Brandon Donnelly — Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly. — Page 274

The Greater Toronto and Hamilton Area is expected to see 6,821 new rental homes completed this year. This is a "multi-decade high", according to Urbanation's latest rental report. Indeed, you need to go back to the 1970s to get rental supply figures of this magnitude.

A big part of this has to do with the fact that we are now taxing rental housing less . Toward the end of last year, the federal government removed their portion of the HST on new rental housing and, then in November, the province of Ontario followed with theirs.

This was "a big first step" for the industry, according to leading apartment developers like Fitzrovia .

But there's another reason that many developers are now looking to purpose-built rentals: fewer people are buying new condominiums . And if you can't presell condos, well then you're going to need to find another path forward for your land.

However, flipping over to rental is not necessarily a panacea. The margins are generally razor thin (+/- 50 bps). It requires more and different capital (typically). And you need to believe in some fairly non-consensus assumptions (high rent growth, low cap rates, etc.).

It'll be interesting to see how many developers are able to successfully flip over to rental and how sustained this rental supply number will be.

Last week we spoke about parking space dimensions . And my point was that these dimensions can dramatically change parking designs in new developments. In the comment section of this post, you'll now find a number of examples of how these dimensions vary by city.

But the reality is that cars do keep getting bigger -- at least in this part of the world. In the 1970s, SUVs and trucks made up less than a quarter of new car sales in the US. Today, this number is greater than 80% . It has become the standard kind of car.

So this week, let's touch on why this has happened.

One argument might be that this was just what consumers inherently wanted. But there's lots of evidence to suggest that this wasn't really the case; it was instead encouraged by government policy.

One specific example is the creation of Corporate Average Fuel Economy standards (also known as CAFE). This was first introduced in the 1970s, but importantly, it was done with two different fuel economy standards: one for cars and one for light trucks.

Since the light truck standard was less onerous ( see above chart ), this created a strong incentive for car makers to just make and sell more light trucks. And curiously enough, that's exactly what they did.

For much more on this topic, check out this comprehensive Vox article by David Zipper.

https://twitter.com/RM_Transit/status/1784219694200737890

Sometimes I'll hear people in Toronto talk pejoratively about all of the development that's been happening at Yonge & Eglinton (in midtown). They'll say it's too much density.

But then you come across charts like the ones above (source previously shared here ) and you realize that this location is the only section along the new Eglinton Crosstown LRT line that is actually starting to have enough people.

Based on 2021 Census data, there were about 40k people within 800m of the future Eglinton and Mount Pleasant stations. In contrast, there are many downtown stations along the Ontario Line (also under construction) with around 80k people.

Why this is important is because if the objective is to get people to ride this new transit and collect a lot of fares, then the single most important factor is going to be the amount of people that live, work, and play adjacent to each station.

Now, I'm not a transportation planner, but in my mind there are three simple ways to think and go about optimizing for this:

1. You can look at where population densities are already high and then add new transit to service these densities. This is what is happening with the Ontario Line and it was long overdue. We know that ridership is going to be relatively high because of the chart at the top of this post.

2. You can look at where there's existing transit and then work to optimize the land uses around it. This is what we should be doing a better job of along the Bloor-Danforth line, where certain station areas have actually lost people over the last few decades . This is the opposite of what you want next to transit investments.

3. Lastly, you can also proactively plan new transit while simultaneously encouraging more density. An example of this would be the Vaughan Metropolitan Centre (just north of Toronto). Extend the line and encourage growth. This is good. The only thing with this approach is that it can seem a bit misaligned if you're currently failing at #1 and #2.