I apologize for being late to the pink-slime-in-meat discussion, but unlike 99% of blog post ideas that fail to make it to cyberspace, this one keeps weighing on my mind.

I’ve been pondering the relationship between really poor quality food and an auto-centred lifestyle.  Here’s how I think the link works:

The mid-20th century suburban style of housing development separated houses from grocery stores, allowing for larger grocery stores.  It also required a car, which costs money, and time to drive everywhere including to ever-expanding supermarkets.

To keep costs down, supermarkets supported innovations in industrial food supply, including for meat.  This allowed shoppers to afford meat and cars and gasoline.

As Penelope Truck recently commented, meat (especially beef) should be a luxury good but it is not priced like one. She’s right.

I didn’t think that much about the broader role in society of the inexpensive cost of supermarket meat until an organic butcher shop opened 1 block from my house. All the meat comes from animals raised humanely on one ranch about 400 miles away.  It is at least 3X the price and at least 10X as tasty as the supermarket equivalent.

This new butcher shop has been successful in a Walkscore 100 neighbourhood.  I don’t think this is a coincidence.  One reason so many people in this economically diverse community can afford to buy their meat at this butcher shop is that they don’t drive much.

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?

It has come to this. Every time some bank or other organization releases a new study about housing affordability in various cities I want to scream. Usually, the press release and all media stories have some sensational headline like “Vancouver 2nd most unaffordable city in the world.” As if. Those of you living in San Francisco, New York or London feel free to post in the comments.

What virtually all of these studies do is look at median or average prices of detached bungalows (moderate houses on their own lots) compared to the median or average income. This metric worked okay in the 20th century in most cities when bungalows on modest lots were the first homes of young families.  It is becoming increasingly meaningless in the 21st century. Here’s why.

1. Average and median home prices are being driven up by the larger, mature demographic (think those over 50) who have equity and are now trading homes. Some are buying a nicer location, some are downsizing to a penthouse condo. Everyone has their own reason. Regardless, they are not taking out a $1 million mortgage on their $80,000 salary.

Average prices are also being driven up in some cities, like Vancouver, by an increase in “Luxury Market” sales.  Over 700 homes priced at over $3 Million sold in Vancouver in 2011, nearly doubling the previous record of 375.

This luxury product is not about homes for younger families. Therefore, we should stop including it in analysis of housing market affordability for young families. Bob Rennie argued this in a talk last year. With help from Urban Futures, he noted that if you removed the top 20% of sales from analysis, pricing and affordability had not changed much in Metro Vancouver in recent years.  Suburban developers tell me pricing has been quite flat for some time.

2. With number one said, we can still see that demand today is strong and growing in walkable, mature cities and neighbourhoods; the detached houses are often in highest demand (even when more modest price strata-homes exist).  Because you can’t make more detached homes on lots in these mature areas, demand exceeds supply for this type of product.  This drives up the average and median price of even fixer-uper, non-luxury product; increasingly only those trading an existing home or coming in with cash can purchase them.  Families are buying in these neighbourhoods, but they are typically not first-time buyers; they have above average incomes and often equity from a condo or suburban home.

3. Points one and two above illustrate that detached bungalows are no longer typical first-time buyer product. When individuals, couples or families buy their first home in larger Canadian cities (and many cities around the world), increasingly it is more likely to be a townhouse or a condo. According to Realnet, In the Greater Toronto Area, 62% of homes sold in 2011 were high rise condos. And from watching House Hunters on HGTV this is also happening in many US cities as well.

Therefore a statement like “Vancouver 2nd most unaffordable city” is not that helpful if we are concerned about the “affordability” of buying a decent home for young families. Measuring something that is not first time buyer product against the incomes of first time buyers is comparing apples to Yugos.

If we are truly interested in understanding the ability of individuals with average incomes to buy a home in the higher priced, metro areas, then at minimum look at strata-titled attached homes (rowhouses and condos) instead of detached homes. Ideally you also remove the product coveted by the multi-millionaire club from the analysis.  Suddenly the income needed to get into the market looks more familiar to most of us — $50,000 for Metro Vancouver, $38,000 in Greater Toronto according to this study.

Flashy headlines about Vancouver and other cities being unaffordable get the publisher of the reports and newspaper articles attention–this is why they publish them.  Also it’s much easier to calculate median price and median income, and harder to do real housing market analysis.

What worries me is that politicians, policy makers and lobby groups are using this mis-information.  I fear for the results.  So banks and others, please move your thinking into the 21st century!

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?

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.

“[I was struck by]…the sheer diversity of the crowd… to see people across so many diverse ethnic groups celebrating side by side…[was] very uplifting.”

Seattle Times reporter Danny O’Neil
in Vancouver to watch the Stanley Cup finals from Granville St.

Anytime I’m away from Vancouver this absence of an internationally-sourced and blended population often stands out.

