Graham Churchill
12.3K posts
@GraChurch
Urbanist interested in better growth. Neighbourhoods. Biomimicry. Piazzas everywhere. Make transit networks the city.
Sorry to break it to you but developers wouldn’t “build as much as they could sell” even in a fully deregulated world. This is because the absorption rate is fundamentally an economic limit, not just a bureaucratic one. To understand this it is key to realize that developers are “profit maximizers.” They pace new supply to match the rate at which the market can absorb so as not to crash prices. Flood the market faster than underlying demand growth, and the extra units compete with each other. Margins evaporate, and the later sales in the project become unprofitable. That’s why developers time their builds. They “land-bank,” and hold back—even when they technically could sell more units today. Study financial “options trading.” Real estate is a bundle of “property rights.” Development is an option. You can choose to build or wait. The value of waiting (for higher prices, better market conditions, or resolved uncertainty) often beats developing now. Zoning and red tape may amplify option value by adding delay and risk, but it is the market itself that regulates the pace of supply across locations. Planning (through zoning) mainly controls where and what type of housing gets built. The rate of population growth can change very quickly, but building can take a long time. The chart shows that cities with rapid population growth see the biggest price spikes. This is because it can take 3-5 years (sometimes longer) to build condos. Single family homes are faster. When immigration increases suddenly, it drives up land prices. Once developers start paying higher prices for land, they need demand to stay high in order for their projects to remain profitable. Property developers hate excess competition and oversupply just like any other business. Blaming it all on “govt regs standing in the way” misses the economics. Sure, cut the red tape where it genuinely distorts things but recognise that the absorption rate is the real governor on how quickly housing gets built. I highly recommend the @DrCameronMurray book, “The Great Housing Hijack.” He’s a brilliant housing economist. I wish our dumb politicians would follow him.
Patrick, I added the population growth rates to each of the cities for the 1960-2020 period. Given the length of the period, it does not capture perfectly what is going on, but you can still see the pattern: cities that grow really fast, see much larger increases in house prices. It’s understandable. Here’s why: for every 1% increase in the rate of population growth, the cost of housing increases at a rate of 3.3% to 6.0%. This is because of the absorption rate. Developers don’t want to grow housing too fast because they need to keep sales profitable. Rapid population growth creates massive price distortions. Cities like Vancouver, Victoria, and Toronto have grown so fast, they have seen a disproportionately high increase in housing costs.
Dear Premier Ford, Great cities have unique places people want to visit. Toronto has few of them. But it does have two, or it could: the Toronto Islands and the Harbourfront. Both will be destroyed by expanding Billy Bishop airport. If you want to make Toronto a great place people want to visit, put a train/passenger bridge on the Eastern and Western Gaps and put in a circular tram to go around it. It would turn the harbour into an amazing playground with the best view in the world and make Toronto a must visit destination. Don’t destroy Toronto with an island airport.
Dear Premier Ford, Great cities have unique places people want to visit. Toronto has few of them. But it does have two, or it could: the Toronto Islands and the Harbourfront. Both will be destroyed by expanding Billy Bishop airport. If you want to make Toronto a great place people want to visit, put a train/passenger bridge on the Eastern and Western Gaps and put in a circular tram to go around it. It would turn the harbour into an amazing playground with the best view in the world and make Toronto a must visit destination. Don’t destroy Toronto with an island airport.
The Minister of Transportation has just said the Billy Bishop Airport expansion would generate $8.5 billion in economic benefit – with ZERO evidence presented to back up this claim. ⁉️ Did they consider health impacts? ⁉️ Loss of local business activity? ⁉️ Impact on local housing construction? I think the government simply pulled this number out of a hat.
Dear Premier Ford, Great cities have unique places people want to visit. Toronto has few of them. But it does have two, or it could: the Toronto Islands and the Harbourfront. Both will be destroyed by expanding Billy Bishop airport. If you want to make Toronto a great place people want to visit, put a train/passenger bridge on the Eastern and Western Gaps and put in a circular tram to go around it. It would turn the harbour into an amazing playground with the best view in the world and make Toronto a must visit destination. Don’t destroy Toronto with an island airport.
Patrick, I added the population growth rates to each of the cities for the 1960-2020 period. Given the length of the period, it does not capture perfectly what is going on, but you can still see the pattern: cities that grow really fast, see much larger increases in house prices. It’s understandable. Here’s why: for every 1% increase in the rate of population growth, the cost of housing increases at a rate of 3.3% to 6.0%. This is because of the absorption rate. Developers don’t want to grow housing too fast because they need to keep sales profitable. Rapid population growth creates massive price distortions. Cities like Vancouver, Victoria, and Toronto have grown so fast, they have seen a disproportionately high increase in housing costs.
This needs to be posted from time to time. Bottom line, the more you build the more housing costs. Correlation is not causation but my god!
Dear Premier Ford, Great cities have unique places people want to visit. Toronto has few of them. But it does have two, or it could: the Toronto Islands and the Harbourfront. Both will be destroyed by expanding Billy Bishop airport. If you want to make Toronto a great place people want to visit, put a train/passenger bridge on the Eastern and Western Gaps and put in a circular tram to go around it. It would turn the harbour into an amazing playground with the best view in the world and make Toronto a must visit destination. Don’t destroy Toronto with an island airport.
I’m at the hearings today for the Ontario government’s takeover of Billy Bishop Airport. Minister of Transportation Sarkaria is speaking first: he’s speaking slowly, and is spending a lot of time talking about tolls, highways, drivers, and the tunnel under the 401 (he calls it a revolutionary concept).
Central Park is great, but it takes up a lot of space and isn’t utilized to its full potential. That’s why I worked with McKinsey on a plan to make it a state of the art data center, complemented by rooftop parking and nuclear power. We can still build beautiful things.
A lost decade for some Toronto condo owners
