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.

Subscribe

Tag: urbanism

  • The housing supply narrative is a sham

    That is the argument that Joshua Gordon, who is an assistant professor in the Simon Fraser University School of Public Policy, recently made in this opinion piece in the Globe and Mail. In his view, there’s no evidence to suggest that housing supply can actually help housing affordability. It’s just something that developers throw around to “stymie action on the demand-side” and to help with their rezoning efforts. Really, the housing problem is due to intense demand from foreign buyers, investors, and from “high rental demand.”

    Now, as many of you know, I am a developer, and not a professor. So you can take this post however you would like. But I do have a few thoughts.

    One, I think it’s an oversimplification to argue that there have been no regulatory changes over the last decade that have meaningfully and negatively impacted the supply of new housing. To give you one example, this fall, development levies in Toronto will complete a phase-in that has seen them double over the last couple of years. Almost a quarter of the price of a new residential condominium now goes to pay government fees and taxes. This has an impact on supply, even if the “regulatory environment” hasn’t necessarily changed.

    Two, I don’t buy the argument that, “surrounding cities have also seen rapid price appreciation and it’s easier to build there, so housing supply mustn’t be the problem.” Building outside of cities like Toronto and Vancouver isn’t necessarily easier. In fact, in some cases it can be more difficult if they’re not accustomed to more progressive urban infill-type developments.

    Three, it’s important to keep in mind that we have a financing structure in place that biases the types of homes (specifically residential condominiums) that get built. This approach is designed to mitigate financial risk, but it also means that investors serve an important function in the delivery of new housing. I’m not saying that the system is perfect; but I am saying that things are maybe not as simple as they may seem.

    Four, just because there are cities with lots of single-detached homes and relatively affordable housing, I don’t think we can safely assume that single-family land use policies have no impact on supply and pricing in cities like Toronto and Vancouver. In fact, I would argue the opposite. This probably goes to show you the importance of an elastic housing supply. Indeed, some of the most affordable housing markets are dominated by low-rise houses precisely because it is a typology that is quicker and cheaper to build than most urban infill housing.

    Finally, I’m not sure why anyone would consider high rental demand and a strong labor market to be symptomatic of a problem. Isn’t that what you usually want out of cities? You want there to be an abundance of good jobs that pay people money so that they can, you know, have a life and consume things like housing. But maybe that’s just the way that I look at things. I am a developer after all.

    Photo by Wiktor Karkocha on Unsplash

  • A child of catastrophe

    It used to be the case that cities had a habit of catching fire and burning down. Toronto had the Great Fires of 1849 and 1904. Chicago had the Great Fire of 1871. And the same can be said about many other cities. In fact, you probably weren’t considered a real city until you had some sort of “Great Fire.” But as Derek Thompson points out in this recent Atlantic article about urban comebacks, disasters have a way of forcing positive change:

    The 21st-century city is the child of catastrophe. The comforts and infrastructure we take for granted were born of age-old afflictions: fire, flood, pestilence. Our tall buildings, our subways, our subterranean conduits, our systems for bringing water in and taking it away, our building codes and public-health regulations—all were forged in the aftermath of urban disasters by civic leaders and citizen visionaries.

    As Charles Dickens famously described, British cities in the early years of the Industrial Revolution were grim and pestilential. London, Birmingham, Manchester, Leeds—they didn’t suffer from individual epidemics so much as from overlapping, never-ending waves of disease: influenza, typhoid, typhus, tuberculosis.

    It’s somewhat unfortunate, but oftentimes we need something to break before any action is taken. There’s a bias toward the status quo. Otherwise, it becomes a question of, “what did we do last time? Well that worked just fine. Let’s do it again.” But hopefully all of this makes you at least a little optimistic about the future. Because history has taught us that when faced with adversity, we don’t typically turn our back on our cities. Rather we turn around and make them better.

    Photo by Tomek Baginski on Unsplash

  • Chicago’s Winter Dining Challenge

    This has been a summer of cycling, playing tennis (poorly) on Toronto’s public courts, and eating and drinking on sidewalks — sometimes with, get this, no fencing. But winter will arrive in this part of the world at some point and that will mean having to rethink our patios. I’m certain that we’ll be doing everything we can to extend the season this year because we are already seeing that take place in other cities.

    Last month, the City of Chicago launched, in partnership with IDEO, BMO Harris Bank, and the Illinois Restaurant Association, a competition called the Winter Dining Challenge. The goal is exactly what I just described. It’s to solicit creative ideas for how Chicago can make outdoor dining feasible all throughout the winter. (Chicago and Toronto have similar winters.)

