Brandon Donnelly — Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly. — Page 628

Here are two charts from a recent blog post by Ryerson University's Centre for Urban Research and Land Development. The charts compare residential building permits issued for ground-related housing vs. apartment suites.

Over the last two quarters (Q4 2020 and Q1 2021), the Greater Golden Horseshoe (GGH) issued a record (all-time record?) number of permits: 39,734 housing units. This represents a 56% year-over-year increase.

The biggest contributor to this increase is, not surprisingly, apartment units. These permits saw a 73.6% year-over-year increase. There's simply no other way to deliver this amount of new housing -- at least in the context of the GGH. You have to go up.

But given the price increases that we have seen across the region for ground-related housing, Ryerson's CUR concludes that there must be a strong home buyer preference that is simply not being met by the amount of low-rise supply we are delivering.

Notwithstanding this potential mismatch, I don't see things changing anytime soon.

I attended the above talk last night over Zoom. (Shoutout to Michael Mortensen for inviting Slate's development team and for helping to moderate the Q&A.) The talk was a conversation between Larry Beasley (former Director of Planning for the City of Vancouver) and Theresa O'Donnell ( the newly appointed Director of Planning for the City of Vancouver). Prior to this, Theresa was the director of planning for cities such as Las Vegas, Nevada, and Arlington, Texas.

I'd like to point out two comments that she made last night that I found interesting.

The first is that community meetings over Zoom actually aren't all that bad. And the reason that they're not all that bad is that they tend to draw out larger crowds (they are easier to attend), and so the feedback on development applications tends to be a bit more inclusive / representative. I agree with this overall view and I've been arguing for years (here on the blog) that the typical approach to community engagement is pretty much broken. The opinions become lopsided when you erect too many barriers to participation.

The second point has to do with the amount of land in Vancouver (and other North American cities) that is dedicated to low-rise housing. It's too much and it's going to need to be addressed in order to increase overall housing supply and to chip away at the housing affordability problem. This won't be news to this audience, but it's interesting to see how widespread this belief has become. Of course, the big questions remain: How gentle should gentle density be? How much intensification should these neighborhoods see?

I also appreciated her comment that it's pure lunacy (my words, not hers) to have higher order transit lines running through mostly low-rise neighborhoods. We need much higher densities to sustainably support these kinds of investments in infrastructure. For us Torontonians, a good example would be (most of) the underdeveloped Bloor-Danforth subway line, though there are other culprits.

Welcome Theresa.

Let's talk some more about floor plan designs and the economic constraints that form part of the decision making process. There continues to be a narrative out there that for-profit developers only want to construct small apartments (a form of social engineering perhaps) and that they aren't focused on livability. So let's dig into some of the constraints.

Consider that the average price of a new construction condominium in downtown Toronto last quarter (Q1 2021) was $1,419 per square foot . And I bet that this number has already increased. Now consider that, in the City of Toronto, the "growing up guidelines" suggest that an ideal family-sized three bedroom suite should be around 1,140 square feet.

When you multiply these two numbers together, you get an "ideal" three bedroom suite that costs just over $1.6 million. Of course, this is without parking. So if you want downtown parking, add another $100-200k (which, at this price point, is still almost certainly going to be a loss leader for the developer).

All of a sudden, you've now got a $1.7 - 1.8 million residence. This will work in some submarkets and in some locations, but certainly not all.

So what happens is that the end price becomes a constraint. And in order to make the suite more affordable, the developer will naturally look for ways to make it smaller. Turn this into a 900 square foot three bedroom and all of a sudden you shave off over $300k from the price.

The point I am hoping to make is that developers generally aspire to respond to what the (sub)market wants. If the (sub)market wants a certain price point, developers will try and meet that need. If the (sub)market wants massive apartments, developers will gladly deliver. (We're working on combining some supremely awesome suites at this very moment in fact.)

It is "what if" instead of "should be" thinking .

Photo by Loewe Technologies on Unsplash