Tonight on The Brian Crombie Hour, Brian interviews Darryl Frankfort about the current housing crisis and his Luxury Rental buildings, which he believes are the one positive opportunity in today’s market and Brian closes with his ten point solution to the current Housing Crisis.
Darryl Frankfort, President and Founder of DealCore Properties is hailed as one the best property developers in the city, focused on high end luxury developments. Together Brian and Darryl discuss real estate development in Toronto, focusing on housing challenges and future directions, including policy changes, community building, and the role of leadership in shaping the future of urban development. Darryl discusses his two high-end luxury development projects in Toronto, one in Forest Hill and another in Bridle Path, both targeting an undersupplied market segment with large suites. While luxury housing has become marketing-driven, with many small units, there is a gap in the market for large, high-end luxury rentals, which he aims to fill with his new development on Bayview, targeting suites of 2,500-3,000 square feet with premium amenities.
Darryl discusses the design and amenities of luxury residential buildings, emphasizing the demand for spacious walk-in closets, bathrooms, and bedrooms, along with concierge services and a valet system. He describes a project inspired by New York high-end condo living, featuring brick facades and turnstile doors, and predicted that brick construction might be more cost-effective in the long run than curtain wall systems, which he believes may face maintenance issues in the future. Darryl highlights the current state of the Toronto condo market, highlighting how issues with financing, the introduction of assignment sales, and speculative behavior led to an overheated market with small, expensive units that many buyers didn't intend to keep. He notes that the market's reliance on flipping properties rather than actual occupancy contributed to the current challenges, including a surplus of undesirable units and falling prices. Development charges, fees, and conversions to purpose-built rentals have created issues. He notes that developers who initially targeted the condo market faced difficulties when converting to rentals due to size and cost differences, as well as a mismatch between investment expectations and market realities.
Darryl Frankfort, President and Founder of DealCore Properties is hailed as one the best property developers in the city, focused on high end luxury developments. Together Brian and Darryl discuss real estate development in Toronto, focusing on housing challenges and future directions, including policy changes, community building, and the role of leadership in shaping the future of urban development. Darryl discusses his two high-end luxury development projects in Toronto, one in Forest Hill and another in Bridle Path, both targeting an undersupplied market segment with large suites. While luxury housing has become marketing-driven, with many small units, there is a gap in the market for large, high-end luxury rentals, which he aims to fill with his new development on Bayview, targeting suites of 2,500-3,000 square feet with premium amenities.
Darryl discusses the design and amenities of luxury residential buildings, emphasizing the demand for spacious walk-in closets, bathrooms, and bedrooms, along with concierge services and a valet system. He describes a project inspired by New York high-end condo living, featuring brick facades and turnstile doors, and predicted that brick construction might be more cost-effective in the long run than curtain wall systems, which he believes may face maintenance issues in the future. Darryl highlights the current state of the Toronto condo market, highlighting how issues with financing, the introduction of assignment sales, and speculative behavior led to an overheated market with small, expensive units that many buyers didn't intend to keep. He notes that the market's reliance on flipping properties rather than actual occupancy contributed to the current challenges, including a surplus of undesirable units and falling prices. Development charges, fees, and conversions to purpose-built rentals have created issues. He notes that developers who initially targeted the condo market faced difficulties when converting to rentals due to size and cost differences, as well as a mismatch between investment expectations and market realities.
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Episode Transcript
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Speaker 1 (00:00):
The views expressed in the following program are those of
the participants and do not necessarily reflect the views of
Saga nine sixty AM or its management.
Speaker 2 (00:18):
Hi, good evening everyone. My name is Brian Crombie and
welcome to the Brian Crombie Radio. While we're on Saga
nine sixty, I'm endlessly fascinated by and curious about the
world around US business, politics, the arts, culture, developments, social
issues and the people who are changing the future. Every
night here on this show, I get to dive into
conversations with thought leaders, change makers, entrepreneurs, politicians and everyday
(00:40):
heroes to unpack the ideas and stories that matter. What's
the future of economy, How do we build stronger communities?
What can we learn from music, theater or sports? How
does policy shape realize? What does leadership look like today?
If it's interesting, relevant, and we're talking about you'll hear
about it here. These are real conversations, in conversations. These
(01:00):
are ideas I think are worth sharing. This is the
Bran Crombie Radio Hour. My guest tonight is Darryl Frankfort.
He is the owner of deal Core Properties. He's a
real estate development developer in the Toronto area, and he's
also a co host of his own podcast that focuses
not only on real estate development, but lots of lots
of other issues. Daryl, Welcome to the show, sir.
Speaker 3 (01:20):
Thank you, sir Iver here.
Speaker 2 (01:23):
My pleasure to have you. My initial interest in you
was a post that you made about the bridle Path
Rentals which described an incredibly high end luxury rental building,
the nicest rental building in Toronto. It was described comparable to,
if not better than, the Four Seasons. Where do you
think the market is going? You know, we've talked just
(01:43):
last week with people talking about a ninety five percent
reduction in condo sales. We've talked about challenges and the
purpose built rental business, how condo prices are down, how
condo development is down, how rental prices are down. But
you're one light. It is talking about, you know where
you can actually build. Tell me where you think the
market is going and why your development has an opportunity
(02:06):
be successful if you could so.
Speaker 4 (02:08):
Fortunately, I have two different projects right now, both in
that high end luxury market. One is a condo in
Forest Hill, the other is the one you're talking about
in the bridle Path.
Speaker 3 (02:19):
Both of them.
Speaker 4 (02:21):
Luckily, they're just small scale, user oriented. We're doing gigantic suites.
I think in Forest Hill the average will be about
three thousand square feet per unit. It's just retailoring to
a segment of the market that is undersupplied. I think
it's funny because you know, you hear all the stories
(02:43):
about the rest of the broad market, which.
Speaker 3 (02:45):
Is a absolute disaster.
Speaker 4 (02:47):
And I think, my lucky stars all the time that
I don't own a downtown high rise site right now,
that's just you know, your typical everyday site.
Speaker 3 (02:57):
I got lucky.
Speaker 4 (02:58):
I stumbled into a great site in Forest Hill, and
I realized quickly that this was not like the same
market that I was used to playing in.
Speaker 3 (03:08):
This is like playing in the real estate market in Mars.
It's so different, okay.
Speaker 4 (03:14):
And you go from trying to just get rid of
stuff for the highest price right to anybody that will
take it, to really trying to appeal to a market
segment that like wants everything and has money to do
it and doesn't care what the market is doing. And
(03:34):
this is this is such a different playground to play in.
Speaker 2 (03:38):
But your description was fascinated. These are full service residences
with average sweet sizes of twenty five hundred square feet,
giant balconies, twenty four hour valet concierge, reporter service in
Toronto's most exclusive neighborhood. This level of living doesn't exist
outside the four Seasons, and even there you won't find it.
This didn't just design a building. We created a lifestyle
that's never existed in the city before.
Speaker 4 (03:59):
Right, So, as part of that Forest Hill deal, we
got stuck with some rental replacements.
Speaker 3 (04:07):
And I don't know how deep we want to get into.
Speaker 4 (04:09):
Things, but some of the city's policies are kind of
insane and they don't make things easy on us.
Speaker 3 (04:16):
Usky's trying to get housing out there.
Speaker 4 (04:18):
So I bought a site of ten properties in Forest
Hill Village that had not been lived in for two decades,
and we're falling apart. And the two of them, the
city had forced them, they condemned them, they forced them
to take them down because they were dangerous. And still
somehow they managed to have eleven like thousand square foot
(04:40):
rental replacements that had to be dealt with on the site.
Speaker 3 (04:45):
And so.
Speaker 4 (04:46):
Nobody had been able to figure out how to deal
with this because up until recently, planning called for a
townhouse site there. And you know, luckily, the city has
changed a whole bunch of planning regulations and that this
was inside of that. And I made a deal with
the city to move those rental replacements off site, and
(05:08):
so it forced me to do this other site. And
the only way I could figure out to not lose
money on these eleven rental replacements was to do a
rental building that had such a good income that it
could cover these horrible rents that the city was forcing
me to take on for a decade at the very least.
