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 morning I stumbled up on this conversation between Richard Florida and Ed Glaeser about the post-pandemic city. It’s from September 2020 and that is obvious in some of the comments. Richard Florida (who was in Toronto) remarked that it felt like the pandemic was mostly over at that time and that Canada had seemingly done a much better job than the US at tackling it. That no longer feels right. But I did find myself agreeing with some of their other points.
Here’s one from Ed Glaeser that looks back to previous health crises:
But pretty much since the 14th century, urbanization proceeded despite the reappearance of the Black Death in the 1350s. Urbanization proceeded despite the Great Plague of London in the 1660s. All of the great diseases that spread in 19th-century America, cholera, yellow fever, the urbanization just chugged along. Even the influenza pandemic of 1919-1920 was followed by a tremendous decade of city building. So, I think our cities have proven to be remarkably resilient.
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.
Howard Lindzon has a podcast called Panic with Friends. It was started last March (hence the name) and he uses it to interview entrepreneurs, investors, venture capitalists, and other business people about what they’re up to. In today’s episode he speaks with Harley Finkelstein, President of Shopify, about the future of ecommerce and about how they’re positioning the company. What was interesting but not surprising to hear was that in the early years people didn’t believe that Shopify had a large enough total addressable market. Supposedly, there weren’t enough people out there who might be interested in starting their own online store. That, of course, has proven to be false and there are new and successful ideas emerging all the time. We’re also now talking about how ecommerce is reshaping the landscape of our cities. Given all of this, the company has grown to think of itself as an entrepreneurship company. If you’re at all ambitious, then you’re an entrepreneur in their eyes and Shopify wants to be the platform for you. As a Canadian, it’s great to see them doing so well. If you can’t see the embedded Spotify player above, click here.
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.
Okay, Clubhouse is pretty awesome. I participated in my first discussion room — thanks to my friend Evgeny, who has been a vocal supporter of the platform — and I have now seen the light. The topic was real estate and PropTech. And we hope to do it again.
It feels a bit like Twitter to me, but obviously with audio and with greater controls and visibility in terms of who can participate inside of a discussion room.
It also makes perfect sense to me that Twitter is piloting their own version of Clubhouse called Spaces. That feels like a natural extension and something that needs to happen. Perhaps some of the moderation features will also make their way into the rest of Twitter.
As many of you already know, what makes Clubhouse unique is that the communication is free-flowing and impromptu. You are able to see what topics people are talking about and then jump in and out of those audio rooms, as well as invite people to join a discussion that you may be having.
All of this makes the communication feel like you’re at a party or in an open office. Over there you can see/hear that someone is talking about the “Pensky file.” If that’s interesting and/or relevant to you, you have the option of jumping into that conversation.
I wouldn’t be surprised to see some of these features and behaviors translated over into workplace collaboration tools. I think it would be helpful to see what other discussions are taking place within a team or company.
Maybe if we made things a little more free flowing, we wouldn’t need so many damn Zoom meetings.
Proptech Collective has just published their inaugural 2021 Proptech in Canada report. Here are a couple of screen grabs that you all might find interesting:
What these images should tell you is that the Canadian proptech landscape is fairly Toronto-centric, but that it’s also very much in its nascent stages. We’re just getting started here.
There are many development narratives that I don’t quite understand. (I’m thinking of Toronto, but you can probably replace Toronto with any number of global cities for this discussion.) One is the belief that our transit network is full and so no new development should be allowed in certain locations, next to certain transit stations. The thrust of this argument is that additional transit capacity must be added before any new development is allowed to occur. This might sound logical, except it ignores the fact that the need for new housing doesn’t magically disappear because subway cars are thought to be too busy during the morning rush.
Transit systems are also a network, and so does this mean that no more development should be allowed to happen anywhere in the city/region? Or is the goal to simply move development off of higher order transit and into lower-density areas so that the future residents in these new buildings can either take buses to the transit stations that were previously deemed to be at capacity or drive their cars everywhere? (Our highways have excess capacity during the morning rush, right?)
The second narrative that I find perplexing is that new developments don’t give back in any way. Above is a chart showing residential development charges in the City of Toronto, as of November 1, 2020. This chart outlines the fees that every developer must pay when building new residential, though it is important to keep in mind that there are many other government fees and charges that form part of almost every new development. These are things like parkland dedication and separately negotiated community benefits. But for the purposes of this post, let’s just focus on development charges (aka impact fees).
Assume you’re building a 400 unit apartment building, consisting of 240 one bedroom suites (60%) and 160 two and three bedroom suites (40%). Based on the above chart, your development charge bill would be:
240 one bedroom suites x $33,358 per unit = $8,005,920
160 two and three bedroom suites x $51,103 per unit = $8,176,480
For a total of $16,182,400.
But it’s important to keep in mind that these are the rates as of November 1, 2020. They will almost certainly go up by the time these charges become payable for your 400 unit apartment building. By how much you ask? Well according to Urban Capital’s most recent issue of Site Magazine, which compared a development pro forma from 2005 to 2020, development charges in the City of Toronto have increased by about 3,244% during this time period. (The S&P 500 was up about 220% during this same time.) These are obligatory fees that contribute to everything from transit and parks to subsidized housing and municipal services. (The line items above.)
So it strikes me that there are other more productive questions that we could and should be asking ourselves. Such as, why is it that our transit/mobility infrastructure hasn’t kept pace with new development and new housing demand? What are we going to do to fix that immediately? Why are we not taxing the things we don’t want (like traffic congestion) so that we have more resources for the things we do want (like transit and housing)? And most importantly, what is the best way for all of us to work together so that we can create the absolute greatest global city in the world?
This is an incredible house in Hamilton, Ontario by Toronto-based architecture practice Partisans. The central idea is clearly its folding roof, which dips down to accommodate a set of stairs that lead to the roof of the house. At the same time, the sloping roof creates a wave-like enclosure for the indoor/outdoor pool that sits below it.
Partisans is, in my opinion, one of the most creative firms practicing in the city today. This house is a good example of that. I also admire their ability to go deep into materials and construction methods, which is something you need to do when you design forms like the ones you’re seeing here. For more photos and information, check out this Dezeen article about the project.
“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.
It is starting to feel like 2021 could be a turning point for “missing middle” type buildings here in Toronto. Momentum seems to be growing and there’s increasing interest in finding ways to make this scale of housing more feasible — everything from duplexes to low-rise walkup apartments.
This week Councillor Bradford published a great op-ed in Spacing Toronto as a kind of call to action: Let’s make this year the year. In it, he provided an update on a pilot project that will be taking place in his ward — Beaches-East York — this year:
We’ll be setting out this spring to find a city-owned site and the right partners for the project. From there, the work will be to go through every step of the development process, from design to construction. This Pilot is about accomplishing two key tasks. One, building housing that meets the Missing Middle typology while aiming to incorporate the affordability and sustainability elements Toronto needs. Two, through undertaking that development process, to identify the execution issues so we can bring forward the policy corrections that’ll make what we achieve in the Pilot build replicable across the city.
With the continued run-up in single-family home prices, it really is starting to feel like we’re at a tipping point. Something is going to need to change. People continue to move to Toronto from all over the world. Perhaps this year will be the year. To learn more about the pilot project, take a look at this update report.
