Brandon Donnelly — Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly. — Page 215

I had lunch today with a friend (from school) who runs a multifamily development company in South Florida. His business is very similar to the apartment strategy that we are now working on in Toronto , in that he builds a repeatable apartment product (garden style apartments). In fact, he was telling me that he now has a dedicated design & QA/QC team within the company. Their job is to focus on continuous optimization and on reducing construction inefficiencies.

This is the way!

But each market is obviously unique. His rents are in the US$3 - 3.25 psf range (call it ~C$4.15 - 4.50 psf), whereas in Toronto you need something closer to C$5 psf to have a feasible project. Our yields are also lower on average. It's hard work to get to an untrended yield-to-cost of 5% here. But for him, he can't raise capital with anything less than 6.5%, which represents a development spread of at least 150 bps over where multifamily cap rates are today in his market (~5%).

Juicy by comparison.

As a general rule, road pricing isn’t popular. But that’s not because it doesn’t work. The problem is that it works too well , and people don’t like the idea of driving less and paying for roads (that currently have a zero marginal cost).

Here’s a recent study by Robert Bain and Deny Sullivan that looked at just how well it can work. In it, they examine 76 data points from 16 countries, including roads, bridges, tunnels, and cordons (areas).

The question: What happens to demand once the marginal cost of using a road goes from $0 to some cost greater than zero? (As part of this, they also looked at whether the road or bridge in question has viable alternatives.)

The results:

The median traffic reduction was 25%. But the interquartile range was -17% to -44%. This is all very significant. Said differently, the traffic impact in nearly a quarter of the examples was -45% or more. So almost a halving of traffic congestion.

These reductions are obviously a function of the cost of using each road, but regardless, the overarching takeaway remains the same: You may not like or want road pricing, but it totally works.

Vishaan Chakrabarti is an architect based in New York City. He is the founder of Practice for Architecture and Urbanism (PAU) and the author of two books.

His first book, published in 2013, was A Country of Cities: A Manifesto for an Urban America . And as the title suggests, it was about the virtues of dense urban agglomerations. You know, the kind of cities that I like and have good bike lanes.

His second book, which just came out, is called The Architecture of Urbanity: Designing for Nature, Culture, and Joy . In this one, he talks about the role of architecture and urbanism in fighting both climate change and social division.

Below is an excerpt from a recent interview in Bloomberg where he discusses the book's theme of "social friction." This snippet is also a timely follow-up to yesterday's post about autonomous vehicles:

Cars are problematic when it comes to connective design. It doesn’t matter if they’re electric because the problem with a car is it’s a divider. It’s a metal bubble and it keeps you from interacting with your neighbors. So the virtues of mass transit, public parks and well-designed buildings in cities are not just that they are good for the climate. They are also good for this sense of social coherence. If we’re going to live up to our promise as a country — a multicultural democracy — we need to have spaces that both reflect and perpetuate that.

I haven't read the book yet, but it sounds like it's in the wheelhouse of this blog. If you'd like to, here's a link .