And I stumbled at somebody from Twitter called me about
(05:32):
this property on Bayview. Off market deal called me about
the property on Bayview, and I loved it. I knew
the new planning that was coming down the pipe for
the six story Main Street stuff, and this property just
kind of happened to be in it. And just kind
of through the other site, I realized that this segment
(05:53):
of market doesn't even exist.
Speaker 3 (05:55):
Like high end large suite life luxury rentals.
Speaker 4 (06:02):
The only way you could really get one is if
somebody owned a condo in the Four Seasons or some
high end luxury hotel condo project and was renting it
out and they're renting out for ridiculous amounts of money
because one they're large, and two you get this level
of quality and level of service. And so I started
(06:23):
to look at other buildings around the city that were
considered this high end luxury and realized that it really
didn't even exist, right, because I don't know if you've noticed,
I mean, I know, you develop everything is a luxury
building today, right, And so luxury kind of lost its
meaning in the last decade because it was all just marketing, right.
(06:45):
Everything just became marketing because everything was a four to
six hundred square foot box, right.
Speaker 2 (06:51):
Like, how can you go from four to six hundred
square foot box to twenty five hundred to three thousand
square foot box.
Speaker 3 (06:57):
It was scary, and it happened incrementally. It started.
Speaker 4 (07:02):
You know, we were I think at thinking average of
seventeen hundred and thinking we were crazy, and just through
going to every suite I could go into in the
city that was larger, I started to realize, if I'm
coming from six thousand, eight thousand, ten thousand square feet
right in Forest Hill or the bridle Path, and I
(07:23):
come into twelve hundred square feet for some people, twelve
hundred square feet seems gigantic if you're coming from four
hundred and seventy five square feet, right, But if you're
coming from six seven, eight thousand, you go into two
thousand and it feels tiny. So it just slowly started
to realize that these people, they don't care about how
(07:45):
much it costs. They want big walk in closets, they
want big bathrooms, they want lots of bedrooms, they want
an office potentially, they want big outdoor spaces. They don't
care about a pool, and they don't care about, you know,
the menities that most people care about.
Speaker 3 (08:02):
They want service, right.
Speaker 4 (08:04):
They want to walk in and not have to carry
things or walk out and their cars ready for them,
and they want to know just feel like everything's being
taken care of. When they go to the cottage in Muskoka,
or they go to the place in Miami or wherever
the heck they're going, it's like a turnkey operation. It's
(08:25):
taken care of. You've got people like a valet, a porter,
and a conseiers that know everybody in the building and
are like part of the feeling.
Speaker 2 (08:35):
So I've had that sort of described as bring the
New York high end condo lifestyle to Toronto, is that
sort of what you're describing, Like.
Speaker 3 (08:43):
So bang on.
Speaker 4 (08:45):
If you look at the new building we designed on Bayview,
it is so inspired by New York. We went to
New York specifically just to find elements that we wanted
to make sure we incorporated. So if you look at
the close up render that we've put out there, it
actually has a turnstile door in the front, you know,
one of those like roundabout turning style doors, just to
(09:08):
give it that New York vibe. And it's all brick, right,
It's all brick with layers and layers of more brick.
Speaker 2 (09:15):
It's just so many of these buildings are glassed the
whole way up. How do you afford to do brick
the whole way up?
Speaker 4 (09:22):
Well, I mean, it doesn't hurt that you're going to
be charging ridiculous amounts of rent every month for the
luxury of living in these buildings.
Speaker 3 (09:33):
But you know, I think brick over time probably will.
Speaker 4 (09:40):
Cost less than the maintenance on these curtain walls that
are all failing or about to fail in the next decade.
Speaker 2 (09:46):
Do you think curtain wall glass walls are going to fail?
Speaker 4 (09:49):
I know a few guys that make them, and you
know they they've been telling me for years that you know,
something is going to happen at some point because they're
not fail safe systems right, and they're getting older, and
these condo boards don't maintain things one hundred percent the
way that they should, and people don't always build one
(10:11):
hundred percent properly, that there will be some curtain wall
issues in the future. This is a prediction based on
having friends that make them.
Speaker 2 (10:22):
So there's a development up four to one and different
that has got its luxury rentals. It's eight hundred, seven
hundred and fifty square feet, so significantly smaller than yours,
and they've got everything. They've got a yoga studio, a
bowling alley, theater, massive gym. So it's gone, you know,
very It's called itself luxury, and it looks luxurious, but
(10:46):
you know, a third of the size of what you're
building and tons and tons of amenities.
Speaker 3 (10:51):
What's the amenities?
Speaker 4 (10:52):
Well, I mean part of the planning dictates the amount
of amenity space that you have to have a minimum
in a project. Right, So my buildings are small. I'm
going way over what I need to do without doing
very much.
Speaker 3 (11:09):
But these guys have to look for ways to fill
these spaces.
Speaker 4 (11:12):
Right, because they're gigantic amounts of space because it's fifty
square what is it, fifty square feet per unit? I
can't think in square meters. Sorry, I just can't do
that for some reason without without one of those calculators.
But if you have five, six, seven hundred suites or
three hundred suites right that starts.
Speaker 3 (11:34):
To get up there.
Speaker 4 (11:38):
Yeah, you get these crazy huge amenity spaces that nobody
really uses. For a few people use costs of fortune,
raises the cost of living in the building for everybody.
Maintenance fees are up because of these stupid spaces.
Speaker 3 (11:52):
But this is how things work.
Speaker 4 (11:53):
So I have the luxury of deciding what I want
to put in the building because no matter what I do,
it'll be more than what the city permits.
Speaker 2 (12:03):
How many how many units would you have your building?
Because these are like five hundred and six hundred units
in these buildings, so you've got to be signialantly smaller.
Speaker 4 (12:11):
Yeah, Forest Hil will probably be about eighteen or nineteen units.
And then in the bridle Path, I think right.
Speaker 3 (12:20):
Now we're at forty seven. It's gone from like eighty
something down to.
Speaker 4 (12:27):
High forties, just because I keep realizing that they're just
they're too small for this segment even now. Quite honestly,
I think at the size they're at in the bridle
path they're going to be they're too.
Speaker 2 (12:40):
Small and big outdoor space. Why in Toronto do people
want big outdoor space? Do they ever use it? When
I go around, I look at balconies. All the people
are doing on their balconies is storing stuff.
Speaker 4 (12:50):
Well that's because they only have five hundred square feet,
so the balcony becomes usable necessary storage space. And they
also don't have like a decent size storage space even
if they pay for one. In those buildings, it's like
a little dog locker, right, So if you have a
bigger space, now you can use the outdoor space for
(13:12):
something usable, like maybe a barbecue or a lawn chair
or a table.
Speaker 3 (13:16):
Like these are big.
Speaker 4 (13:17):
These are gonna be like two hundred square foot outdoor spaces,
so they're actually usable livable spaces. And I don't know,
some people still smoke, they like to go outside. I
personally love to go outside and have a coffee.
Speaker 3 (13:30):
Every morning when I can.
Speaker 4 (13:32):
So when you're in a building, if you don't get that,
I imagine that's a big decision, especially when you're coming
from like an acre with a backyard and a pool
or something.
Speaker 2 (13:42):
We're chaut in tight with Daryl Frankfort. He's the owner
of Deal Court Properties. He's also which is a real
estate development from here in Toronto. He's also the co
host of his own podcast, and so it's a real
pleasure to have him on my radio show tonight talking
about what's going on. I'm going to take, after a break,
a step back and ask him what's happened and why
has this happened in the real estate business in Toronto
(14:03):
such that we've got this situation where we've got a
ninety five percent decline in sales of pre construction condos.
We've got something like two years worth of inventory of
condos on the market today. We've got rental prices going down,
we've got condo prices going down, we've got real estate
prices going down, and yet he's building. What's going on?
Stay with us, everyone back in.
Speaker 3 (14:23):
Two minutes.
Speaker 1 (14:28):
Stream us live at SAGA nine to six am dot C.
Speaker 2 (14:31):
A welcome back everyone to the Brian Cromby Radio Hour.
