraints alone lowered overall growth by more than half between 1964 and 2009.

    At the same time, these land-use restrictions may have benefited other regions – such as the Rust Belt – that would have otherwise lost more people and jobs to places like New York and San Francisco. The research found that without these land-use restrictions, employment growth between 1964 and 2009 would have been more than 1,000% higher in New York and almost 700% higher in San Francisco.

    The final takeaway is one that we’ve talked about before on this blog. One of the most effective things we can do to counteract geographic inequality is to build great transit; transit that connects both people and land to the most desirable areas of our city.

    And with that, Happy Canada Day weekend all.

    Photo by João Silas on Unsplash

  • Toronto real estate is out of control

    You can’t have an Easter dinner in Toronto right now without somebody bringing up the topic of our “crazy” real estate market. 

    Below is a chart from Bloomberg showing the year-over-year change in home prices in the Greater Toronto Area since 1990. It also shows the historical average (in blue) and how in March 2017 we hit 4 standard deviations above that. Home prices rose 33% in March compared to a year earlier.

    If I were a realtor, I’d probably tell you that the market is hot hot hot. Now is the time to sell because you’ll get some absurd number above your asking price and now is the time to buy because prices are going nowhere but up. Don’t miss out. 

    I would like to try and be a bit more nuanced than that. Here are 3 thoughts:

    1)

    There’s no question that low rates / cheap money is one of the root causes of the real estate valuations we are seeing today. But frankly I have no idea when or if that will change. There is an interesting argument out there that capital is no longer scarce. Our economy is going through a fundamental shift, which is why real estate is not the only asset class seeing these sorts of valuations and growth figures.

    2)

    There are a number of global factors which are helping to cement Toronto’s position as an alpha global city and destination for human capital. Think Trump, Brexit, and so on. I agree with Richard Florida’s argument that our real estate market will see more – not less – pressure going forward. Here is a snippet from a recent interview with Florida in Toronto Life:

    I think Toronto is going to get an even bigger influx of the creative class. With the rise of Trumpism, more and more people who might otherwise have gone to the United States are going to come to Canada. We’re going to see American tech companies invest more and more in Toronto. And if we think the housing affordability and economic divide we see today is bad, it’s going to grow ever more gaping. 

    3)

    I believe that there are always opportunities in the real estate space, but that you have to be disciplined, focused on fundamentals, and willing to do things that others won’t. What bothers me is when I hear people say things like: “Real estate only goes up. You can never go wrong.” I started my career pre-2008 and lived in both the United States and Ireland. I saw what down looks like.

  • The suburbanization of America continues

    FiveThirtyEight (Jed Kolko) published a post last month called, “Americans’ Shift To The Suburbs Sped Up Last year.” 

    What Kolko did was take recent population estimates from the US Census Bureau and group them into 6 categories based on the size of the metro and its population density. 

    By doing this he discovered something that runs counter to the narrative that we are living through an urban renaissance: lower-density suburbs grew faster than urban counties. The former grew at ~1.3% in 2016. And in the south and west, the lower-density suburbs of large metro areas topped over 2% growth.

    What gives? 

    Well, this urban renaissance is lopsided. Here’s an excerpt from the article:

    That revival is real, but it has mostly been for rich, educated people in particular hyperurban neighborhoods rather than a broad-based return to city living. To be sure, college-educated millennials — at least those without school-age kids — took to the city, and better-paying jobs have shifted there, too. But other groups — older adults, families with kids in school, and people of all ages with lower incomes — either can’t afford or don’t want an urban address.

    Richard Florida is calling this phenomenon: The New Urban Crisis.

  • Top 10 city regions by GDP (and comparable countries)

    Below is a mapping (by Taylor Blake of the Martin Prosperity Institute) of the top 10 metro economies in the world by GDP at purchasing power parity. In brackets, is a country with a comparable GDP.

    Tokyo is the world’s largest metro economy with ~$1.6 trillion in GDP. This is greater than the GDP of all of Canada. New York City is number 2 with ~$1.5 trillion in GDP, which is only slightly less than Canada.

    The point of all of this – which Richard Florida argues here – is that the global economy is, today, powered by metropolitan areas. And yet our governance structures do not reflect this new reality.

    Here’s an excerpt from Florida’s article:

    “Cities really are the new power centers of the global economy—the platforms for innovation, entrepreneurship, and economic growth. But when it comes to fiscal and political power, they remain beholden to increasingly anachronistic and backward-looking nation-states, which has become distressingly obvious with the rise of Trumpism in the United States and populism around the world.”

    Florida has been arguing this for years and I’ve really gotten behind it. The above chart is a good reminder just how big and wealthy some cities have become in today’s economy. 

  • Solutions to NIMBYism

    Earlier today Richard Florida published a piece in CityLab called: Anatomy of a NIMBY. The article cites a recent paper by Paavo Monkkonen (of UCLA) that focuses on the relationship between NIMBYism and housing affordability – a much talked about subject these days.

    More specifically, the paper identifies “four different strains of NIMBYism” and then offers up some possible solutions, which include things like a more inclusive process and better data. I’ve publicly supported these kinds of approaches on this blog many times before.

    But in addition to the above, I wanted to point out two other ideas from the paper and Florida’s article.

    The first is about shifting land use decisions up to the regional level, and maybe even the state level. This one is particularly timely given that there’s a lot of discussion in Toronto right now about shifting land use decisions in the exact opposite direction – from province (OMB) to city.

    The second is a suggestion from Yale professor David Schleicher that he refers to as “tax increment local transfers.” Essentially, the idea is to somehow allow current residents to participate in the future tax revenues generated from new development in their neighborhood.

    There’s lots of interesting reading buried in the above links.

  • This is not right

    I have largely avoided commenting on politics and Trump on this blog, but at this stage it is almost impossible to do that.

    Donations are starting to pile up for the American Civil Liberties Union (ACLU) as the tech community, and many others, begin to respond to Friday’s executive orders. Lyft announced a $1 million contribution to the non-profit group.

    Today, venture capitalist Fred Wilson wrote: Make America Hate Again. And yesterday, his business partner Albert Wenger wrote: Misleading the World on Immigration.

    At 6 AM this morning, Richard Florida started a tweet storm where he argued that “Trump’s immigration insanity” will fundamentally threaten the core of America’s innovation hegemony. 

    (He also argued that Canada, and more specifically Toronto, serve to “gain substantially”, as there will no doubt be a doubling down on tolerance to attract the best talent from around the world.)

    The Canadian tech community penned an open letter to reinforce the message that, here in Canada, diversity is our strength. This echoes similar messages from Prime Minister Justin Trudeau and Mayor John Tory.

    Mass protests have broken out at US airports (links to photos) spanning San Francisco to New York. 

    And I am seeing folks from Toronto offer up their homes (publicly on Twitter) to anyone who might be stranded at Pearson International Airport as a result of the orders. Many have even tweeted out their phone numbers.

    Everywhere I look this weekend I am seeing these sorts of messages. So while I could remain quiet, that doesn’t feel right. And that’s because what is happening is not right.