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.
This is a great diagram from Smart Density comparing the urban and regional rail networks of Toronto, London, and Paris. All are at the same scale.
What immediately stands out to me — besides Toronto’s relatively miniscule network — is Paris’ compactness. I have said this before on the blog (here, here, and here), but I will say it again: There seems to be a tendency to fetishize the scale and height of Paris.
But building height is only one component of its ubiquitous built form. Unlike Toronto, we’re not talking about midrises built up against single-family homes. Paris is far more dense and its buildings are far closer together (usually with interior courtyards)
Electric scooters are an unsanctioned form of mobility here in Toronto, mostly because people think they’re dangerous, but also because I think people are worried about them cluttering up our sidewalks.
The problem with this position is that electric scooters are also a lot of fun to ride and people seem to find them useful. The last time I rode one was in Paris and it seemed perfectly safe to me, though it may have been because there were two of us on it and we were kind of overloading the thing.
In any event, lots of cities either have them or are piloting them. Seattle just finished year one of its pilot program and here’s what they learned:
From September 2020 to October 2021, Seattle saw 1.4 million trips taken by over 260,000 riders
Electric scooter ridership greatly exceeded that of public bicycles, with 300,000 scooter trips taken in September alone, compared to about 35,000 bike trips
54% of surveyed scooter riders said that they would have taken a taxi or driven their personal vehicle had a scooter not been available
21% of riders said that they used it to connect to public transit (helping to solve that pesky last-mile problem)
17 collisions involving a scooter and a car were reported during the pilot year (though, for what it’s worth, some/many of the incidents involved a scooter that was privately owned and not part of the actual pilot program)
As much as I love riding a bike, it’s a bit more of a commitment compared to riding an e-scooter, which is why I think the numbers look the way that they do here. Not everybody wants to bring a change of clothes and shower at the office.
So I think it’s really too bad that Toronto just shut these down before exploring ways to make them both safe and useful.
Deeply affordable housing is mostly infeasible to build.
This is why you don’t see the market naturally building this kind of housing on its own. It, for the most part, doesn’t make any economic sense to do so. So this is also why the US has fabricated things like low-income housing tax credits. They are a way to make up the economic shortfall that exists with low-income rental housing and get the private sector building this kind of housing.
We sometimes try to convince ourselves — or maybe it is a way of shirking responsibility — that there can be such a thing as no-cost affordable housing through things like inclusionary zoning. But I think we all know that there’s no such thing as a free lunch. Somebody is ultimately going to need to pay. The big question, of course, is who should that be?
By definition, we acknowledge that the people who will ultimately live in these affordable homes cannot afford to pay market rates. So by default, the subsidies will need come from somewhere else. But again, from where and from who? Should it be specific people who pay or should it be mostly everyone who pays?
If we return to the Toronto building industry’s favorite topic right now — development charges — you’ll see that under the current rates, every new 2 bedroom or larger apartment that is constructed must pay $3,727 toward affordable housing. Under the proposed rates, this will increase to $12,545 for every new large apartment. It’s by far the largest proposed percentage increase (237%) and also one of the largest service items.
This raises two interesting philosophical questions.
One, should the buyers of new housing be responsible for contributing to affordable housing in this way? Because what we are in effect saying to these people is, “Hey, you can afford to buy a new market rate home, so we’re going to collect some additional money from you — $12,545 to be exact — so that we can try and help those that aren’t in the same position as you. We’re also going to mandate additional affordable homes within your building and we’d like you to subsidize those too.” This is one way to redistribute wealth.
But if the goal is to try and create more broad-based affordability, an alternative approach might be, “Hey, you already own a home and it has gone up a lot in value, so we’re going to collect some additional money from you over time so that we can try and help those that aren’t in the same position as you.” This would be the property tax approach. It’s probably not perfect, but might it be a more fair and equitable way to redistribute wealth?
The second interesting philosophical question has to do with whether this is consistent with the dogma that growth should pay for growth. The idea behind development charges (also known as impact fees in some parts of the world) is that they should pay for the cost of new development. This makes complete sense. When you build new housing you certainly need some additional stuff — everything from additional school capacity to emergency services.