I've got Garrod Frankfurt with us today. This company that
you've got and these two launches in Forest Hill and
(14:53):
in Bavie. If people want to go check it out.
Is there a website that you would direct them to
to go to to check them out?
Speaker 4 (14:59):
Yeah, you can go to deal Coreproperties dot com.
Speaker 2 (15:03):
So before the break, we were talking about, you know,
how you found this At least you think you found
this market at the high end. It's not huge, but
a lot of people are pausing. You know, the articles
that I'm reading the paper, I've talked about you know,
forty or eighty I don't even know what the right
number is of condo projects that have been put on hold.
(15:23):
That condo prices are down, that sales are down ninety
five ninety five percent, That there's tons of assignment sales
with condos that people are trying to get rid of.
There's developers that are litigating against people that aren't closing.
And at the same time, rental prices are down, so
the amount of rental buildings that are being done is
being challenged. You know, you're talking about twenty five hundred
(15:45):
square feet and we talked earlier about you know, five
hundred to four hundred to seventy five to maybe six
hundred square feet shoe boxes is the way people have
described it. You're an expert. What's happened in the market
such that we built all these built all these small
condos that it would appear people don't want, and yet
we are in the middle of the housing crisis.
Speaker 4 (16:05):
What's going on, Well, there's a lot of stuff going
on there. So I mean it depends I guess how
far we want to go back, because I think if
you step back and you take a look at how
the Toronto condo market kind of unfolded, you could see
disaster kind of written on the wall. So I mean,
depending on how far back you go. I personally, I
(16:27):
mean the way the financing.
Speaker 3 (16:29):
Works is.
Speaker 4 (16:32):
A route part of the problem because it's very hard
for anybody to forecast out having like being able to
wait six seven years for their first place to live
or for their next place to live.
Speaker 3 (16:47):
And so the financing forced people to figure out ways to.
Speaker 4 (16:51):
Get the money so that they could actually build the projects.
And so that's one layer of I think the giant
mess that we're in right now. Then along the way,
somebody decided it was a good idea to allow assignments. Okay,
and now that assignment idea. I think not allowing the
(17:12):
assignments to really kept the lid on things because it
really made it so that you were closing this thing
right like you bought it. You were closing when the
assignments came in. It turned it into a futures market
right now. You were just looking for anybody willing to
put down the money and willing to flip it right.
And so you got this casino thing going on, and
(17:35):
as these prices were going up like crazy, it forced
developers who were appealing to these gamblers to bring down
the square footage because the gamblers didn't.
Speaker 3 (17:46):
Care about how big it was.
Speaker 4 (17:48):
They cared about the price, and they believed that somebody
else was going to buy it from them in a
few months or a year and they're going to make
a fortune.
Speaker 3 (17:55):
And the market proved that that was right and that
it worked.
Speaker 4 (18:00):
And so now we're left with all the stuff left
over from that, which is like undesirable suites, super expensive prices,
and people that never intended on closing owning a bunch
of paper that's about to hit the market or has
just recently hit the market. So that whole thing has
(18:21):
created this backlog that we're talking about. I mean, we
can mix in all kinds of other geopolitical stuff and
Bank of Canada decisions and all kinds of other things.
But I think for the real estate market in Toronto,
especially the condos, like that recipe there, really made a mess.
And you can't blame anybody because it's like this thing
that just kind of kept rowing on its own. Right,
(18:44):
politicians needed to get in with development charges and fees
and it just snowball.
Speaker 2 (18:50):
And then I've heard that you know a lot of people,
a lot of developers took those condo development proposals and
when the condo market went into sort of of a
deep freeze, converted them to purpose built rental, but then
found that the people didn't want that small size of
sweet Is that? Is that true?
Speaker 3 (19:09):
Well, that's part of the story.
Speaker 4 (19:11):
And the other part is that you know, when you
buy a site based on the condo market and all
those prices and all of those specifications, it doesn't work
necessarily when you convert to rental for reasons like size
and costs, And there's all kinds of reasons why one
won't work in the other will right, the returns are
(19:33):
so different for the investment pool in a purpose built rental.
Speaker 3 (19:37):
It's again, it's like a different game completely.
Speaker 4 (19:40):
So you're taking people that bought something for one thing
but don't even know this other game, and they're trying
to like figure it out while the city's throwing new
planning and CMHC changes.
Speaker 3 (19:50):
The rules every week. It's so crazy.
Speaker 4 (19:54):
So it makes things a little easier when like the
sky's the limit in my experience right now, right because
if people are paying three thousand bucks a foot, now
you can really start making good decisions. You don't have
to do everything based on what the hell's the cheapest,
nicest looking thing, right you can go what is what
do these people want?
Speaker 3 (20:14):
Because they're going to pay for it, right.
Speaker 2 (20:17):
But there's got to be a pretty limited market to
people that are willing to pay three thousand bucks a
square foot when the average is what I think it's
seven hundred bucks for these small shoe boxes that are
for sale, and maybe it's a thousand or one thousand,
one hundred for other ones.
Speaker 4 (20:32):
Very limited group, one hundred percent, no doubt. I don't
know if you saw recently. I know we're talking about
all the negative things that are happening in the market now.
Speaker 3 (20:41):
But a few days ago, CITYTV came out.
Speaker 4 (20:43):
With the article about ultra luxury home sales up in GTA,
even amid chaos in Toronto's real estate market. And this
article goes on to say that Greater Toronto area sales
of ten million dollars in Greater are up two hundred
percent for the first half of the year compared to
last year same period. And so like, what does that
(21:06):
tell us, right, the ultra rich people are buying stuff
cash in Toronto right now at a record pace. I
don't know what that means, but I think it means that, like,
you know, the smart money is looking for the deals
right now.
Speaker 3 (21:24):
It's funny, I was on, I ask.
Speaker 2 (21:26):
Smart money is looking for the deals right now? Well,
if you take a look at some of the graphs
that people have produced that you know, prices are down
comparable to the way they were down in nineteen ninety
and the people that bought in nineteen ninety one, et
cetera made really good purchases.
Speaker 3 (21:44):
Made really good purchases.
Speaker 4 (21:46):
And so the deals that are coming now and that
are going to come down the pipe now are on
things that don't necessarily get to come on the market.
Speaker 3 (21:57):
Right These are like some some smart.
Speaker 4 (21:59):
People or some people in aging industries that have changed,
or people that had great businesses that are no longer great,
need capital or need to you know, they need to
sell their house for whatever reason. And some of these
are prize homes. And so in a market where a
prize home comes up or something super unique comes up,
(22:23):
it's it's a frenzy. The article even goes on to
say that most of these are not even hitting the market.
These are all just whisper sales in the background, right,
And and so I don't know, if you're super wealthy
and you have all this cash line around and you
want something, you just buy it, right And so again,
(22:43):
if you have a limited supply or you have something
super unique and those people are buying it a two
hundred percent over last year, I mean that's a crazy increase.
Speaker 3 (22:53):
I don't know.
Speaker 4 (22:53):
That could just be like three houses though in that
in that range.
Speaker 2 (22:57):
Right, So, your your market focuses this life true high end.
And you've got the site in Forest Hill Village and
you got a site in Bayview, are you involved in
other developments that would be you know, lower of lower price,
lower value.
Speaker 4 (23:11):
No, But I think the extreme opposite of what I'm
doing is the other segment of the market that if
I was to do something, I would focus on that
because I think, like everything right now the middle is
a bloody disaster and it just I don't know how
to make numbers work in the middle anymore.
Speaker 2 (23:29):
And so what's the extreme opposite? Small cheaper buildings.
Speaker 4 (23:33):
Yeah, cheap and cheerful, no parking, Like you know, I
would look for something in this new sixth Street, six
story main street thing where I would do no parking,
walk up six story wood boom boom boom building in
a year and rent them out for like as light
as low as possible.
Speaker 2 (23:54):
So we've got a housing crisis supposedly in southern Ontario,
and the GTA CIMA Sea says we need three point
five million additional homes. They've reduced it for three point
eight because they've changed their baseline from two thousand and
four to twenty nineteen, but still it's you know, a
huge amount. How do we solve that?