This summer, in Portland we enjoyed the numerous old craftsman and Edwardian era homes and neighbourhoods, many streets with 100% of the original homes, their wood-siding in tact.  We live in a similar vintage neighbourhood in (East) Vancouver, but the homes today are much less homogeneity.

A sharp colleague who spends lots of time in Portland suggested that the two phenonmenon are interrelated; Portland has experienced fewer massive waves of immigration over the past 80 years.  In thinking and reading more about the heritage of the area, I think she’s right.

Back in the 1920s, our neighbourhood would have been indistinguishable from those in Portland.  The mostly-European immigrants built their craftsman homes from kits, and using the old growth douglas fir that dominated the Pacific Northwest Landscape as a structural base, and as trim and flooring.  (In my area, and I’m sure in Portland, a few Chinese and Japanese were involved as builders or land developers but left only a limited imprint on the housing landscape).

Today in East Van, only some of those original homes exist in their original state, or restored back to it.  After world war two a wave of southern Europeans from Italy in particular arrived.  They were masons and concrete workers, and gradually covered the unfamiliar-to-them wood siding with concrete stucco.  They paved a portion of the yard with concrete, and planted tomatoes in wood pots.  Some also added grape arbours.

The next wave from Asia (southern China in particular, but also India and SE Asia) helped popularized “the Vancouver special” in the 1960s and 1970s which replaced smaller pre-war homes on many lots.  Two levels and designed to be easily split into two units or house a large extended family, these adaptable homes worked well for the changing needs of immigrant families who often arrived with no money (although often with education or marketable skills).  They could rent out half the house until financial fortunes improved, or they could house extended family to help pay the bills. (Italian and Greek immigrants as well as native born also embraced this housing type in other neighbourhoods of Vancouver for some of the same reasons).

Grander homes, square like, covered in pastel California stucco came next in the 1980s and 1990s, often purchased or developed by a new wave of wealthier immigrants and those who had come earlier and been successful.

Also at this time a more hybrid home appeared, with the two level characteristics but also craftsman-style bay windows, and a wide mix of coverings from brick to stucco to vinyl to wood siding.  These seem to appeal to a range of immigrants as well as the now-grown children of immigrants—who may well be in couples with roots from many different parts of the world and eras of immigration to Vancouver.

I don’t know if this house style has a name (if it does, someone please comment), but for now I’ll call it “The Vancouver Mix” it’s a hybrid of the sheer diversity of the housing and reflects the people.

What’s the housing mix like in your neighbourhood?

As is probably obvious, I have no architectural background (feel free to correct, comment or expand).  But in pondering this over the past few months,  I have a new appreciation for the interrelationship between housing and the cultural and immigration history of a city. Sounds like fodder for a Jane’s Walk next spring.

In cities around the world people have been occupying key streets to express frustration over a variety of issues.  Many protesters have commented on “growing inequality” as being one grievance.  But what if the real cause of this apparent phenomenon is demographic rather than a result of economic or financial systems, or something abstract like “corporate greed.”  The baby boomer cohort has been distorting aspects of the economy since they were born, and today is no exception.

Looking at urban housing issues provides a good window into how the bulge of humanity born between 1945 and 1960 has created many of the challenges our cities and countries face today (and I’m not blaming individuals here, it’s just the fact that there are so many more people in one age cohort than in others that is unusual in human history, and the issue here)

1. Those  who bought houses before the boomers have done really well.  Many people born in the 1920s through early 1940s who bought in the late 1960s or early 1970s achieved a real estate windfall upon retirement.  The reason? One the baby boomers hit the housing market, demand skyrocketed but the preference for detached single family homes meant that supply could not increase in the best locations, and so values went up owing to increased demand.  The only place supply could expand was the suburbs.

I know many people who bought a house for $20,000 in 1970 and without taking on much or any more debt ended up with homes in the $1 Million to $2 Million range at retirement in the mid-2000s. This is in Vancouver, but I am sure similar stories can be found in places like New York, Boston, San Francisco, Sydney, Melbourne, Seattle, etc.  The earlier one got in, the better.  So the oldest boomers have done okay as well.

In Canada, this pre-boomer and older boomer group still has their wealth, whether it’s in real estate or they sold it.  In the US, some likely ended up losing at least a portion (by buying a McMansion in suburbia only to have its value plummet, or from using their house as an ATM and borrowing too much) but I also get a real sense that this group has done okay.  It is hard for younger generations to imagine buying into the same types of homes they might have grown up in.  The younger boomers and gen xers got caught in the US housing crash, is my perception (but someone please give me stats to disprove this if I’m wrong).

2.  In Employment, a similar general  story exists.  The pre-boomers ended up with the plum management jobs supervising boomers, who then filled up all of the employment making life tougher on subsequent generations, especially gen x during the economic downturns of the 1990s (until the dot com boom put people who widdled away idle time in front of computers to work).  The youngest boomers and the “jones generation”(those born 1960-1967) did well in the computer revolution because they understood it, and then could put to work this lost generation x who couldn’t squeeze themselves into a lot of the companies and organizations that employed the boomers.

