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: toronto

  • Rent control and inclusionary zoning

    I received an email from a reader over the weekend saying that my comments around rent control have been too critical, and that they are not doing proper justice to the challenges that renters face in today’s cities. I thought this was a fair comment and so I’d like to respond to it publicly on the blog.

    But before I get into that, it’s worth saying that housing issues are incredibly complex. And I am certainly not professing to have all of the answers. In fact, part of the reason I write this blog is so that I can think critically about these topics and hear what other people have to say.

    It is obvious that wages have not kept pace with home prices in many cities around the world. This is a problem. And so we can all agree that we need more economic opportunities, we need more housing, and we need more attainable housing. The question is how best to go about this.

    Mechanisms like rent control and inclusionary zoning might seem like obvious solutions. Just cap rents and force developers to build affordable housing. Problem solved at no cost to anyone, right? It’s not that simple. Every intervention creates distortions in the market.

    To give just one example, studies suggest that rent controls end up creating a misallocation of housing. Because if you are living in a rent controlled home and your rent is well below market, you are now heavily incentivized never to move. Even if you have an empty nest with 5 bedrooms, why would you?

    Of course, there are other possible repercussions. Residential contracts are typically gross leases (though some utilities might be sub-metered and paid for by the tenant). This is in contrast to commercial leases where net leases are common and most, if not all, of the operating costs are passed through to the tenant.

    Why this matters is that if your rents are capped but your utility costs, taxes, and other operating expenses are continuing to rise, you may run into a situation as a landlord where you can no longer afford to upkeep your building. And you’re certainly not going to invest in any new improvements if this is your situation.

    Rent controls could also impact the supply of new housing by making it no longer feasible to build. This is similar to what we have seen with policies like inclusionary zoning. Just last month San Francisco went on the record saying that it’s going to rethink its inclusionary zoning policies because of a view that it is now choking off new housing supply.

    And so herein lies one of our great housing challenges. We want more housing and we want more affordable housing. But depending on how we approach the latter, it could hurt the former, which ends up creating a viscous cycle.

    Building new rental housing is very challenging in Toronto (and elsewhere). Typically the way the process goes for a developer is that you start by preparing a detailed development pro forma. This pro forma will then tell you that your new rental development is infeasible. And so you go back, convert it to a condominium development, and then it magically becomes feasible.

    I am exaggerating, but only slightly. The point is that there are lots of developers out there who would love to build more rental housing — they just can’t make the math worth.

    My goal with this post was to explain where I have been coming from with some of my past comments. I also used the opportunity to link to a number of my related posts. But I haven’t really put forward any possible solutions. I plan to do that in a follow-up post, and I think I’m going to call it “the definitive but crazy guide to creating more affordable housing.”

    So if any of you have any crazy ideas, please send them over.

  • Finally — garden suites are now permitted in Toronto

    Some of you might remember that Toronto City Council approved new garden suite policies earlier this year. Garden suites (also known as accessory dwelling units) are kind of like laneway suites but without the adjacent lane.

    Unfortunately, these new policies were subsequently appealed by a group of Resident’s Associations, and so they haven’t been in force. Thankfully, the Ontario Land Tribunal has just dismissed this appeal:

    What this means is that, as of today, you’re now free to build a garden suite in the City of Toronto. So hire an architect and file for a building permit — it’s go time. If you need any referrals, please feel free to reach out.

    The Ontario Land Tribunal is often criticized for its ability to overrule local communities on land use matters such as these. But this is a good example of why it is needed and why it is important to have some kind of neutral arbitral.

    Because these sorts of decisions should not be based on what any one individual or group thinks; these decisions should be based on what makes for good planning and what makes the most sense for the broader city and region.

    Invariably, this is going to piss some people off. But in my mind, it’s kind of like that asshole teacher you used to have. Sure, you hated him/her at the time, but in retrospect you end up appreciating what they were trying to do to help.

    This could be a bad analogy.