Speaker 4 (24:12):
Well, I think, I mean, they're trying to do things now,
and they've implemented a lot of things in the last
couple of years that I would say are in the
right direction and positive for getting more units on the market.
The problem is is they needed to do this stuff
a decade ago, when numbers worked, project's penciled, and people
(24:32):
were willing to build stuff. Imagine how much more supply
we would have right now, which may or may not
be a good thing at the moment, but you wouldn't
have a crisis. You know, it's kind of hard to
tell if we have this housing crisis. I mean, I
know in my core I believe that there'll be a
glut again, and God knows what's going to happen when
that happens. But there is an extraordinary amount of inventory
(24:57):
out there now and I don't see that shrink anytime soon,
if anything. I mean, imagine every crane in the sky,
how many of those are not closing like I have.
I have partners who say people are not closing, they're
having to sue people.
Speaker 3 (25:11):
It's it's a real mess.
Speaker 4 (25:12):
Or people that bought five units, you know the flip
are being consolidated and allowed to just buy two of
them and let the other three go like people are
making concessions like crazy.
Speaker 2 (25:25):
But but I think, what is the What does the
developer do then if they're if they're if they're consolidating
to purchase a five ton to two, then they got
three more that they gotta they gotta bail out of
in today's depressed market.
Speaker 4 (25:37):
Yeah, Well, A big, a big buzzword these days is
inventory loans. I hear a lot of people talking about
inventory loans right now, right, and I.
Speaker 2 (25:46):
Hear inventory loans. Can you explain that to everybody?
Speaker 3 (25:48):
Please?
Speaker 4 (25:49):
Well, it's just a loan that the builder takes out
that replaces the construction loan so that they can kind
of close things off and pay things out.
Speaker 3 (25:59):
And I guess, oh, the next level of debt.
Speaker 2 (26:02):
And then what do they do with that inventory? Do
they rent it out? Do they just continue to market it?
What do they do?
Speaker 3 (26:07):
Well?
Speaker 4 (26:07):
I think a lot of people want to probably rent them,
but soon as you rent them, there's terry on implications
and it's no longer a new home when you sell it,
and it just changes all. I mean, people pay less
when it's not a new home. There's all kinds of implications.
So I think most people are trying not to do that,
but eventually, I mean, how long can you sit with
(26:28):
thirty forty fifty units that are empty or the deals
are falling? Apart or a combo both, and when do
we get a building where like nobody, all of them
collectively decide we're not doing this.
Speaker 3 (26:41):
This is dumb.
Speaker 2 (26:42):
Had conversation recently with some people that are doing work
in Texas and in Florida, and they were suggesting that
both those markets were like a year ahead of Toronto
where there was a significant amount of increase in supply.
And what's happened is prices and rents have come down,
and yet they still of some housing challenges. And so
therefore the states needed to ensure that there was even
(27:05):
in a depressed market, can continue building. And in Florida,
what they did is they put in something called Local
Act where if you build housing a certain percentage of
market pricing, you get twenty five years a seventy five
percent reduction in property tax. So it's a huge incentive
for people to build affordable housing. In Texas, there is
(27:26):
this new state law that has come in and have
said if a city has a certain amount of density,
we're going to ply it everywhere, rather than all these
different zoning density rules in different areas. And so it's
a dramatic increase in density. And so therefore both Florida
and Texas. You know, different jurisdictions clearly have put in
huge incentives to developers to keep building. Do you think
(27:49):
we need that kind of of provincial action to put
incentives in place instead of all these taxes and development
fees and rules and red tape and restrictions that we've got.
Speaker 4 (27:59):
Yeah, of course, I mean god, I mean who doesn't
do anything based on incentives? I mean developers just get
the short end of the stick with everything, Like not
only do we have to fight for the right to
build these things, after we do them, we're bastards for
making money on them if we're lucky enough to make
money on them. Right, People have this weird conception of
(28:20):
us as like these evil profit makers who were doing
Like if people saw the bottom lines on some of
these deals, they would be so shocked at and realize
their perception is so wrong.
Speaker 3 (28:33):
The incentives drive the market.
Speaker 4 (28:35):
If we look back in the seventies and sixties at
the stuff that they built, I mean you can see
what the incentives were.
Speaker 3 (28:42):
Their purpose built rental, you know, block buildings everywhere. Right,
you just didn't have enough people with balls enough.
Speaker 4 (28:49):
So I don't know if I could say that with
enough bravery to actually do it back then. Right now,
you've got people coming from different countries, different provinces, all
over the place. Everybody wants to try and be the developer.
It's like the it's like a cool thing to do,
but we don't have any incentives. We disincentivize us every day.
We CMHC had things going perfectly about a year ago.
(29:13):
Everybody loved the system, everybody loved the program, things were
getting done, and then they just changed it and just
it annihilated the market overnight, and then everybody had to
scramble again. We're constantly scrambling to figure up, figure out and.
Speaker 5 (29:30):
Like keep up with the city's like crazy ideas, because
they'll come up with something on the surface that's like, oh,
this is going to be fantastic, and then you look
under the hood and there's nothing there.
Speaker 3 (29:42):
It's like spaghetti and elastic bands.
Speaker 4 (29:44):
Right For example, on this they come out with this
wonderful main street policy that allows six story buildings on
all these streets that were never allowed.
Speaker 3 (29:55):
Okay, but they leave this one ruling.
Speaker 4 (29:59):
So I mean, it's not they can't think of every scenario,
but they have a rule or a guideline that tells
you that you have to the maximum length of your
building is twenty five meters in a residential area. Okay,
so fine, that's the rule, okay, but in a commercial
(30:20):
building it does not count the underground the parking. Okay,
so the parking you can go whatever. The setbacks that
you need to go are, but up above ground twenty
five meters in this new policy, because they're all residential zone,
they're not commercial zone, underground has a twenty five meter cap.
(30:41):
So now you could build two buildings like with setbacks
and everything perfect as of right, but you have to
build two underground parking garages.
Speaker 2 (30:51):
You can't combine them.
Speaker 3 (30:52):
You can't combine them.
Speaker 4 (30:54):
And even the ramp that combines them is a little
iffy in the idea.
Speaker 3 (30:59):
Okay.
Speaker 4 (31:00):
But so they give you the ability to do stuff
as of right, but then they like they limit you
and they do stupid stuff, and then when you call
them about it, they're like, they can't do anything.
Speaker 3 (31:11):
Well that's how it's written.
Speaker 4 (31:13):
I don't know, okay, I guess you're gonna have to
go for an amendment now, right, And then you go
for an amendment, and then the whole city comes down
and starts chasing you with the pitchfork and flaming brooms.
Speaker 2 (31:25):
This has been a fasting conversation. I really appreciate it
to If people want to check out your podcast, how
do they do that?
Speaker 4 (31:30):
Best best way would be to go onto YouTube and
check out Under the Table podcast or Spotify, Instagram, We're everywhere.
Speaker 2 (31:39):
We're gonna have to have you back talking about some
of your other issues at some point in time. This
has been a fasting conversation. I appreciate it.
Speaker 3 (31:45):
I appreciate you having it. Thanks so much.
Speaker 2 (31:46):
We're gonna take a break and come back in just
two minutes. Stay with us, everyone back in.
Speaker 1 (31:50):
Two No Radio, No Problem stream is live on Sagay
nine sixty dot com.
Speaker 2 (32:11):
Welcome back everyone to the Brian Crombie Radio Hour. I
have just done two interviews on the last two days
with two experts in the housing industry. Al ed iberwas
a deputy chief economist of a C and Richard Lyle,
the head of the Residential Construction Council of Ontario. Both
of them have talked about how this is a crisis,
(32:33):
and I think that we've got to really give some
detailed thought to how bad this crisis is, how a
bust boom boom bust boom scenario can can destroy a
lot of people's lives. I think that we've got a
situation where, you know, we have this intergenerational inequity where
it's completely unaffordable for young people to afford housing. Uh.
