Archive for residential development

Step 1: Define Affordability

It’s hard to solve a problem without first identifying what it is.  Solving the “housing affordability crisis” is no exception.

What is meant when someone says there is an affordability problem?  Affordability of what? for whom?

Here are four common things that I think people mean when they talk about housing affordability (feel free to add more in the comments):

1. A lack of rental at prices that workers who earn $10 to $15/hr might be able to pay with 1/3 of their income.

2. A lack of housing options for people without jobs who survive on social assistance.

3. Challenging ownership options for middle income households (for argument’s sake lets define this as those earning $50K-$120K)

4. The inability of middle income earners to afford detached single family homes in their preferred location. (Personally, I want a 4 bedroom detached house across from the beach for less than $400K)

After defining the problem, we can then look at the causes and possible solutions.  Once solutions are tried, we’ll also be in a better position to know if they work.

Take definition number 1 above, the rental affordability issue for the $10-$15/hr worker. First, what can someone afford? Let’s say they make $24,000 before taxes, and $21,000 after taxes; using the 1/3-income-on-housing rule, such a person can afford $7000 per year on rent or just under $600 a month. Doesn’t sound like much in the city–but lots of people seem to get by.

According to CMHC, the average rental rate for a 1 bedroom apartment in Vancouver Metro Area is $964.   However, we should also note that the average rental rate for a 2 bedroom place in the CMA is $1237 –two friends each making $12/hr could rent it.

But maybe people don’t want a room-mate, or the person has a dependent such as a child.  Or maybe they want to live in Vancouver itself (not a suburb) where the average 2 bedroom unit goes for $1493 and 1 Bedroom for $1045?

What causes average 1 bedroom rents to exceed $1000/month and 2 bedrooms to reach nearly $1500/month ?

Answer: Demand for rental housing exceeds supply.  This is especially true in locations where you truly don’t need a car; these locales work great for lower income people who can’t afford one anyway.  But these places are now also in demand from middle and higher income renters who enjoy the amenities at their doorsteps and would rather walk, bike or take transit than drive. Whenever a rental unit becomes available, a landlord can push the rents knowing lots of middle and upper income people desperately want to live in the area.

Solution: More supply.  And not just more supply anywhere in the city or metro area (although this will help a bit).  More supply is needed where people want to live–walkable, urban areas. Note: this could mean adding density in existing neighbourhoods; but it could also mean building new urban spaces at new transit stops in traditionally non-residential or lower density areas.

New supply could also mean smaller units, which then rent for less per month than larger ones.

Also note that new apartments (whether in Condo buildings or purpose-built) also tend to draw the middle and higher income renters out of the older stock–they often want the latest in modern appliances, nicer views, etc. and can afford to pay more if this is available.

How will we know that more supply is helping affordability: rental vacancy rates will stabilize or go up slightly; rental rates in older product will stabilize or go down (give some of the demand a nicer alternative and they’ll remove themselves from the demand pool for lower-priced, older suites).  Note that in a city with strong in-migration, it could take a lot of supply to notice a difference.

***

This was one example of what happens when we define Housing Affordability. We can then pick apart the causes and start to see a path toward improving the situation.  These same steps work for the other definitions (other than maybe #4).

The question of housing affordability is multifaceted.  The term means different things to different people and groups.  Any group claiming to be trying to solve affordability needs to define what they mean by it.  This way successes can better be measured, and proposed solutions be better explained to the general public and other interested stakeholders.

What does the term “housing affordability” mean to you?

The Heights: Anatomy of a Skyscraper (Book Review)

 

Kate Ascher, The Heights: Anatomy of a Skyscraper (New York: Penguin Press, 2011)

Skyscrapers are a vital component of modern cites.  They allow tens of thousands of people to work in close proximity, allowing them to share ideas.  Tall residential buildings have also become important to supporting vibrant 24 X 7 downtowns, keeping thousands in close proximity to downtown amenities after the workforce has gone home.

Anyone interested in understanding the modern city would benefit from reading Kate Ascher’s masterful tribute to the skyscraper.