  • Toronto’s downtown streets broke over the weekend

    Canada Day weekend was a lot of fun in Toronto. This city was alive and it felt like people had come far and wide to visit downtown. But it was a good reminder that even if all of our cars were electric and even if they were all able to drive themselves, we would still have this problem:

    I was in an Uber on Saturday afternoon heading over to the west side of downtown and we had no choice but to declare bankruptcy and hop out in the middle of Bay Street. We thought about waiting for the Ontario Line to be ready, but that seemed a bit far out.

    So we rented bikes instead and rode along the waterfront, which was a considerably better experience. But then we couldn’t find any docks with available slots, so we had to ride up into Liberty Village, drop our bikes off there, and then walk back down to Ontario Place.

    Of course, this was still the better option. I’m fairly certain that we’d still be in that Uber had we stuck it out. And maybe not finding a bike dock is just part of life in the big city on a beautiful long weekend in the summer.

    Still, it was frustrating. So I’ll use this opportunity to once again ask our city leaders to reconsider their ban on dockless electric scooters. Toronto clearly needs all the mobility support it can get.

  • Why traffic fatalities are lower in Canada than in the US

    We’ve talked about this before. If you live in New York City, you’re probably about a third as likely to die from a transportation-related accident as compared to the average American. And if you live in Paris, you’re probably about a third as likely to die from a transportation-related accident as compared to the average New Yorker.

    These stats might feel a bit intuitive to you. Both New York and Paris are big and dense metros with high public transit ridership. And that usually translates into less car accidents. As for the divide between these two cities, Paris is in Europe. It’s old. Most of its streets were built before the car had been invented. And all of these things are generally good for pedestrians. Makes sense.

    But David Zipper asked a good question today: So what’s going on with Canada? Canada is not in Europe (though some might argue that it sits culturally somewhere between the US and Europe). It’s not that old. And it generally has a car-oriented landscape just like the US. So why is it that in 2020, Americans were 2.5x more likely than Canadians to die in a car crash? The trend lines are also diverging between these two countries. Between 2010 to 2020, US road deaths increased 19% on a per capita basis, whereas Canada’s rate declined by about the same rate, according to David.

    Ultimately, we are probably going to need Malcolm Gladwell to write a book about this so that we can really figure out what’s going on. But in the interim, David does propose a few possible explanations ranging from Canadians buying slightly smaller vehicles to Canadians being slightly more law-abiding than Americans and so less likely to run people over. But one of the most persuasive explanations for me is that maybe our urban landscapes aren’t actually the same.

    More than a third of Canadians live in our three biggest cities: Toronto, Montreal, and Vancouver. And this number would be even higher if you looked at the full urban catchment areas of each. Either way, this is a significantly higher concentration than in the US, where about 13% of Americans live in the metro areas of New York City, Los Angeles, and Chicago.

    Part of this difference is because the US has almost 9x more people and has many more big cities to choose from. But it doesn’t change the fact that, despite our reputed love for things like forests and beavers, Canadians are actually quite urban. And as we have discovered, that’s a good thing for pedestrians.

    Photo by Jamshed Khedri on Unsplash

  • What should Toronto do with its major streets?

    The City of Toronto’s Official Plan directs growth to areas of the city that it refers to as Centres, Avenues, Employment Areas, and the Downtown. In other words, these are the areas where most new development is intended to take place. So if you own land in one of these areas, it is probably worth more than if it were outside of them, all other things being equal.

    Avenues are what you might expect. They are major streets that run throughout the city (pink ones in the above map). But not all major streets are “Avenues.” There are lots of major streets that provide connectivity across the city but still feel like residential streets (tired ones I might add) and that have land use policies that only allow low-rise housing. I have always viewed this as a mismatch and I have long been critical of it on the blog.

    But as part of the City’s Expanding Housing Options in Neighourhoods (EHON) initiative, this exact problem is being looked at. And I think it is one of the most important land use studies currently underway in the city. Because if we are truly serious about housing affordability and our low-carbon goals, we are going to need to blanket our city with a lot more transit-supportive density. And our major streets are great place to start.