(32:56):
And then at the same time, we've got a whole
bunch of people that have built up a big net
worth in housing that probably they should have been investing
in other things to ensure their retirement. And if we
have a bust, they're going to lose money. And particularly
if they entered into home equity lines of credit or
(33:16):
mortgages or something like that to maximize the leverage on
overinflated housing, they could end up having a problem. So
it hurts people on the boom, and it hurts people
on the bus. And we got to realize that as
we go through this, and it's the same as almost
any other boom bust cycle where it can harm people.
And housing should go up by GDP. It shouldn't be
(33:37):
an investment. It should be something that is, if not
a right, damn close to a right, and should be
the same percentage of income over time or the same
multiple income over time the same percentage from a mortgage
carrying standpoint, and the fame multiple from a total price standpoint,
(33:57):
from generation to generation, from year to year, from decade
to decade. There's no justification for it to increase at
dramatically higher rates other than maybe if it's you know,
on water or uniquely positioned at Maine and Maine or
Bay and King or something like that. So, yes, location
does warrant some appreciation above what average appreciation would be,
(34:20):
but general housing shouldn't. We should make enough of it
such that it goes up by GDP. So I've got
a ten point program that I want to propose that
I think we need to address because I think we
need politicians and we need the public to realize that
we in a crisis situation. And we really have gone
from two years ago FOMO fear of missing outsets that
(34:41):
everyone was overbidding and prices were booming and prices got
to a high to today FOOP where it's a fear
of overpain and no one is willing to pay. And
as Richard Lyle talked about, he's worried that we're going
to have hundreds of thousands of layoffs leading to a
one point five percent to two percent decline in GDP.
We can't miss. We can't risk the layfts, we can't
(35:01):
risk the unemployment. We can't risk the devastation to our economy.
We can't risk the decline to GDPA. We can't risk
what's going to ultimately be the result of that, which
is going to be another boom in a couple of
years because there's no housing available and our young people
become even more sentenced to a life without the Canadian
(35:24):
dream of owning a house. It's wrong and we need
to address it. So here's my ten point plan. First
of all, I think we need to change the whole
attitude of government and particularly people in city planning and
city councils and planning committees, et cetera, from the Planning
department attitude that's been we want to stop development in
(35:44):
the past, to more like the Economic Development department, which
is we want to attract development to our cities, and
they need to become customer focused. They need to become
focused on what we can do to build great cities
rather than what we can do to stop development from happening.
So I think we need to have a complete change
data to it, and if we believe that this crisis
is happening and it's going to cause laffs. It's going
to cause devastation, it's going to cause drop in GDP,
(36:06):
it's going to cause housing and affordability, and we need
to have an attention to it like we did in
the pandemic, like we are I think in regards to
the threat of Trump tariffs, then we'll take the kind
of action that we need to take. So Number one,
change the whole attitude within municipal politicians and with the
missile planning departments to be more like the economic development.
We want to attract building. We want to attract development
(36:28):
rather than we want to push it away. Number two,
development fees should go to zero right away. A couple
of years from now. If you want to increase them again,
we can talk about it, but for now, in this
crisis scenario, this should go to zero, and I don't
think there's any other choice. We need to take that
one to one hundred and fifty thousand dollars, which is
(36:50):
equal to the kind of down payment that a lot
of people would pay. This unbelievable growth pays for growth.
Incorrect belief that developers pay for the development fees, not
the end consumer. This unbelievably probably the most progressive tax,
as Richard Lawle has talked about, a syntax comparable to
cigarettes or alcohol, which is discouraging people to consume, which
(37:15):
is not what we should be having. On housing, we
need to eliminate it completely right away. Zero. Do we
need to come up with another way of funding infrastructure,
no question, And I think it's the way that the
United States funds it, whether the whole society pays for
it by way of municipal tax bonds, or whether it's
just funded through property taxes, or whether it's funded by
(37:38):
infrastructure that comes from provincial or federal government. Yes, we
need to come up with a different way. But to
have these development fees that have gone up by one
thousand percent over the course of the last decade, that's
creating three billion dollars worth of a surplus for the
City of Toronto. That is regressive that the people that
can least afford it are asked to pay for it.
We need to get rid of it, and rid of
(37:58):
it right away, zero away. Across the board Number three
GST HST on housing. You know we put in this
consumption tax. You know Brian mulrooney did back what was
it forty years ago, and it may have made sense
to be as broad based and across the board as possible.
(38:18):
But we've taken it off et and oil at different times.
We've taken it off different items that have been deemed
strategic to our economy and important to people. We need
to take it off of housing right now. If we
want people to be building housing, if we want people
to be buying housing, we need to take it off
right now. You know, I think that taxation is one
(38:40):
of those things that you increase in good times and
you decrease in tough times Keynesian economics. This is a
crisis time. The GST, the HST, the provincial sales taxes
on housing, on all things that go into housing eliminated
right now. We're in a crisis situation. Number four, provincial
(39:01):
rules should be imposed that effectively provide as of right housing.
I'm doing development in Texas. Everyone in Texas is talking
about this new Senate build that effectively means that you've
got a zoning within a city that's over one hundred
and fifty thousand population where the most beneficial density zoning
(39:24):
applies across the board. So if a city has decided
that a certain density is appropriate, they applied across the board.
And I think it's a simple way of simplifying how
many different zoning designations we have. I think what we
need to do is we need to get rid of
a lot of these rules and regulations that different cities
put in place, that different municipalities put in place, that
(39:45):
different wards within municipalities put in place, and frankly, different
councilors and different planning people in different parts of different
wards of different cities end up putting in place. We
need to simplify that. We need to quicken up the
process of getting approval. It makes no sense that it
takes two to three times as long to get something
improved as it does to build it. We need as
a right zoning. I think that the MTSA rules that
(40:08):
were thought about that dramatically increase density and height around
major transit station areas and not just down the streets,
but in a circle radius as people thought about walking
to major transit. That's the right type of change, and
we need those types of zonings around major transit station areas.
We need the main street zonings, we need the six
plexes as a right on regular streets. We need to
(40:30):
dramatically decrease the rules and regulations in regards to what
you can build and make it as a right so
people can quicken up the process of getting approvals, submitting
building plans, and getting under construction. Number five inclusion the
inclusionary zoning, where we give more affordable development available to
(40:51):
people is critically important, but it should be done by
way of an incentive, not a disincentive. By having the
inclusionary zoning, the ten percent of the homes that you
want at below market rates being paid for by the
other people in that condo building or apartment building makes
no sense. It's a regressive taxation on the people that
can least afford it. It should be something that is carried
(41:13):
by all the society. The bill that was passed in Florida,
which effectively means that if a developer builds inclusionary zoning,
they get a reduction in property tax for the next
twenty years, makes ten of sense because what that does
is it means that all of society shares the cost
of providing inclusionary zoning, not a regressive taxation on one part.
(41:34):
So affordable housing is something. We need to do it,
but the way that we've been enforcing it is wrong
and it needs to change. Number six, I think what
we need to do is we need to think of
housing as the best social program out there. I think
that the statistics and this book called Abundance that's been
(41:54):
written in the United States is excellent. What it does
is it shows where we've got increase to supply of
housing home, homelessness goes down dramatically. And so we've got
to take a look at all these progressive people, these
left wing people that say that they want to decrease homelessness,
but come up with all these massive programs to deal
with it. The best program is to take them off
(42:15):
the street and give them a home, and the best
way to do that is by way of dramatically increasing supply.
Across the United States. It's been proven in Canada as
well that if you have an increase in housing supply,
you'll have less homeless and so we need to make
that available. Does it need to be affordable, Does it
often need to be social housing? Yes, but we need
to make sure that people have an opportunity to put
(42:39):
a roof over their head. I had one interviewee that
told me that homeless people visit on average emergency wards
one hundred times a year. I don't believe that statistic.
Maybe it's homeless people with mental health issues. I'm not sure.
I want to find out. But it makes logical sense
that if you're homeless and you need some care, if
(42:59):
you're cold, you're hungry, if you need some drugs, medication,
et cetera, you're going to go to emergency. And that
is one of the reasons why our emergency room waits
are too long. If we give them a home, I
was told that it costs less than one hundred thousand dollars,
but if they're on the street, it costs us an
excess of half a million dollars. So it's a five
(43:20):
times increase for society to not give them a home.