Ascher inter-weaves detailed technical descriptions of building components with a overarching narrative covering the relationship between skyscrapers and broader human history and the history of science.  The beautiful illustrations and photographs assist in the visual appeal of this book that would proudly sit atop any coffee table.  Her descriptions of the technology, materials, mechanical  systems and engineering challenges involved in constructing tall buildings are fascinating and highly readable to a non-technical reader (such as me).  Yet, I suspect those with an engineering or construction background would find the descriptions equally compelling.

This book offers something for almost everyone, whether your interest lies in engineering, construction, real estate or cities.  As someone with a Ph.D. in history (although I work in the real estate investment industry), I was particularly drawn to Ascher’s discussion of the relationship between the economy, history of capitalism, history of technology and skyscraper evolution.

The industrial revolution and more specifically the mass-production of steel made the skyscraper revolution possible.

…the development of the internal steel skeleton permitted larger windows and more usable floor area…by the turn of the [19th] century, steel had replaced cast iron as the backbone of choice for new skyscrapers, and buildings of 15 to 20 stories [sic] had been completed in both New York and Chicago

The booming US economy from the 1880s through to 1929 allowed for a race to the sky that did not occur elsewhere, and New York and Chicago were the preeminent cities for this race..  Ascher describes how booming corporations each attempted to out-do each other in constructing ever taller buildings.  In 1930 there were vrtually no buildings with skyscraper technology outside of the USA.  This was an American phenomenon.

It was not until the post-world-war-two expansion in the 1950s and 1960s that the skyscraper race to the top began again (although the style was the plain, modernist rather than the ornate art deco of the 1930s notes Ascher). And this time, it was slightly more global with Europe joining in.

Ascher correctly notes that the tallest buildings of an era tend to begin just before an economic downturn. The twin World Trade Centre towers of New York began construction in 1972.  Although Ascher avoids much non-technical (and therefore political) discussion of these buildings, looking back as an historian, I might argue that they represented the culmination of America’s 20th century economic expansion—the end of an era.

When the skyscraper race began again, in the 1990s, Ascher notes it became an Asian era.  Here’s some perspective she offers on the Asian rise: before 1980, 85% of buildings over 500 feet high (150 metres) were in North America.  By 2008 72% of skyscrapers were outside of North America.

The Asian version has tended to be mixed use.  Whereas in North America skyscrapers tended to offer only office and occasionally residential, in Asia developers combine retail, residential and even hotels within a single building. The new Burj Khalifa in Dubai is presented as the prime example of this urban lifestyle building where people live, work and play.

Ascher covers an impressive range of subjects and knowledge in this book from history to civil, mechanical and environmental engineering. Her background is a Ph.D. in government from the London School of Economics followed up with time in the real estate and consulting sectors. Specialists in any of the myriad topics she covers will no doubt find the occasional fact or interpretation to quibble with, as I did. But these do not detract from what the book offers–a comprehensive, multi-disciplinary examination of skyscrapers and their relationship to economic and urban history.

Ascher ends with a good question: what would Jane Jacobs think of cites in which a large percentage of the population lives in skyscrapers?  Do they allow for enough informal interaction that Jacobs believed helps to build community?

Maybe these are good questions for the TED prize initiative around Cities 2.0. How to we better build communities in the sky?

Urban Housing Prices Reveal Urban Shift

 

A new survey in the United States revealed that only 12% of future home buyers wanted to purchase a home in the suburban-fringe. A decade ago, it is quite possible that the number would have been reversed with over 80% wanting a large suburban home.  Certainly, house prices were more expensive on a per square foot basis than in mature urban markets.

We have more than survey evidence of what people say.  You can see it in the housing prices–what they are doing (where they are putting their money).

In the US, housing prices in higher density, older urban areas have begun to rise. From the New York Times

Today, the most expensive housing is in the high-density, pedestrian-friendly neighborhoods of the center city and inner suburbs. Some of the most expensive neighborhoods in their metropolitan areas are Capitol Hill in Seattle; Virginia Highland in Atlanta; German Village in Columbus, Ohio, and Logan Circle in Washington. Considered slums as recently as 30 years ago, they have been transformed

Meanwhile in some suburban fringe locations it is hard to give away a McMansion–or they are being used as low-cost (!) student housing.