But the question here is whether the construction of new housing in and of itself creates a direct need for more affordable housing, and therefore should be charged for it. Asked in the opposite way, if you weren’t building this new housing, would you then no longer need this affordable housing, just like you no longer need that additional school capacity?
This is definitely not the case. In fact, I would argue that the opposite is true. If you don’t build any new housing in a growing city, you actually exacerbate the problem of affordability. So here’s a provocative thought. Rather than a charge, should this affordable housing line item actually be a credit towards each new project given that it benefits affordability?
While it may not make any economic sense to build affordable housing, I think that many of us would agree that it makes a lot of social sense to build affordable housing. We know that our cities are at their best when they are both diverse and inclusive. The problem is that we can’t agree on who should pay for it.
Here are a few Ontario / Toronto housing supply charts taken from this recent blog post by Mike Moffat (an assistant professor at Ivey Business School):
So what do these tell us?
Well, 2015 was a banner year for the supply of new apartments/condominiums in the City of Toronto. And supply, in general, has been ticking upward for apartments across the province.
But if you’re in the market for a new single-detached, semi-detached, or row house, supply is on the decline in the Toronto CMA. You’re likely going to have to go further out for that.
This, of course, makes sense. The Toronto CMA has been built out. Most of the new growth is now going to need to take place through intensification, which usually means apartments and condominiums.
Though obvious, I think all of this is an important reminder. Because the more difficult and the more expensive we make it to build in our already built-up areas, the more we are encouraging sprawl in “Ontario outside of Toronto CMA.”
At the same time, we are also making it more financially challenging for families to remain in the city. We can talk all we want about 3-bedroom suites and ways to make them more accommodating to children, but that doesn’t mean much if people can’t afford them.
If you’ve been following the Toronto housing market and/or following any panicky resale agents/brokers on Twitter, you’ll know that things have shifted over the last few months. Here’s what broker (and my friend) Christopher Bibby had to say about the market in his most recent newsletter:
As anticipated, April has ended up being one of the defining months of the 2022 real estate market. With the recent fragility we are seeing, it is clear that the market peaked in February. In fact, the Toronto Real Estate Board, in its most recent Market Watch, claims that month-over-month prices could be down by 2.6%—which is very likely. TREB also indicated that the overall number of year-over-year transactions in March was down by approximately 30%. I deferred the release of this newsletter because weekend activity positively altered some of my previous commentary. The key takeaway, however, is that sentiment has shifted in our marketplace.
But let me paraphrase the conclusion of Bibby’s newsletter with two words: who cares? If you think that Toronto (or some other city) will remain an important global city by 2025, 2030, or even 2040, you really shouldn’t be fussed by what the market is doing over the span of a few months.
Moreover, I can tell you that my least favorite time to go out and buy real estate is when everyone else is submitting silly offers and clamoring to buy whatever they can find.
The big news this week for Toronto city builders is that the city has put forward a proposal to substantially increase development charges. Here’s a tweet storm that I published earlier today on the topic, and here’s a summary of what the new fees might look like:
To translate this into a specific example, let’s assume that you’re building a 300 unit apartment building with 180 one bedroom suites and 120 two bedroom suites.
Under these proposed DC rates, this would translate into charges of about $9.6mm for the one bedroom suites and $9.8mm for the two bedroom suites, totaling over $19.4mm in DCs alone. But keep in mind that there would be other charges on top of this for parkland dedication, community benefits, and a bunch of other things.
When our cost consultant ran the numbers back in 2019, the estimate was that about a quarter of the price of a new condominium in Toronto was going to government fees and taxes. But with the above increase and with the introduction of policies like inclusionary zoning, I am sure that the number is higher today.
These are easy fees to hide. Most people don’t know they exist. And a lot of people don’t seem to like new development and new housing. Property taxes on the other hand are highly visible and highly sensitive. So that tax tends to be left alone, especially by comparison.
But these increases are hugely impactful. It means that developers across the city will now need to start looking at increasing rents and prices in order to try and offset it. If they can’t, they won’t build. And if they can, it will mean that the housing that does ultimately get built will be that much more expensive.
I was driving to the office from the Junction last week, and I passed a brave individual waiting at this bus stop on Parkside Drive:
I immediately thought to myself, “what an undignified and silly bus stop.” There’s a little bit of paving so you have a place to stand while you’re waiting, but how do you even get there?