So let's deal with our homelessness problem by making more
housing available. Seven. We need CMHC to become more aggressive.
This change that they've taken the amount of debt that
they're willing to finance from ninety five percent down to
seventy five percent and putting the risk on rents on
private developers. You know what, they should take some risk,
(43:41):
but it's not that kind of differential in leverage, because
what's happened is purpose built rental has gone down dramatically
in that regard, and so we need to have CMHC
more aggressive in providing financing and shouldering some of that risk.
The whole idea here was that they were going to
take some risk of the house leverage, and we need
(44:02):
to have increase the amount of funds they've got available
and increase the amount of leverage that they're willing to
provide to developers. Number eight, There's been a real lack
of productivity within housing, and I think that's caused by
this plethora of different zoning, the plethora of different building codes,
the lack of modernization of building codes, the changing, constant
(44:24):
changing of building codes, et cetera. We need to focus
on making sure that we've got some consistency and zoning,
consistency in building codes, focused on productivity, less rules and
regulation so that we can become more productive. Why do
we have far smaller housing companies in Canada that don't
have the economies of scale that they would elsewhere in
(44:46):
the world, particularly in the United States. We need to
think through that. We need to have the role of AI,
the role of digital twins, the role of economies of
scale like we've got in every other industry in the world.
Apply to housing and figure out how we can do that.
Number nine tariffs reciprocal teriffs, tariffs in the United States,
tariffs on furniture, tariffs on HVAC, tariffs on electrical equipment.
(45:07):
We've got to solve this tariff for We got to
solve it for the economy in general, but we got
to solve it in housing particularly. And the fact that
the Americans are taxing our lumber at outrageous amounts, that's
that their housing is going to become more expensive doesn't
make sense. And the fact that we then put on
reciprocal tariffs on aluminum, steel, mechanical equipment, electrical equipment that
is coming into Canada we need for housing makes no sense.
(45:29):
We need to solve that problem. And Number ten, we
need more people in the housing industry. We need more
skilled laborers. We need to do training, we need to
do apprenticeship. We need to think about immigration that attracts
people that have got those skills sets that we can
bring them to Canada to work. I'm really worried about
what Richard Lowles talked about about mass layoffs and then
(45:50):
what do those people do? They move into other industries,
they move into other geographies, and we can never get
them back. We need to be thinking about having the
right kind of deployment and housing given this crisis scenario
that we would have for doctors, that we would have,
for nurses, that we would have for people with STEM experience,
that people would have for quantum computing, you know, areas
(46:11):
of industry that are critically important. We need to have
a labor market strategy. We need to have a labor
market strategy for housing. So crisis situation we need to
acknowledge and admit and put an all government and all
business industry effort into solving. We need to have an
economic development attitude. We need to have elimination of development fees.
We need to have an elimination of the GST on housing.
(46:33):
We need to think about provincial rules rather than a
plethora of rules in all municipalities. We need to think
about market housing, affordable housing from all of society standpoint,
rather than the inclusionary zoning that we've had in the past.
We need to get rid of homelessness by providing or
housing and make housing or right. We need to have
CMAC and government support housing with more financing and higher leverage.
(46:56):
We need to have productivity orientation to housing and think
anybody n the scale. We need to eliminate tear us
on the inputs to housing, and we need to have
a labor market strategy for our housing. That's my ten
point plan to solve the housing crisis. But the most
important thing, the old thing about draining the swamp, is
I understanding you're in one. We've got to understand where
(47:18):
we are in a housing crisis. We've had a boom,
We're having a bus. We're going to end up having
another boom. That's not the way to manage an industry
or let alone. Something that's so and critically important to
our economy and critically important to all of us. Making
sure that we don't have this intergenerational inequity such that
people my age have huge net worth in their homes
and people my kids age can never afford a home.
(47:40):
It's just not fair, it's just not right. We need
to address it right now. We need to take attention
to this crisis that is at our doorstep and address it.
Thanks for joining, Thank you for listening. I'm Brian Cromby.
Brian Cromby Radio Hour on every night six o'clock nine
to sixty am. You can stream online at Triple WSGO
nine sixty dot. You can get on my podcast videos
on my website Brian CROMBYTCK on YouTube channel, on social media,
(48:02):
on podcasts, Thanks good.
Speaker 1 (48:03):
Day, No Radio, No Problem. Stream us live on SAGA
nine sixty am dot c a
The views expressed in the following program are those of
the participants and do not necessarily reflect the views of
Saga nine sixty AM or its management.
Speaker 2 (00:18):
Hi, good evening everyone. My name is Brian Crombie and
welcome to the Brian Crombie Radio. While we're on Saga
nine sixty, I'm endlessly fascinated by and curious about the
world around US business, politics, the arts, culture, developments, social
issues and the people who are changing the future. Every
night here on this show, I get to dive into
conversations with thought leaders, change makers, entrepreneurs, politicians and everyday
(00:40):
heroes to unpack the ideas and stories that matter. What's
the future of economy, How do we build stronger communities?
What can we learn from music, theater or sports? How
does policy shape realize? What does leadership look like today?
If it's interesting, relevant, and we're talking about you'll hear
about it here. These are real conversations, in conversations. These
(01:00):
are ideas I think are worth sharing. This is the
Bran Crombie Radio Hour. My guest tonight is Darryl Frankfort.
He is the owner of deal Core Properties. He's a
real estate development developer in the Toronto area, and he's
also a co host of his own podcast that focuses
not only on real estate development, but lots of lots
of other issues. Daryl, Welcome to the show, sir.
Speaker 3 (01:20):
Thank you, sir Iver here.
Speaker 2 (01:23):
My pleasure to have you. My initial interest in you
was a post that you made about the bridle Path
Rentals which described an incredibly high end luxury rental building,
the nicest rental building in Toronto. It was described comparable to,
if not better than, the Four Seasons. Where do you
think the market is going? You know, we've talked just
(01:43):
last week with people talking about a ninety five percent
reduction in condo sales. We've talked about challenges and the
purpose built rental business, how condo prices are down, how
condo development is down, how rental prices are down. But
you're one light. It is talking about, you know where
you can actually build. Tell me where you think the
market is going and why your development has an opportunity
(02:06):
be successful if you could so.
Speaker 4 (02:08):
Fortunately, I have two different projects right now, both in
that high end luxury market. One is a condo in
Forest Hill, the other is the one you're talking about
in the bridle Path.
Speaker 3 (02:19):
Both of them.
Speaker 4 (02:21):
Luckily, they're just small scale, user oriented. We're doing gigantic suites.
I think in Forest Hill the average will be about
three thousand square feet per unit. It's just retailoring to
a segment of the market that is undersupplied. I think
it's funny because you know, you hear all the stories
(02:43):
about the rest of the broad market, which.
Speaker 3 (02:45):
Is a absolute disaster.
Speaker 4 (02:47):
And I think, my lucky stars all the time that
I don't own a downtown high rise site right now,
that's just you know, your typical everyday site.
Speaker 3 (02:57):
I got lucky.
Speaker 4 (02:58):
I stumbled into a great site in Forest Hill, and
I realized quickly that this was not like the same
market that I was used to playing in.
Speaker 3 (03:08):
This is like playing in the real estate market in Mars.
It's so different, okay.
Speaker 4 (03:14):
And you go from trying to just get rid of
stuff for the highest price right to anybody that will
take it, to really trying to appeal to a market
segment that like wants everything and has money to do
it and doesn't care what the market is doing. And
(03:34):
this is this is such a different playground to play in.
Speaker 2 (03:38):
But your description was fascinated. These are full service residences
with average sweet sizes of twenty five hundred square feet,
giant balconies, twenty four hour valet concierge, reporter service in
Toronto's most exclusive neighborhood. This level of living doesn't exist
outside the four Seasons, and even there you won't find it.
This didn't just design a building. We created a lifestyle
that's never existed in the city before.
Speaker 4 (03:59):
Right, So, as part of that Forest Hill deal, we
got stuck with some rental replacements.
Speaker 3 (04:07):
And I don't know how deep we want to get into.