    I just hope that everyone involved will be as bold and visionary as possible. If you have any thoughts, please leave them in the comment selection below. And for the latest on this study, click here. It is an agenda item at next month’s Planning and Housing Committee meeting.

  • The story behind those pixelated video game mosaics in Paris

    If you’ve ever been to Paris, you’ve probably noticed the small pixelated art pieces that are scattered all around the city on buildings and various other hard surfaces.

    Or maybe you haven’t seen or noticed them in Paris, but you’ve seen similarly pixelated mosaics in one of the other 79 cities around the world where they can be found.

    Or maybe you have no idea what I’m talking about right now. Huh? Here’s an example from Bolivia (click here if you can’t see the embedded post below):

    These pixelated urban art pieces are the work of French artist Invader. Modeled after 8-bit video games from the 1970s and 1980s, Invader has been installing these mosaics since 1998 as part of his broader “Space Invaders” project. The first one was installed in Paris.

    No two pieces are alike and they’re all made out of ceramic tiles so that they last. Invader also meticulously researches and then records each install location. He is basically trying to take over the world with his “invasions”. As of today, there are 4056 invaders in 80 cities.

    Here’s a map. Sadly there are none in Toronto.

    The goal of the project is to liberate art from what Invader calls “its usual alienators”, that being museums and other institutions. It is about bringing art out and into the public realm so that everyone can enjoy it. And this is precisely what makes his mosaics so wonderful — it is their playful integration into the urban landscape.

    But these aren’t exactly sanctioned pieces of art. If he started out by asking, the answer probably would have been no.

    Invader thinks of himself as a kind of hacker of public realms. He keeps his identity concealed. He installs these mosaics during the night (from what I have read). And sometimes he gets in a lot of trouble.

    Sometimes they also get removed by the building owner, though at this point his mosaics are pretty well known, so I can’t imagine many owners not wanting to be “invaded.”

    But let me ask all of you this: If you owned a building in a major city and woke up tomorrow morning to a Space Invader on the front of it, would you celebrate it, apathetically leave it, or would you remove it immediately?

  • Learning from Lisbon

    This happened earlier in the week:

    And it got me thinking about how much I love Lisbon:

    But the important story here is that these tweets made it abundantly clear to me that (1) people from all over want far more from their parks and public spaces and that (2) Lisbon’s kiosks are a truly beloved urban feature.

    I’m putting this all out there because I received a ton of inbounds following these tweets, and I would love to find a way to execute on the kiosk idea that I outlined in the above twitter thread. So if you’d like to help, please continue to get in touch.

  • So how is the Market Street pedestrian-only pilot project going?

    A portion of the street that I live on has been thinking about going pedestrian-only for a few years now. Last summer it was pedestrianized for a few weekends. And this summer, it’ll be pedestrianized until, I think, September as part of a more extensive pilot project. These sorts of moves can be controversial and so our usual approach is to ease-in with a pilot project.

    When our condominium board sent out a notice about the pilot project, they framed it as a closure to vehicles. But of course, the other way to frame this is that the street is now open to pedestrians. And since I happen to walk this street every day (and oftentimes multiple times a day), I’ve been tweeting out pedestrian usage updates.

    Click here to view on Twitter if the embedded tweets below aren’t showing up for you properly. Spoiler: it’s all working according to plan.

    Not every street (or area) is necessarily a good candidate for a pedestrian-first focus. But there are many great examples across the city, including Kensington Market and this stretch of Market Street. So let’s start investing in mechanical bollards, as they do in Europe, and make this pilot a permanent fixture.

  • Infill balcony housing — an adaptive reuse proposal

    Balconies are a never ending debate here in Toronto (and in many other places). In some cities, like New York, they don’t seem to matter for new housing. Residents seem to be generally content without them. But here in Toronto, we have typically included them in new high-rise housing and there has been a lot of debate and criticism around both their utility (high up in buildings) and their impact to overall energy performance.