In Canada, you could see the shift in urban vs suburban housing prices beginning in about 2003.  Urban prices began to rise more quickly than suburban ones.  What began as a trickle of people choosing a more urban lifestyle has become a flood, with various consequences and responses from residents, city halls and builders.

In Toronto there has been a massive push to add housing supply downtown–in the form of condominiums (there are more under construction in Toronto than anywhere else in the world).  This actually improved affordability for switching from rental to ownership in Toronto between 2006 and 2010.

In Vancouver city itself (the urban core)  the most significant evidence comes in the pricing of ground oriented housing.  In neighbourhoods with good transit, walkable and close to downtown prices have tripled (that is risen 200%) for detached homes in about 7 years.  Officially, the stats for East Vancouver say prices are up 41% in 5 years and on the west side 71% in 5 years.  Meanwhile in the suburbs, prices are up only 14% in 5 years.

In Calgary, a city that once sold itself on offering less-expensive, suburban-style housing than Vancouver or Toronto now promotes its urban-ness.  Condos are sprouting up on the fringe of downtown, particularly in the Beltline and areas immediately south.  And money is being pumped into museums and the arts (it is cowboy country no more).

The challenge going forward for all cities in North America will likely be to ensure enough amenities (parks and recreation) and services (including transit) are available to a much larger population than a given geography has ever held before.

Finding the right labels

  Cities and their hinterlands are changing, and have been for some time.  The black-white dichotomy of suburban-core is becoming ever more unhelpful in describing the different types of places in or related to cities where people can live and work. Some new definitions or labels may be in order.

Here are my thoughts on some definitions of metropolitan and related spaces.  I’d welcome your ideas, or links to existing work in this area by others.

Lets start with what we had maybe 20 years ago.

Twin Cities – Cities that were founded separately, for different reasons.  They have their own historic “downtown” centre of gravity.  During the 20th century, because of the automotive age, they became linked by a ribbon of freeways; they also likely came to share a major airport as well as some “suburbs” that grew to sprawl in between the historic poles.  Twin cities have distinct identities and even economies in the sense that not many people live in one twin and work in the other.  Dallas-Fort Worth, Minneapolis-St. Paul, and possibly Seattle-Tacoma  could be called Twin Cities.

Satellite Cities – Cities or smaller metro areas that are close enough to a major metropolitan area that citizens or business people might make easy day trips there and take advantage of specialized amenities, but are far enough to be distinct entities.  They don’t share suburbs or airports.  The Kitchener CMA (+ Guelph) would be a good example of a satellite (to Toronto). Tucson in some ways qualifies as a Satellite to Phoenix and San Diego and Los Angeles might also be considered a Satellite pair.

Bedroom Suburban District – Bedroom suburbs do not have the same economic centres of gravity as major metropolitan areas, satellites or twins.  Typically, many more people would leave them daily to go to work than there are jobs in that suburb. Plus many of the jobs there would be retail, restaurant or personal services, mostly serving the bedroom community population.

Industrial Suburban District – A suburb that contains a lot of low density industrial lands and business parks.  Manufacturing might have been there in the mid 20th century, while today it could be home to more warehouse-logistics space as well as suburban office parks and flex spaces.  Sometimes within the same municipality there might be an industrial suburban half and a bedroom suburban half, with little relation or interaction between the two other than they pay taxes to, and are served by, the same municipal government.

Urban Suburban Districts -  Places that are within a major metropolitan area, but seem more urban.  They have mid and even higher density, walkable residential areas often next to taller office towers and higher density employment lands.  They also have rapid transit links into the major metropolitan area’s downtown.  What they may lack is that “historic downtown” and they likely have regional branch offices of businesses rather than the metro area’s head office.

Today many suburban municipalities are shifting from all or mostly low density, separated bedroom and industrial districts into something more complex.  Mississauga (Toronto CMA) and Surrey (Vancouver CMA) are attempting to create new high density town centres from the shells of shopping centres. Office and residential spaces combined with new transit options are being created to reshape these places into urban suburban districts.  What shall we call these places — Urbanizing suburbs?

