Brandon Donnelly — Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly. — Page 244

I've been having more coffee meetings over the last few weeks. And one of the things they are doing -- besides making me jittery -- is reminding me that at least two things happen during bear markets:

1. Conviction gets tested.

2. People get really creative.

Let's start with number one. It's easy to have conviction in something when it's obviously working and lots of other people are doing it. But what about when that is no longer the case?

Take the example of Amazon. In this 2018 post by Fred Wilson , he reminds us that at the peak of the internet bubble in 1999, Amazing was trading at around $90 per share. Two years later it was somewhere around $6 per share. And it was not until 2007 that Amazon would start trading above its peak again.

In hindsight, holding on was very obviously the right thing to do. But to do that from 1999 to 2007, you would have needed patience. And to have patience, you would have needed a high degree of conviction in Amazon as a company and in the internet as the harbinger of an important societal shift. That wouldn't have been easy -- just like many things today are not easy.

At the same time, bear markets force people to get really creative -- we're now onto thing number two. In this case, it's not a question of patience. It's, "the thing I was doing before no longer works and I don't know if/when it will work again, so I'm going to get creative and try something new." Bear markets give you this wonderful opportunity because the opportunity cost of not doing the status quo disappears (or greatly reduces).

On some level, though, these are two contradictory things: are we sticking to our guns or are we trying something new? But in my mind, you want both. This is not about saying, "lots of people used to want to buy cryptocurrencies and condominiums, but now a lot of people don't, so I'm going to move onto the next hot thing." It's something more calculated than this.

To return to Amazon, I think it's akin to Jeff Bezos' old mantra that you want to be stubborn on vision, but flexible on the details. Right now, lots of people are being forced to be flexible. But the vision part is what you still need conviction around. Otherwise, how will you get to where you want to go?

https://youtu.be/011TOfugais?si=85OchFBtjZAVp0Ez

Here is another great video from About Here talking about how breaking certain rules could make for better apartment buildings.

The basis for the video is a design competition put on by Urbanarium, called Decoding Density , which asked participants to propose creative solutions for "six-story plus apartment forms in Metro Vancouver."

More specifically, the competition asked: How might Vancouver intensify its single-family neighborhoods with small-scale wood-frame apartments?

The About Here video covers some of the common themes from the submissions and, not surprisingly, the first is single-stair buildings . Requiring only a single point of egress can really unlock small sites.

Some of the other ideas are, perhaps, a bit more adventurous; but these are valuable exercises. Many rules are dumb. So it's important that we continually question them and search for better ways.

Over the weekend, we spoke about how the " GTA condo market is in a state of economic lockdown ." What this generally means is that the math isn't making sense to build new condominiums. And so the market is necessarily pausing.

We spoke about what this will likely mean for supply in the coming years, but I think it's also interesting to talk about this in the context of something else: unfunded inclusionary zoning.

As a reminder, inclusionary zoning is, in its most basic form, a requirement to build a certain amount of affordable housing as part of new housing developments. And what I mean by "unfunded" is that there are no subsidies or other incentives being provided to the project.

This means that the cost of providing this housing -- and there is an additional cost -- needs to be shouldered by the project, which ultimately means the market-rate units need to pay for it.

Which is why if you look at most policy studies, you'll often find recognition that, because of this economic reality, IZ tends to work better in areas where home prices/rents are higher. And again, that's because the market-rate homes need to shoulder the cost.

We have questioned, many times , on this blog , whether this is the right approach to delivering affordable housing, but I think this question becomes even more critical in our current market environment.

If the entire market is, for the most part, in a state of economic lockdown, should we really be layering on additional costs and making it broadly more difficult to build any sort of new housing? It seems counterintuitive.

For more on this topic, check out this recent Sightline article by Dan Bertolet.