Speaker 4 (04:09):
Things, but some of the city's policies are kind of
insane and they don't make things easy on us.
Speaker 3 (04:16):
Usky's trying to get housing out there.
Speaker 4 (04:18):
So I bought a site of ten properties in Forest
Hill Village that had not been lived in for two decades,
and we're falling apart. And the two of them, the
city had forced them, they condemned them, they forced them
to take them down because they were dangerous. And still
somehow they managed to have eleven like thousand square foot
(04:40):
rental replacements that had to be dealt with on the site.
Speaker 3 (04:45):
And so.
Speaker 4 (04:46):
Nobody had been able to figure out how to deal
with this because up until recently, planning called for a
townhouse site there. And you know, luckily, the city has
changed a whole bunch of planning regulations and that this
was inside of that. And I made a deal with
the city to move those rental replacements off site, and
(05:08):
so it forced me to do this other site. And
the only way I could figure out to not lose
money on these eleven rental replacements was to do a
rental building that had such a good income that it
could cover these horrible rents that the city was forcing
me to take on for a decade at the very least.
And I stumbled at somebody from Twitter called me about
(05:32):
this property on Bayview. Off market deal called me about
the property on Bayview, and I loved it. I knew
the new planning that was coming down the pipe for
the six story Main Street stuff, and this property just
kind of happened to be in it. And just kind
of through the other site, I realized that this segment
(05:53):
of market doesn't even exist.
Speaker 3 (05:55):
Like high end large suite life luxury rentals.
Speaker 4 (06:02):
The only way you could really get one is if
somebody owned a condo in the Four Seasons or some
high end luxury hotel condo project and was renting it
out and they're renting out for ridiculous amounts of money
because one they're large, and two you get this level
of quality and level of service. And so I started
(06:23):
to look at other buildings around the city that were
considered this high end luxury and realized that it really
didn't even exist, right, because I don't know if you've noticed,
I mean, I know, you develop everything is a luxury
building today, right, And so luxury kind of lost its
meaning in the last decade because it was all just marketing, right.
(06:45):
Everything just became marketing because everything was a four to
six hundred square foot box, right.
Speaker 2 (06:51):
Like, how can you go from four to six hundred
square foot box to twenty five hundred to three thousand
square foot box.
Speaker 3 (06:57):
It was scary, and it happened incrementally. It started.
Speaker 4 (07:02):
You know, we were I think at thinking average of
seventeen hundred and thinking we were crazy, and just through
going to every suite I could go into in the
city that was larger, I started to realize, if I'm
coming from six thousand, eight thousand, ten thousand square feet
right in Forest Hill or the bridle Path, and I
(07:23):
come into twelve hundred square feet for some people, twelve
hundred square feet seems gigantic if you're coming from four
hundred and seventy five square feet, right, But if you're
coming from six seven, eight thousand, you go into two
thousand and it feels tiny. So it just slowly started
to realize that these people, they don't care about how
(07:45):
much it costs. They want big walk in closets, they
want big bathrooms, they want lots of bedrooms, they want
an office potentially, they want big outdoor spaces. They don't
care about a pool, and they don't care about, you know,
the menities that most people care about.
Speaker 3 (08:02):
They want service, right.
Speaker 4 (08:04):
They want to walk in and not have to carry
things or walk out and their cars ready for them,
and they want to know just feel like everything's being
taken care of. When they go to the cottage in Muskoka,
or they go to the place in Miami or wherever
the heck they're going, it's like a turnkey operation. It's
(08:25):
taken care of. You've got people like a valet, a porter,
and a conseiers that know everybody in the building and
are like part of the feeling.
Speaker 2 (08:35):
So I've had that sort of described as bring the
New York high end condo lifestyle to Toronto, is that
sort of what you're describing, Like.
Speaker 3 (08:43):
So bang on.
Speaker 4 (08:45):
If you look at the new building we designed on Bayview,
it is so inspired by New York. We went to
New York specifically just to find elements that we wanted
to make sure we incorporated. So if you look at
the close up render that we've put out there, it
actually has a turnstile door in the front, you know,
one of those like roundabout turning style doors, just to
(09:08):
give it that New York vibe. And it's all brick, right,
It's all brick with layers and layers of more brick.
Speaker 2 (09:15):
It's just so many of these buildings are glassed the
whole way up. How do you afford to do brick
the whole way up?
Speaker 4 (09:22):
Well, I mean, it doesn't hurt that you're going to
be charging ridiculous amounts of rent every month for the
luxury of living in these buildings.
Speaker 3 (09:33):
But you know, I think brick over time probably will.
Speaker 4 (09:40):
Cost less than the maintenance on these curtain walls that
are all failing or about to fail in the next decade.
Speaker 2 (09:46):
Do you think curtain wall glass walls are going to fail?
Speaker 4 (09:49):
I know a few guys that make them, and you
know they they've been telling me for years that you know,
something is going to happen at some point because they're
not fail safe systems right, and they're getting older, and
these condo boards don't maintain things one hundred percent the
way that they should, and people don't always build one
(10:11):
hundred percent properly, that there will be some curtain wall
issues in the future. This is a prediction based on
having friends that make them.
Speaker 2 (10:22):
So there's a development up four to one and different
that has got its luxury rentals. It's eight hundred, seven
hundred and fifty square feet, so significantly smaller than yours,
and they've got everything. They've got a yoga studio, a
bowling alley, theater, massive gym. So it's gone, you know,
very It's called itself luxury, and it looks luxurious, but
(10:46):
you know, a third of the size of what you're
building and tons and tons of amenities.
Speaker 3 (10:51):
What's the amenities?
Speaker 4 (10:52):
Well, I mean part of the planning dictates the amount
of amenity space that you have to have a minimum
in a project. Right, So my buildings are small. I'm
going way over what I need to do without doing
very much.
Speaker 3 (11:09):
But these guys have to look for ways to fill
these spaces.
Speaker 4 (11:12):
Right, because they're gigantic amounts of space because it's fifty
square what is it, fifty square feet per unit? I
can't think in square meters. Sorry, I just can't do
that for some reason without without one of those calculators.
But if you have five, six, seven hundred suites or
three hundred suites right that starts.
Speaker 3 (11:34):
To get up there.
Speaker 4 (11:38):
Yeah, you get these crazy huge amenity spaces that nobody
really uses. For a few people use costs of fortune,
raises the cost of living in the building for everybody.
Maintenance fees are up because of these stupid spaces.
Speaker 3 (11:52):
But this is how things work.
Speaker 4 (11:53):
So I have the luxury of deciding what I want
to put in the building because no matter what I do,
it'll be more than what the city permits.
Speaker 2 (12:03):
How many how many units would you have your building?
Because these are like five hundred and six hundred units
in these buildings, so you've got to be signialantly smaller.
Speaker 4 (12:11):
Yeah, Forest Hil will probably be about eighteen or nineteen units.
And then in the bridle Path, I think right.
Speaker 3 (12:20):
Now we're at forty seven. It's gone from like eighty
something down to.
Speaker 4 (12:27):
High forties, just because I keep realizing that they're just
they're too small for this segment even now. Quite honestly,
I think at the size they're at in the bridle
path they're going to be they're too.
Speaker 2 (12:40):
Small and big outdoor space. Why in Toronto do people
want big outdoor space? Do they ever use it? When
I go around, I look at balconies. All the people
are doing on their balconies is storing stuff.
Speaker 4 (12:50):
Well that's because they only have five hundred square feet,
so the balcony becomes usable necessary storage space. And they
also don't have like a decent size storage space even
if they pay for one. In those buildings, it's like
a little dog locker, right, So if you have a
bigger space, now you can use the outdoor space for
(13:12):
something usable, like maybe a barbecue or a lawn chair
or a table.
Speaker 3 (13:16):
Like these are big.
Speaker 4 (13:17):
These are gonna be like two hundred square foot outdoor spaces,
so they're actually usable livable spaces. And I don't know,
some people still smoke, they like to go outside. I
personally love to go outside and have a coffee.
Speaker 3 (13:30):
Every morning when I can.
Speaker 4 (13:32):
So when you're in a building, if you don't get that,
I imagine that's a big decision, especially when you're coming
from like an acre with a backyard and a pool
or something.