Will downsizing boomers change urban housing for the better?

As the baby boomers exit the single-family housing market in cities, what will happen to prices and neighbourhoods?

Journalist Gary Mason offers a few thoughts in today’s Globe and Mail:

In a 2008 paper co-written with Sung Ho Ryu, Prof. Dowell Myers said communities in the United States face a historic tipping point. The ratio of seniors to working-age residents is expected to grow by roughly 30 per cent in each of the next two decades, the pair calculated….

Those wanting to enter the market in the coming years may not have the money to buy single-family detached homes, either. Thus the dilemma: Who will boomers sell to when they’re ready to move into some swank condo downtown or on a golf course somewhere?

This could actually be good news for young people. An oversupply of homes generally means prices fall. But as home values decline, so will home equity, diminishing retirement savings in the process. Home equity is the single largest component of net wealth for most people.

Today, Prof. Myers [is] anticipating another recession in the latter half of this decade, and that’s when the crisis he’s predicting will reveal itself. “Recoveries are usually fuelled by people who postponed buying a home who are now surging into the market. I just don’t see there being enough buyers for all those selling. I think this is going to be bad for house prices, public finance and global treasuries.”

Tsur Somerville, [of UBC Sauder School of Business], isn’t as pessimistic as Prof. Myers.

“I know it’s one of those theories where the numbers add up and the underlying fundamentals are correct, but I think in Canada, at least, it’s too early to say how it’s going to play out. I think immigration is the key. … The places that need to worry are those cities with an aging profile that don’t have big net immigration numbers and are seeing their young move to other places,” said Prof. Somerville. “I think there are some centres that fit that description that maybe should be worried. But there’s lots of ways this could play out yet.”

I agree that some suburbs may see values fall as younger generations are less interested in–or able to afford–living in more isolated areas that require a long automotive commute to major employment centers.  This could really hit some US metro areas.

But in cities where boomers own much of the older single-family housing closer to employment centers, or along transit lines, a wave of selling combined with rezoning to higher density use might actually accelerate a shift toward more sustainable urban living.  For example, an older rancher could become two or more homes as it is replaced by a duplex or by two detached homes–or two duplexes–on a subdivided lot.

Such a shift would potentially keep housing prices in check for younger generations–four homes in the same space as one.  It would also increase density, which allows for more retail, service and even transit amenities.  And finally, such a shift might actually help maintain property values for the aging boomer since the land value would reflect a “higher and better use” on the site.

Your thoughts?

The Next Generation Takes Over a City

Evidence is mounting that younger adults live in and experience cities differently than their parents, grandparents or even older brothers and sisters did at their ages.

And, in Calgary this week, youthful adults used their smartphones and their feet to mobilize the vote for one of their own, 38-year-oild Naheed Nenshi, the unexpected new mayor.  He went from 1% support in the polls to victory with the help of an army of inspired youthful citizens who spread his messages.

The Calgary-born, Harvard educated Nenshi campaigned on a platform that included ideas to improve the functioning and design of the city, including design guidelines that would ensure greater walkability in new subdivisions. One of his key messages that people were talking about on the streets this week was about de-emphasizing the automobile in a city that lives and dies by the oil industry.  Despite the mild contradiction, a lot of Calgarians seemed to like this idea.

Nenshi’s election shows how a new generation with ideas—and a candidate who can articulate them—can seize control of a city.

This was a revolution in Calgary, long stereotyped as a place of white, socially and fiscally conservative cowboys with minimal educations.  Indeed many observers would characterize some past mayors (such as Ralph Klein) in this light.

Nenshi’s election reflects a different Calgary that I see gaining strength in every visit I make to the city.  From beneath the above-mentioned stereotype, over the past couple decades, a young, well-educated, energetic, idea-drive, tolerant and highly diverse population has been remaking Calgary into a vibrant global city. 

This was the logical next step—seizing control of city hall.

 Note, although the media has given some press to Nenshi’s minority and muslim background, it shouldn’t be overplayed.  The genius and power of this youthful movement he lead happened precisely because those two things didn’t matter to the voters, of all ages, he inspired with his ideas and fresh approach.