    Domes, pods, and heaters are likely to feature in the submissions, which makes me wonder at what point are you basically now considered to be “inside” as opposed to “outside.” Presumably fresh air needs to factor. But I should really reserve judgement until the top ideas are selected. If you’d like to submit an “idea, concept, or startup,” you have until September 7, 2020 at 11:30 PM PT. Here’s the link.

    Photo by Austin Neill on Unsplash

  • How different is Tesla’s business model?

    I have a friend who is a big fan of Tesla. And judging by what’s going on with the company’s stock these days, he is not alone. This morning he sent me this article talking about how Tesla has introduced an entirely new business model for the automotive industry. The two key takeaways are as follows. One, Tesla is in many ways a software company. The hardware and software onboard each vehicle are continually getting better and oftentimes these improvements are delivered to their customers for free via over-the-air updates. This is not how the incumbent car companies work. And two, fully electric vehicles are going to crush after-sales revenue by virtue of the fact that electric vehicles simply don’t require the same amount of service. So now you’re in a position where the cars last longer (and apparently depreciate a lot less). This might seem bad for business, but if you can build an ecosystem of energy products and services around said car, then maybe you’ve got a big ass Tesla moat. Maybe. I have no idea what the company should be valued at today, but all of this is interesting to me and I’m fairly certain that the car I have right now will be the last combustion engine vehicle I ever own. Depending on when autonomy arrives, it may also be the last car I ever own.

  • A few thoughts about housing supply

    Here are a few things to consider.

    One, the home you live in was likely built by a person or company that was trying to make a profit.

    Two, when your home was being developed and built, it probably upset a bunch of people. Both because something new was coming and because construction can be annoying.

    Three, your home was built using materials and construction techniques that were readily available at the time. Some of those materials and techniques may no longer be practical.

    Four, when your home was complete, somebody probably thought, “boy, they don’t build them like they used to.”

    Five, the need for new housing doesn’t stop just because you now have a home.

  • New York City isn’t dead

    I was speaking to some friends in New York City over the weekend and they said to me, “you know what Brandon, we don’t really go out at night anymore. It doesn’t feel safe. There are homeless people everywhere and they’ve started to get very aggressive, particularly against Asians.”

    They live in a good neighborhood in Manhattan.

    I was somewhat surprised to hear this, but at the same time, I don’t think for one minute think that New York City is dead. But some do, including James Altucher. James moved to Florida because of the pandemic and recently penned an article in the NY Post called, “New York City is dead forever.”

    That didn’t sit well with Jerry Seinfeld and so this morning he published a rebuttal op-ed piece in the New York Times. It has been making the rounds online today with people responding from both sides of the fence. Richard Florida responded with this tweet thread.

    If you’re a regular reader of this blog, you’ll know where I sit on this topic. I love technology, but sitting at home all day going from Zoom meeting to Zoom meeting is not the kind of life I aspire to live. I agree with Jerry. There’s no energy. In fact, it sucks the energy right out of me.

    With that, I’ll leave you with some more words from Jerry Seinfeld:

    There’s some other stupid thing in the article about “bandwidth” and how New York is over because everybody will “remote everything.” Guess what: Everyone hates to do this. Everyone. Hates.

    You know why? There’s no energy.

    Energy, attitude and personality cannot be “remoted” through even the best fiber optic lines. That’s the whole reason many of us moved to New York in the first place.

    You ever wonder why Silicon Valley even exists? I have always wondered, why do these people all live and work in that location? They have all this insane technology; why don’t they all just spread out wherever they want to be and connect with their devices? Because it doesn’t work, that’s why.

    Real, live, inspiring human energy exists when we coagulate together in crazy places like New York City. Feeling sorry for yourself because you can’t go to the theater for a while is not the essential element of character that made New York the brilliant diamond of activity it will one day be again.

    Photo by Florian Wehde on Unsplash

  • Photoblog: Humans are social creatures

    The above photo was taken on Lake Couchiching (off Lake Simcoe) with a DJI Mavic Mini.

    Here is the before straight from the drone.

    And here is the after with my Lightroom edits. I then cropped it to a 4×5 aspect ratio because wide landscape photos don’t show well on Instagram.

    For me, this scene is a reminder to remain bullish on cities. Take people out of the city. Put them on boats in the middle of a large lake. And they’ll still find a way to cluster together.

    Why? Because humans are social creatures.

  • The great balcony debate — revisited

    Over the years, I have written a few times about the great balcony debate. It’s a discussion that comes up time and time again as those of us in the building industry go through the process of designing new residential buildings. One the one hand there are the arguments that balconies don’t really get used all that much and that they are bad for the environment (thermal bridging through the slabs). And on the other hand there’s the argument that, regardless of whether or not they actually get used, they form an important part of the buying/renting decision. Usually the former is made by architects and engineers and the latter is made by sales and marketing teams.

