Brandon Donnelly — Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly. — Page 1550

Yale economist Robert Shiller - who is famous for his work on speculative bubbles and housing markets - was just awarded a Nobel Prize in Economics .

By way of his Case-Shiller Home Price Indices , he has argued that from 1890 to 2012 home price appreciation in the US (in real terms) has been basically zero. It has been flat:

As a result, he’s been very critical of the notion that homes should even be thought of as an investment. In this interview , he says the following:

“So, why was it considered an investment? That was a fad. That was an idea that took hold in the early 2000’s. And I don’t expect it to come back. Not with the same force. So people might just decide, "Yeah, I’ll diversify my portfolio. I’ll live in a rental.” That is a very sensible thing for many people to do.“

He also gives the example of Japan, which saw a massive run up in real estate prices and homeownership rates in the late 80s, only to then see them fall and stagnate for the next 20 years.

In the US, homeownership rates have gone from about 69% at the peak (2006) to roughly 65% as of 2013. The long term average is probably somewhere in between these two numbers.

But homeownership is a fundamental and heavily subsidized part of the American dream. Could America ever be a nation of renters?

Last Monday, the Office of the New York Attorney General subpoenaed Airbnb for information about all of its 15,000 “landlords” who rent out spaces in New York through their service. Airbnb has since  refused to provide the information .

This is an interesting case. Airbnb is one of those startups that seemed initially like an idea too crazy to work, but has since grown to become a serious disruption to the hotel industry. However, the problem is that many jurisdictions have laws pertaining to illegal hotels. In the case of New York, the law prohibits short-term rentals under 30 days unless the permanent resident is present alongside the guest(s).

What this means is that renting out your apartment while you’re away for the weekend-which from my experience here in Toronto is how a lot of people use the service-is technically illegal in New York. State senator, Liz Krueger , believes that apartment building residents shouldn’t have to worry that their neighbouring apartment could turn into a de facto hotel room.

While I do sympathize with this concern, I think there’s a gradient of use here. Not every Airbnb user is operating a de facto hotel. Many, whatever that percentage might be, simply use it to earn extra income while their place sits idle. And to do this, the permanent resident is trusting their home to a stranger.

So in a way, there’s a filter in place that isn’t there when the unit is being operated strictly as a hotel suite. Therefore, maybe we just need to expand the definition of having a “permanent resident present” to include having their belongings and life in the place.

It’ll be interesting to see how this all pans out. But whatever the result, it’s clear that Airbnb is definitely shaking up the status quo. Do you think residents should be freely allowed to rent out their places on any term?

Transit planning is absolutely and utterly broken in Toronto. Over the past few years, it has become abundantly clear that our current methods are completely ineffectual. We’re entirely useless at delivering transit infrastructure to the most important economic region in Canada. 

The process is deeply political, and with all three levels of government involved, as well as countless agencies, we’re getting absolutely nothing done. And when we do manage to achieve some level of progress, such as provincial funding for the Scarborough subway line, it turns out that fact and evidence would suggest we’re actually headed in the wrong direction .

It’s an unfortunate situation that we’ve gotten ourselves into, because transit and infrastructure have such a profound impact on productivity levels and our economy as a whole. And yet we’re just sitting back while our politicians fight over transit investment according to what best suits their voter bases.

Politicians should not be making these decisions. At this point they’ve proven their inability to make effective progress and so I believe we need to strip them of this responsibility. Part of the problem is that we have a mismatch of time horizons: politicians need quick wins, while transit investment is a long term game.

What we need is an entity - ideally one entity - that isn’t reliant on ad hoc funding hand outs. It needs a sustainable funding source and the power to make decisions about where infrastructure investments will be made in our region. We can’t continue to screw this up. Transit is far too important.