Brandon Donnelly — Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly. — Page 662

One of the reasons why I remain so bullish on cities is because we know that new ideas disproportionately come from cities (typically big and dense ones). Matt Clancy does an excellent job of explaining this in a recent post . In it, he cites a number of studies that suggest density is pretty good. It's good for not only increasing innovation, but also for increasing the diversity of innovation.

One of the studies found that, all else being equal, doubling the number of jobs per square mile resulted in 20% more patents per capita. Matt argues that the reason for this is that density allows us to meet and collaborate with new people. With this is mind, what do you think that working from home (which is the opposite of job density) might do to innovation/patents?

Another one of the studies that Matt cites in his article deals with the correlation between patents and street grids. Denser street networks seem to have a marginally positive relationship with innovation.

But Matt surmises that this may not be because it means we're all serendipitously bumping into each other all over the place; instead a denser street network is likely symptomatic of other things -- namely an increase in "third places." Because if you consider which census blocks have a concentration of restaurants, cafes, and bars, the number of patents then goes up meaningfully.

As further evidence of this, Matt cites a fascinating paper from 2019 which looked at the effects of early 20th century prohibition on patents. Turns out that this is a pretty good experiment, because you can examine the impacts of prohibition, as well as compare counties that were already dry (i.e. unaffected by prohibition) against counties that were wet prior to prohibition.

What the study found was that (1) prior to prohibition wet counties were producing more patents per capita (where they bigger and denser?) and (2) wet counties saw a meaningful drop in patents right after prohibition. Previously dry counties went unchanged in terms of innovation.

If you're skeptical of the relationship between bars and innovation, I would encourage you to check out Matt's full post . But know that there is overwhelming research to suggest that new ideas tend to flourish in the big and dense places that we call cities.

This morning I stumbled up on this conversation between Richard Florida and Ed Glaeser about the post-pandemic city. It's from September 2020 and that is obvious in some of the comments. Richard Florida (who was in Toronto) remarked that it felt like the pandemic was mostly over at that time and that Canada had seemingly done a much better job than the US at tackling it. That no longer feels right. But I did find myself agreeing with some of their other points.

Here's one from Ed Glaeser that looks back to previous health crises:

But pretty much since the 14th century, urbanization proceeded despite the reappearance of the Black Death in the 1350s. Urbanization proceeded despite the Great Plague of London in the 1660s. All of the great diseases that spread in 19th-century America, cholera, yellow fever, the urbanization just chugged along. Even the influenza pandemic of 1919-1920 was followed by a tremendous decade of city building. So, I think our cities have proven to be remarkably resilient.

For the full conversation, click here .

Rachelle Younglai's recent piece in the Globe and Mail does a great job summarizing Canada's COVID-19 housing boom. The title of the article is, "How Canada's real estate market defied expectations in the COVID-19 pandemic."

Non-mortgage debt is down. Mortgage debt is up. Money is cheap. And people are clamoring for drivable vacation homes. Average home prices in places like Prince Edward County and the Kawartha Lakes (both outside of Toronto) are up ~30% from Jan 2020 to Jan 2021.

But after I sent this article around this morning, I was reminded that this is a good summary of what has just happened. It, for the most part, does not speak to what might happen going forward.

None of us can travel anywhere. We're stuck at home. And immigration volumes last year were down some 48% in Toronto, 43% in Vancouver, 40% in Montreal, and 46% in Calgary. The Toronto region went from about 120,000 new permanent residents in 2019 to about half that last year.

The behaviors and market outcomes that we have seen over the last 12 months, therefore, make intuitive sense. But how about the next 12 months or the next 5 years? I would prefer to use this latter time period for decision making right now.

Chart: The Globe and Mail