    Back in 2016, I remarked that I was starting to see more Juliet balconies across Toronto (could have been some sort of bias at work — like when you’re shopping for a new car and then all you can see is that new car). Regardless, there are countless examples of architects and developers omitting balconies and finding creative ways to connect inside and out. But given that this pandemic has forced us to reconsider and reallocate how we use space in our cities, it’s probably worth revisiting the great balcony debate. Has COVID-19 changed how we view outdoor space? And if so, will it last?

    I’ve decided to start with a Twitter survey (see above tweet) and then either do a long-form article or a series of posts on the topic. If you have any thoughts that you would like to share (ideally before I write), please leave a comment below or on Twitter.

  • The urbanization of families

    Toronto has more people living in apartments than not. Looking at 2016 census data, the City of Toronto has about 1,112,930 occupied private dwellings and the breakdown between apartments (both lower and higher than 5 storeys) and grade-related housing is roughly 60/40. If you look at what’s been built more recently, the split is closer to 80/20. From 1996 to 2014, about 78% of all housing completions in the city were condominiums/apartments.

    So what is obvious to me is that the City of Toronto is becoming more dense, rather than less dense, and that family housing is destined to become more urban. As of 2011, there were 10,145 more families with children living in apartments/condominiums in the city compared to 15 years earlier. By comparison, the number of families with children living in low-rise housing remained more or less flat over this same time period.

    Of course, what this data doesn’t speak to is the number of people and families that may have opted to leave the City of Toronto for the suburbs — driving until they qualify for the kind of housing product that they would like to consume. The number of children living in higher density housing might be increasing within the city, but we probably shouldn’t ignore the pull toward the suburbs that still exists during family formation.

    Cities around the world are working to make their urban environments more suitable to families and young children. Here in Toronto we have something known as the Growing Up Guidelines. But the focus seems to be largely on design considerations — think playrooms and stroller-friendly foyers. That’s crucial, but it’s not everything. There are also very real economic realities to consider.

    The average price of remaining condo inventory in the Greater Toronto Area last quarter was nearly $1,100 psf. That puts a family-sized 1,000 sf suite at $1.1 million — and a lot more if you’re in a central neighborhood. The average would be closer to $1.5 million downtown. Obviously not all families can afford this. So there’s an affordability challenge. It’s one thing for the critics to say that developers should be building larger suites, but the market needs to be there.

    Another consideration is that of financing. Most developers rely on construction financing in order to build their projects. And in order to build a new condominium, there is typically a requirement to pre-sell a certain number of suites (revenue is the actual governor). This is generally a lot easier to do with smaller suites and with investor suites because these buyers tend to be more comfortable waiting out construction.

    Families, on the other hand, usually have a more immediate time horizon. It’s harder to forecast when the need will arise and it may not be financially viable to do that pre-emptively. And so I would argue that in addition to having an affordability challenge, we also have a financing structure in place that biases the type of homes that get built. There are, of course, advantages to this model. Pre-sales are a way for lenders to mitigate risk. It helps to ensure that the market doesn’t get ahead of itself. But there are side effects.

    Despite all this, we are seeing more families with children in higher density housing. Anecdotally, I see it happening in elevators with the number of strollers. This trend is destined to continue, but the winds are not entirely at the back of this shift.

  • Job mixes and job losses

    Recent job posting data from Indeed has revealed a bit of a paradox. The metro areas where more people are able to work from home — i.e. tech hubs and finance centers — have experienced larger job posting declines compared to all other US metros, as well as to tourism destinations such as Las Vegas and Orlando.

    We know that the hospitality and tourism sector has been the hardest hit by the current environment. But that doesn’t appear to be the biggest driver for overall job losses. In fact, one of the key takeaways is that job losses between February and June 2020 look to be correlated with metro size. That is, the bigger the city, the greater the job losses (% change).

    So what’s going on?

    Well, according to Indeed, it’s important to look at the local job mix. In “work-from-home metros” like Seattle, San Francisco, and Boston, there has been a relatively high percentage of people who were able to quickly transition to working from home. This is reflected in the anonymized mobile-device data for these cities. More people at home. Less mobility. And a seemingly stronger adherence to social-distancing protocols.

    The problem with this outcome is that it crushes most of the in-person sectors and businesses that relied on this workforce moving about the city — things like food prep and beauty & wellness. I mean, just think about all of the food businesses that survive off lunches in a CBD. According to Indeed, it is these sorts of local economic connections that have really been driving the declines in job postings and overall payroll employment during lockdown.