Brandon Donnelly — Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly. — Page 270

A few days ago, Waymo announced (on X) that its robotaxis are now doing more than 50,000 paid trips every week across Phoenix, San Francisco, and Los Angeles.

This means that the company is getting an average of 300 bookings every hour or five bookings every minute. And if you add in Austin, where it's currently offering a limited number of rides, the company has completed a total of over one million rider-only trips .

In the announcement, Waymo also went on to say that " fully autonomous ride-hailing is a reality and a preferred mobility option for people navigating their cities every day." All of this is something.

But perhaps the most important takeaway, right now, is that the company continues to claim -- by way of a study from Swiss Re -- that its robotaxis are already significantly safer than human-driven vehicles .

I don't personally know if this is true, but it's not hard to believe. I mean, human drivers suck. And assuming it is true, we should all want more robotaxis on the road, because statistically, we would be significantly safer.

The problem, though, is that autonomous vehicles suffer from a perception bias. We're all looking for them to fail. If a robotaxi gets into an accident, it's news. But if a human driver gets into an accident, it's standard operating procedure. It'll be interesting to see how and when this flips.

Oftentimes, it feels like there is a perception that developers price new housing with the fattest of margins. Meaning, if only developers were less greedy, housing could be more affordable. But as we have spoken about many times before, real estate development is a competitive industry; therefore, projects happen on the margin.

Ordinarily, the prices you see are the result of a cost-plus pricing strategy . Developers figure out what it will cost to build and develop, they add on a margin that they think their investors will accept, and then they determine what sticker prices they need to make the project financially feasible .

I've been writing about this approach for many years, but today it's even more obvious. According to Urbanation's Q1-2024 condominium report , new unsold condominium inventory in the GTA is currently sitting at approximately 23,815 units. This is up 30% YoY and is equal to about 23 months of supply. Two years ago in Q1-2022, this number had reached an 18-quarter low of 8,726 units.

Developers are highly motivated to sell and move their projects forward. Time is a killer, especially today. So the logical explanation for this rising inventory is simply that they can't sell it. Their cost-plus pricing doesn't overlap with what most buyers in the market are willing to pay. Like I said, development happens on the margin.

In theory, there is always a price where buyers would be willing to transact. If I listed a beautiful condominium for $100k today, many people would want to buy it. Supply would quickly run out. The problem is that no developer can build for this. There is always a very real price floor and, right now, that floor doesn't seem to be low enough for many buyers.

By some measures, housing affordability is, in aggregate, the worst it has been in Canada going back to the 1980s. Below is a chart from RBC showing homeownership costs as a percentage of median household income.

The previous spike came around the early 90s, but following that, we saw 3 decades of relative affordability. In fact, for a large portion of this timeline, condo apartments look to be hovering around 1/3 of median household income. This is a common rule of thumb for measuring affordability.

Now obviously things changed pretty dramatically during the pandemic. But that time has ended and a reset is underway. New housing supply has slowed dramatically . Developers are sitting on record levels of inventory. And sellers of all shapes and sizes are clinging, as best they can, to yesterday's prices.

With so much uncertainty, it's challenging, if not impossible, to know exactly how all of this will play out in the coming years. But I suspect that, as time goes on, the above chart is going to start to mirror what we saw in the early and mid-90's. In other words, affordability is going to improve.