    I have noticed that we are starting to see fewer balconies on new buildings, and I suspect this might increase with the way that costs are right now. And for some people and some (sub)markets, this will be just fine. But I happen to be a huge fan of outside. As my tanned dad likes to say when asked about the value of outdoor spaces in multi-family housing, “you don’t get this dark by staying inside.” He is pretty tanned.

    I also believe that great outdoor spaces are an important ingredient in shaking off the deep-rooted cultural biases that this city has toward low-rise housing. Since pretty much the beginning, low-rises houses with backyards have been seen as noble, whereas apartment buildings have been viewed as disease-breeding tenements liable to morally corrupt even the best of intentions.

    This is one of the reasons why we created the two-storey House Collection of suites at Junction House and why One Delisle is almost entirely formed by its outdoor spaces (both balconies and terraces). We wanted to celebrate multi-family living.

    At the same time, I really like this adaptive reuse proposal by Peter Song over at BDP Quadrangle. The idea is to allow people to infill their balconies with more interior space so that our existing stock of housing can become more flexible for growing families and for when people’s lives just generally change.

    The balcony offers extra space for children to play, and parents to work. ©Peter Song

    It would be a great way to capture additional space within our existing stock of buildings, and I think it would be pretty interesting to see what people ultimately choose when given a binary option: more interior space or more outdoor space. Maybe it would help provide some clarity to the great balcony debate.

    Technically, it is my understanding that this is entirely doable.

    In the middle of writing this post I shot an email over to one of the best structural engineers in the city (James Cranford, Principal at Stephenson Engineering), and he confirmed that strength is no problem. Typically balconies are designed to accommodate more load than the suites. The thing we’d have to look at is slab deflection, since this is not usually limited on balconies.

    The greater challenge is likely to be the overall coordination.

    In some cities this sort of thing happens all the time on an ad hoc basis. People just do it and the end result is likely more functional, but the building elevations end up looking pretty schizophrenic. Here you’d need each condominium corporation to bless the change (since the envelope is a common element). And people would also need to agree on what design(s) should be used across the building.

    It would require some work, but I think Peter’s idea is a really good one. What do you think?

  • The cost floor

    Generally speaking, the cost of building a new building is always going up. There are moments in time, like during a recession, where costs might temporarily correct downward. But generally speaking, there is a cost floor that is constantly rising. This includes everything from hard costs to rising development charges.

    We have spoken before about how developers typically look at their costs, and then price accordingly through “cost-plus pricing.” Put differently, it is answering the question, “what do I need to rent or sell this space for in order to cover all of these projected costs?” This can be tricky when costs are all over the place, as they are right now with double percentage point swings, but that’s a different conversation.

    As long as there remains some price elasticity in the market, cost-plus pricing can work just fine. Costs are up, but I’m just going to increase pricing to absorb most of it, or in some cases all of it. However, problems occur when and where you can’t increase pricing. Maybe it’s in a marginal area where rents aren’t increasing. Or maybe interest rates are rising and overall price elasticity is tightening.

    Whatever the case may be, in this scenario, it likely means that development will stop and supply will slow or possibly even shut off. We are starting to see some evidence of this happening in Toronto right now.

    But if the fundamentals of the overall market remain strong, this should only be a short-term problem. Eventually the market will catch up (through higher pricing and/or some reduced costs), and then projects will return to being feasible. But if there’s a structural problem in the market, maybe development never returns without some kind of subsidies.

    Thankfully, it is obvious to most that markets like Toronto have incredibly strong fundamentals. We can screw up a lot of things as long as we remain open to smart immigrants from around the world. This makes it fairly easy to have conviction around what will happen over the longer term. And this is generally how I like to make decisions, whether we’re talking about real estate or crypto (see above tweet).

    But all of this doesn’t mean that one shouldn’t also be managing the short run.