Brandon Donnelly — Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly. — Page 1325

This evening I was interviewed for a documentary called The Millennial Dream . It’s all about how Millennials – people like me – are rethinking or even rejecting some of the traditional notions of The American Dream . It’s being produced by Hemmings House .

My part was all about housing. 

So a lot of it was about how housing preferences have (or have not) changed for Millennials. If you’re a regular reader of this blog, you’d already be familiar with many of the topics I covered.

What’s most interesting to me though, is not what Millennials are doing today. We already know that there’s been a return to cities and that many young people prefer walkable and authentic communities. Everyone is talking about it and it’s no longer novel.

What’s more interesting to me is what Millennials are going to do in the next 10 years when the majority of the cohort is in their 30′s. What percentage will be married? What percentage will have kids? And, where and how will they choose to live in cities?

Because there are some structural changes happening. Marriage rates in the US have been declining since the 1960s (see New York Times ).

And fertility rates are at their the lowest in US history . So in theory, and unless things change, Millennials should on average demand different types of housing. Fewer of them are likely to marry and they’re having fewer kids.

But at the same time, I also believe that there have been changes in consumer preference that are not going to completely reverse as Millennials age. So city builders will need to come up with new and creative forms of housing for families who want to stay in urban centers. And that’s an exciting challenge.

I’d be curious to hear thoughts in the comment section below. The documentary won’t be out until the end of the year, so you still have a chance to influence its direction. More voices are better than one.

Uber is currently testing out something called “Smart Routes” in San Francisco.

Basically it works similar to UberPOOL (where you carpool with strangers to bring the cost down), except that your pickup location (and trip?) is confined to a specific route. 

This means less detours and more rides for drivers, as well as even cheaper fares for passengers. But just like public transit, you’ll likely have to walk a few minutes to get to the closest route. 

Here’s a screenshot of what that looks like (via TechCrunch ):

The green line is the “Smart Route.” So all you have to do is select a pickup location somewhere along that green line, and you’ll save a bit a money. Currently it’s “$1 or more” off your fare, but who knows what it might be when this feature actually rolls out.

This is fascinating to me because it’s starting to look and feel a lot like a conventional bus route. But in this case, the routes can change and new routes can be easily created as demand changes. 

So it’s not just taxis that need to be thinking about Uber. It’s public transit authorities as well.

https://500px.com/embed.js

As further evidence that real estate is a local business , let’s take a look at the housing market in Japan today. It’s a very unique market.

According to this Freakonomics podcast , 50% of all single family houses in Japan are demolished by the time they reach 38 years old. That’s their half-life. By contrast, in the US, this number is 100 years.

The reason for this is rapid depreciation. Real property typically consists of two things: land and the building. Land doesn’t depreciate. But the structure sitting on the land does.

In Japan, the building or structure is thought to be fully depreciated (and therefore worth nothing) after about 30 years for a single-family home and after about 40 years for an apartment/condominium.

The result is that there’s virtually no resale housing market. When somebody buys a house, it is usually torn down and completely rebuilt. It’s a uniquely Japanese phenomenon.

So why does this happen?

The Freakonomics podcast presents a couple of hypothesis. Some believe that it’s caused by a Japanese fixation with newness. New is seen as pure and clean. 

Others believe that it has to do with a building code that is constantly changing due to the high frequency of earthquakes in Japan. 20% of the world’s earthquakes with a magnitude of 6.0 or greater happen in Japan. And so there appears to be a belief that newer homes – with the latest seismic technologies – are the safest.

Whatever the case may be, the fact that there’s virtually no resale housing market in Japan, not surprisingly, produces some interesting outcomes. For one, maintenance and DIY home projects are uncommon. Why invest in your home when it’s not viewed as an asset, but as a disposable good?

At the same time, people worry very little about marketability when they are building new. And this is a big reason why Japan is so famous for its radically designed homes . When you’re building only for yourself, you just do what you want.

But most importantly, some (such as Richard Koo, who is interviewed in the podcast) believe that this approach to housing is a huge “obstacle to affluence.” Without a functioning resale market, the Japanese don’t get the opportunity to build wealth/equity in the same way that other countries do.

Do you buy that?