 Watch for this collaborative, youthful revolution to shake other Canadian and North American cities within the next 5 years, including Toronto and Vancouver.

Solving the rental housing shortage and price challenge

Many dynamic cities throughout North America have a housing challenge.  Prices are high, whether people wish to rent or own.  In some neighbourhoods escalating prices may be pushing out people who have lived in the community for years, even helped to build it into a great place that is now desirable. Many communities may also be becoming less economically diverse as the minimum income needed to move in may be well above the regional average.

While some suggest trying to forbid any redevelopment or even substantial renovations to homes and buildings (that is, stopping gentrification), I don’t think this is a solution.  Communities are like organic entities. They grow, evolve and change constantly.  Trying to hold them back would be like magically making your cute 3 year old stay in her cute state forever–very quickly she would stop growing and developing, which is actually the very thing that makes her interesting and cute at any one stage.

What can help keep neighbourhoods more economically diverse, with housing for everyone, is greater density and greater flexibility of housing types in those communities where prices are escalating fast (that is, where demand to live there exceeds supply).

In the Vancouver metro area, and in many cities across Canada (and the world) people are starting to increase the value they place on: short commutes, walkable communities, transit-oriented communities, and living a more sustainable lifestyle (less auto use, for example).  If you want a healthier planet and environment, this is a good thing.  But it has the consequence of higher housing prices.

 In my view, the challenge in all of these cities is and will be two fold:

First, get people in existing walkable,’hoods with great transit to accept greater density: more neighbours. This can be what I’ve called “stealth” density (homes you don’t really see from the street) like laneway houses, basement suites, front-back duplexes, etc. It can, of course, also be apartment towers which are appropriate in certain places, or condos/apts over storefronts on busy streets.  If the supply of housing can increase, it will help prevent prices from rising further and maybe help them come down in a few places. And the city will also have to welcome proposals to provide more housing through a variety of creative approaches including reducing parking requirements for new homes in walkable, transit-oriented places.

 Second, steps need to happen to convert suburban areas that are currently more auto-centered into more walkable areas with amenities nearby.  This will also mean existing residents in these places accepting more density and even some new commercial uses in their areas.  You don’t get the customers for successful organic grocers, coffee bars, clothing stores, etc. without a lot of people living nearby, but increasingly you don’t get people wanting to live nearby without the grocers and cafes.  

 And housing of any type is helpful in making rental accommodations more affordable to those of modest means.  We need more purpose-built rental, more owner-occupied homes, more co-ops, more co-housing projects, more subsidized housing plans, and anything creative in between.  This will help push down prices, or at least stop their escalation in places with growing populations or growing demands.

Sometimes I hear renters’ rights groups protesting a city planning department giving a concession to a luxury rental project, claiming it doesn’t help the poor and middle income.  It does.  Any new housing that can pull people with high incomes out of existing lower-cost rental will help make room in a lower priced building for someone else who can’t afford the luxury options.

If we want lower cost housing, or at least housing prices to stop escalating, we need more of it–where people want to live.

Stealth density vs high rise density

Living in walkable, urban neighbourhoods is becoming trendy.  And communities are defined as “walkable” when virtually everything you could need from groceries to clothes to plumbing supplies can be acquired on foot.

But to support those businesses, you need a dependable large supply of consumers.  Walkable places therefore tend to have higher housing density than less-walkable nodes.

Most cities and many urban residents believe that the only way to increase density in an area is to add high rise buildings.  Although perhaps a quick and efficient way to add people, high rises and even mid-rise structures often stand in stark contrast in an existing community of ground-oriented dwellings.

City planning departments and civic governments could do more to promote what I call stealth density.  That is, density that you can’t really see from the street–it flies under the radar, so to speak.   In Vancouver some older neighbourhoods evolved their stealth density quite by accident.  Big 1910 era houses in the 1970s and 1980s were converted into multi-suite houses with the garage often becoming a “coach house.”  Having a number of small units allowed more households to move in as well as created a variety of housing price-points to suit an economically diverse community.   Even as some gentrification has come, many of these homes retain multiple suites as the owners need “mortgage helpers” to cover Vancouver’s $million+ home prices.  San Francisco appears to have similar neighbourhoods of multi-household homes.