There are no sidewalks actually leading to said bus stop, and so you really only have two options: 1) jaywalk or 2) cross at some far away intersection and then walk unceremoniously on a narrow strip of grass and dirt on the side of a busy street.
Not surprisingly, this was the first time I had ever seen anyone waiting at this stop even though I take this route all the time on my way to and from Junction House.
I recognize that I was operating a motor vehicle when I saw this guy waiting for the bus. But I also took transit last week. And I know that we have it in us to do much better than what you’re seeing in the above street view photo.
It’s also a reminder that while High Park is really great, we need to work on its edges. Both the urban edge that I’m describing above, and the built form that surrounds our magnificent park. High Park is an urban park, but we seem to be a little uncomfortable with that idea.
The Toronto mid-rise housing typology is known for architectural forms that often end up looking something like this:
On what planet would a city want to build accordions around the neighbourhood? pic.twitter.com/LtWgTNKreM
— Jeremiah Shamess | Toronto Land & Building Sales (@JShamess) March 9, 2022
The reason for this is the infamous “45-degree angular plane” that gets applied when new developments abut low-rise residential neighborhoods. It is a way to transition down and mitigate some of the impacts associated with this kind of infill development — usually the concerns are overlook, privacy, and shadowing.
These are, of course, legitimate concerns. But here’s the other side: Should we really be reducing the number of homes that we can build on our main streets by carving away area like this? Is overlook and shadowing more important than additional housing? Stepping buildings like this also makes constructing them more expensive and cumbersome. Are higher costs the goal?
It is for reasons like these that some people have been paying attention to the new Danforth Avenue Planning Study that went to Toronto City Council this week. Among other things, the study recommended the relaxation of the 45-degree angular plane standard along a portion of the Danforth.
This is certainly a step in the right direction. But in my humble opinion, it’s not nearly enough for an area that will ultimately sit at the intersection of two subway lines.
Planner Sean Hertel shared this (embedded above) on Twitter over the weekend. It is a lawn sign from Toronto’s Junction neighborhood that is calling for a stop to demolishing family houses for high rises.
One, high-rises are monstrous beings that enjoy praying on innocent low-rise houses and squashing them with their feet, and sometimes their asymmetric hands.
Two, it is mostly impossible to conceive of a world in Toronto where families live in high-rises and don’t live in grade-related housing with a backyard.
And three, there is little value in building more, rather than less, housing in order to help with affordability concerns. Perhaps the thinking is that it needs to be low-rise affordable housing, or nothing.
With all of this said, let’s do a little thought exercise today on the blog.
Let’s for a second assume that there aren’t any high-rises proposed in the Junction; only European-scaled mid-rise buildings that sit on the area’s main avenues and back onto low-rise single-family neighborhoods. Let’s also assume that these buildings will be sculpted in complete deference to their rear neighbors so that things like shadows are minimized.
Let’s assume that more housing is better than less housing.
Finally, let’s assume that, get this, noble families may actually be able to live in mid-rise and high-rise buildings. And that there are already many successful examples of this taking place in the city, such as over here in CityPlace.
What key messages would this lawn sign be then communicating?
This past weekend it was announced that ground has been broken (i.e. construction has started) on the new Ontario subway line that will connect Exhibition / Ontario Place to the Science Centre by way of the light purple line labeled “C” on the above map. (The other image is a rendering of the proposed Exhibition station.)
This transit line has gone through many permutations over the years and was previously called the Downtown Relief Line (but that was seen as too downtown-centric); the Yonge Relief Line (still too specific); the Relief Line (not Ontario-specific enough, I guess); and probably a bunch of other names corresponding to various lines on a map.
So it is exceedingly easy to be cynical when you hear of an announcement like this. Is it really happening? Are we actually building new and much-needed transit? And as you might imagine, if you read through the chatter on Twitter, you will find an overabundance of this sort of cynicism, along with what appears to be a general dissatisfaction with the current state of everything.
But in my simple view, I reckon that it is far better to be starting construction on an important new transit line than not starting construction on an important new transit line. So this is exciting! Let’s go! If you’d like to learn more, I also tweeted out the initial renderings for the 14 stations that are planned for the Ontario Line.