3. Millennials, those born after 1980, especially those born in the late 1980s are feeling a little squeezed out of both the job market (now full of boomers, gen xers, and the oldest millennials).Boomers have not exited either the employment or real estate markets. This makes jobs a bit scarce during these uncertain economic times (unless you live in Calgary) and real estate prices remain elevated in many high-demand locations.  The suburban housing crash in the US offers options in those locales, but this housing style has not been embraced by younger generations for reasons that have been suggested and explained elsewhere.

Being shut out of the good jobs, and for those with a good job an affordable house, undoubtedly feels unequal, and unfair for millennials.  And it might be nice to blame corporate greed on an unfair economic system for this situation.  But it might be mostly a demographic phenomenon and the situation will change over the next few years.

The good news on the job front is that boomers will be exiting the workforce, creating opportunities.  They will also eventually be selling houses at a fast rate.  This will create some opportunities for younger generations to improve their standard of living.

It was intriguing that General Motors ran an advertisement last week depicting the bicycle as the inferior competition to its product. Instead of trying to compete with Honda or Toyota, they chose the bicycle.

Although GM was shamed on Twitter into pulling the ads, the concept makes sense if you look at it from an automotive manufacturer`s point-of-view.  Young people are driving less, and presumably buying fewer cars than they used to.  Increasingly young Americans are saying they want to live in walkable urban communities and get around on foot, bicycle or by transit. If they need a car, they belong to Zip Car or another sharing equivalent (not much data on young Canadians, but anecdotally it seems to be similar).

Is private automotive ownership going to diminish?  Have we passed peak car? By this I mean automotive ownership per capita is probably on the way down.  Soon a typical American couple or family might only own one car–and some urbanites no cars!

We could see all of the automotive companies fighting back with ads that glorify automotive travel and ridicule the other options.  Maybe they’ll form an industry alliance to promote their sector (like more nascent groups will sometimes do).

I can certainly tell that my Walkscore-98 neighbourhood has passed peak car.  There are many more open parking spots on the street at all hours than there was when we moved here 10 years ago.

What’s happening in your community?  Has it passed peak car?  And should we shed a tear for GM?

The Occupy Wall Street movement is spreading to financial districts across North America and the world.  Seems an appropriate time to think about who actually owns and profits from that real estate.

Union pension funds are the owners of many office towers in Canada’s financial districts

Increasingly Canadian union pension funds are buying up US office towers too. US pension funds are also big owners of real estate.

Gatherings and protests can sometimes become destructive, often against the original organizers vision. We’ve all seen the TV footage or been first hand eye witnesses when a peaceful gathering turns into something else.

Various unions are now endorsing the “Occupy” movement.

They just might want to be extra vigilant to make sure no one trashes their pension fund’s office buildings or those belonging to the pensions of fellow unions from across the country or around the world.

The banks are merely tenants–renters.  A lot of hard working ordinary people are the actual owners of the real estate via their union pension plans.

ESPN recently ranked Toronto as the worst sports city in North America.  They calculated this based on a ratio of ticket prices to wins by the city’s teams.  Toronto’s sports fans loyally pay top dollar to see their favourite teams lose all too often.

I think this affects the psychology of the city, including the business community’s outlook. 

No matter how well things are going for Toronto, many of my friends, colleagues and network in Toronto refuse to believe in it.  They seem convinced they’ll soon be let down—that there is no more point in believing in Toronto’s solid economy than in a 3 game win streak by the Mapleleafs.

The sad state of the Maple Leafs, Raptors, Toronto FC and other teams is about more than sports.  The inability of these teams to win consistently and live up to expectations seems to create a pattern in peoples’ heads that they expect to be repeated elsewhere–such as in the city’s economic performance.  For nearly 3 years now I’ve been hearing it when I put evidence in front of people that Toronto will do (or is doing) fine in this era of global economic uncertainty.

For example, job growth in the knowledge sector has been strong over the past three years, right through the global economic turmoil.  Finance, professional services and information and culture sectors have together added tens of thousands of jobs since 2008. Despite this many in the commercial real estate sector have been convinced that office demand will fall (that this is a mirage of some sort).  Instead absorption has been strong, especially in 2011 as companies lease space in which to put these workers.

Since the global financial crisis began in 2008, Toronto has risen up the ranks of global business and financial centres, as well as the livability rankings.  Compared to most other world cities, and even Toronto’s own past, Toronto is thriving.

And it’s not all business.  Toronto’s international film fest, TIFF, has also risen in prestige and is now *the* place to showcase a new movie.  Bollywood even held its annual award gala in Toronto last year, illustrating the international nature of this city.  With over 50% of residents foreign born, and many from Asia, it’s as connected to Mumbai and Shanghai as to many US or European cities, whether economically or culturally.

Toronto is a city to believe in.  As hard as this is for a Vancouver Canucks fan to say, I hope the Maple Leafs start winning so more of my friends and colleagues in Toronto will start believing in their city too.