The result are communities with a high density of people supporting local businesses.  Ground-oriented neighbourhoods can have walkscores near 100 (my home is a 98).

To their credit, the city of Vancouver planning department is now encouraging multi-suite properties, particularly the installation of “Laneway housing” in some districts.  And in Seattle “Backyard Cottages” are being tried in some districts.

But, there is a lack of awareness about how much density this can actually bring.  If each city lot housed 2-3 households instead of one, you wouldn’t need to build as many high rises to achieve similar goals.  And there is something very community-oriented about having everyone having a front door near the ground (even if the suite stretches up 2-3 storeys).

Maybe a solution for the future in many communities lies in looking at spontaneous stealth density in the recent past.

Building suburbs in “the city”

Are some cities starting to transform into suburbs?  Here’s how I see the dynamic (and then I welcome your responses):

Aside from their frequent auto-dependence, suburbs often offer the characteristic of “sameness.”

  • Homes in each subdivision all tend to be the same, or at least very similar.
  • The same type of people tend to purchase them–one subdivision will be popular with young native-born middle-class families while another will attract more immigrant families and still another older families or empty nesters.
  • The nearby retail, chain-based big box or strip centers.

This is often contrast with life in many traditional inner-urban neighbourhoods:

  • Homes reflect a variety of architectural styles, stemming from the different decades in which they were built.
  • Because of the different eras when various owners bought into the neighborhood, a wide range of people live there.
  • Retail also may have evolved gradually, with ownership fragmented into small units, often family owned, which tends to support more independent retailing and fewer chains.

More recently, to combat sprawl, many cities are re-zoning large swaths of industrial or commercial land into high-density residential.  But what gets built in many ways resembles the suburbs in character.  Buildings and units look very similar; everyone buys in at the same time so will tend to be of similar backgrounds; and the large retail chains scoop up the retail spaces.  Put all this together and you get a suburb in the city, even if the residents take transit to work and live in condos.

My question to urbanistas is whether this matters?

My thought is that it  could. Recent research on Generation Y suggests that this cohort group prefers to consume from smaller, independent businesses and organizations.  This new generation of talent may not be as attracted to vertically-oriented suburbs as they are to more authentic neighbourhoods.    Moreover, if the knowledge economy really needs creative inspiration, are you going to get it in these new milieus?

On the other hand, this style of development may be the only way to quickly offer more housing options in the city. Perhaps it’s not ideal, but it’s the way cities will develop.

A whale in the city:unexpected eco-consequence

A few weeks ago a grey whale swam into Vancouver’s narrow, False Creek inlet.  It swam, fed off bottom dwelling critters, and generally delighted hundreds of spectators who came to watch it swim past the new Olympic Village and over to the condo community of Yaletown.

In my childhood, this was a dirty, aging heavy industrial zone dumping who-knows-what into the water.

No one alive here today seems to recall seeing a healthy whale swimming in urban waterways, although presumably whales visited occasionally before industrial development polluted the water.  The whale in 2010 was a miraculous site.

Environmentalists at the David Suzuki foundation believe the whale visit resulted from efforts to cleanup the False Creek waterway that were undertaken as part of the LEED-Platinum Olympic Village sustainable housing development.  In addition to building a zero-emission community, the inlet was cleaned up and a “Habitat Island” added to provide a home for marine-oriented critters from ducks to fish as well as small mammals.  A whole eco-system including food for whales seems to have evolved in just a few years.

This provides another example of how reducing emissions and pollution in our cities (including their waterways) is the right thing to do, regardless of whether it helps the planet in the long term.  It improves our quality of life–now, today.  Everyone who saw the whale felt enriched.

It’s unfortunate that questionable science about global-warming is what is motivating many policy and behavior changes, but I’m glad something is, and that we can see almost immediate results.  The whale doesn’t lie.  Nor do statistics about reduced hospital admittances for asthma when driving is drastically reduced.  The quality of life is better in cities when the air and environment is cleaner.

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