Speaker 2 (13:42):
We're chaut in tight with Daryl Frankfort. He's the owner
of Deal Court Properties. He's also which is a real
estate development from here in Toronto. He's also the co
host of his own podcast, and so it's a real
pleasure to have him on my radio show tonight talking
about what's going on. I'm going to take, after a break,
a step back and ask him what's happened and why
has this happened in the real estate business in Toronto
(14:03):
such that we've got this situation where we've got a
ninety five percent decline in sales of pre construction condos.
We've got something like two years worth of inventory of
condos on the market today. We've got rental prices going down,
we've got condo prices going down, we've got real estate
prices going down, and yet he's building. What's going on?
Stay with us, everyone back in.
Speaker 3 (14:23):
Two minutes.
Speaker 1 (14:28):
Stream us live at SAGA nine to six am dot C.
Speaker 2 (14:31):
A welcome back everyone to the Brian Cromby Radio Hour.
I've got Garrod Frankfurt with us today. This company that
you've got and these two launches in Forest Hill and
(14:53):
in Bavie. If people want to go check it out.
Is there a website that you would direct them to
to go to to check them out?
Speaker 4 (14:59):
Yeah, you can go to deal Coreproperties dot com.
Speaker 2 (15:03):
So before the break, we were talking about, you know,
how you found this At least you think you found
this market at the high end. It's not huge, but
a lot of people are pausing. You know, the articles
that I'm reading the paper, I've talked about you know,
forty or eighty I don't even know what the right
number is of condo projects that have been put on hold.
(15:23):
That condo prices are down, that sales are down ninety
five ninety five percent, That there's tons of assignment sales
with condos that people are trying to get rid of.
There's developers that are litigating against people that aren't closing.
And at the same time, rental prices are down, so
the amount of rental buildings that are being done is
being challenged. You know, you're talking about twenty five hundred
(15:45):
square feet and we talked earlier about you know, five
hundred to four hundred to seventy five to maybe six
hundred square feet shoe boxes is the way people have
described it. You're an expert. What's happened in the market
such that we built all these built all these small
condos that it would appear people don't want, and yet
we are in the middle of the housing crisis.
Speaker 4 (16:05):
What's going on, Well, there's a lot of stuff going
on there. So I mean it depends I guess how
far we want to go back, because I think if
you step back and you take a look at how
the Toronto condo market kind of unfolded, you could see
disaster kind of written on the wall. So I mean,
depending on how far back you go. I personally, I
(16:27):
mean the way the financing.
Speaker 3 (16:29):
Works is.
Speaker 4 (16:32):
A route part of the problem because it's very hard
for anybody to forecast out having like being able to
wait six seven years for their first place to live
or for their next place to live.
Speaker 3 (16:47):
And so the financing forced people to figure out ways to.
Speaker 4 (16:51):
Get the money so that they could actually build the projects.
And so that's one layer of I think the giant
mess that we're in right now. Then along the way,
somebody decided it was a good idea to allow assignments. Okay,
and now that assignment idea. I think not allowing the
(17:12):
assignments to really kept the lid on things because it
really made it so that you were closing this thing
right like you bought it. You were closing when the
assignments came in. It turned it into a futures market
right now. You were just looking for anybody willing to
put down the money and willing to flip it right.
And so you got this casino thing going on, and
(17:35):
as these prices were going up like crazy, it forced
developers who were appealing to these gamblers to bring down
the square footage because the gamblers didn't.
Speaker 3 (17:46):
Care about how big it was.
Speaker 4 (17:48):
They cared about the price, and they believed that somebody
else was going to buy it from them in a
few months or a year and they're going to make
a fortune.
Speaker 3 (17:55):
And the market proved that that was right and that
it worked.
Speaker 4 (18:00):
And so now we're left with all the stuff left
over from that, which is like undesirable suites, super expensive prices,
and people that never intended on closing owning a bunch
of paper that's about to hit the market or has
just recently hit the market. So that whole thing has
(18:21):
created this backlog that we're talking about. I mean, we
can mix in all kinds of other geopolitical stuff and
Bank of Canada decisions and all kinds of other things.
But I think for the real estate market in Toronto,
especially the condos, like that recipe there, really made a mess.
And you can't blame anybody because it's like this thing
that just kind of kept rowing on its own. Right,
(18:44):
politicians needed to get in with development charges and fees
and it just snowball.
Speaker 2 (18:50):
And then I've heard that you know a lot of people,
a lot of developers took those condo development proposals and
when the condo market went into sort of of a
deep freeze, converted them to purpose built rental, but then
found that the people didn't want that small size of
sweet Is that? Is that true?
Speaker 3 (19:09):
Well, that's part of the story.
Speaker 4 (19:11):
And the other part is that you know, when you
buy a site based on the condo market and all
those prices and all of those specifications, it doesn't work
necessarily when you convert to rental for reasons like size
and costs, And there's all kinds of reasons why one
won't work in the other will right, the returns are
(19:33):
so different for the investment pool in a purpose built rental.
Speaker 3 (19:37):
It's again, it's like a different game completely.
Speaker 4 (19:40):
So you're taking people that bought something for one thing
but don't even know this other game, and they're trying
to like figure it out while the city's throwing new
planning and CMHC changes.
Speaker 3 (19:50):
The rules every week. It's so crazy.
Speaker 4 (19:54):
So it makes things a little easier when like the
sky's the limit in my experience right now, right because
if people are paying three thousand bucks a foot, now
you can really start making good decisions. You don't have
to do everything based on what the hell's the cheapest,
nicest looking thing, right you can go what is what
do these people want?
Speaker 3 (20:14):
Because they're going to pay for it, right.
Speaker 2 (20:17):
But there's got to be a pretty limited market to
people that are willing to pay three thousand bucks a
square foot when the average is what I think it's
seven hundred bucks for these small shoe boxes that are
for sale, and maybe it's a thousand or one thousand,
one hundred for other ones.
Speaker 4 (20:32):
Very limited group, one hundred percent, no doubt. I don't
know if you saw recently. I know we're talking about
all the negative things that are happening in the market now.
Speaker 3 (20:41):
But a few days ago, CITYTV came out.
Speaker 4 (20:43):
With the article about ultra luxury home sales up in GTA,
even amid chaos in Toronto's real estate market. And this
article goes on to say that Greater Toronto area sales
of ten million dollars in Greater are up two hundred
percent for the first half of the year compared to
last year same period. And so like, what does that
(21:06):
tell us, right, the ultra rich people are buying stuff
cash in Toronto right now at a record pace. I
don't know what that means, but I think it means that, like,
you know, the smart money is looking for the deals
right now.
Speaker 3 (21:24):
It's funny, I was on, I ask.
Speaker 2 (21:26):
Smart money is looking for the deals right now? Well,
if you take a look at some of the graphs
that people have produced that you know, prices are down
comparable to the way they were down in nineteen ninety
and the people that bought in nineteen ninety one, et
cetera made really good purchases.
Speaker 3 (21:44):
Made really good purchases.
Speaker 4 (21:46):
And so the deals that are coming now and that
are going to come down the pipe now are on
things that don't necessarily get to come on the market.
Speaker 3 (21:57):
Right These are like some some smart.
Speaker 4 (21:59):
People or some people in aging industries that have changed,
or people that had great businesses that are no longer great,
need capital or need to you know, they need to
sell their house for whatever reason. And some of these
are prize homes. And so in a market where a
prize home comes up or something super unique comes up,
(22:23):
it's it's a frenzy. The article even goes on to
say that most of these are not even hitting the market.
These are all just whisper sales in the background, right,
And and so I don't know, if you're super wealthy
and you have all this cash line around and you
want something, you just buy it, right And so again,
(22:43):
if you have a limited supply or you have something
super unique and those people are buying it a two
hundred percent over last year, I mean that's a crazy increase.
Speaker 3 (22:53):
I don't know.
Speaker 4 (22:53):
That could just be like three houses though in that
in that range.
Speaker 2 (22:57):
Right, So, your your market focuses this life true high end.
And you've got the site in Forest Hill Village and
you got a site in Bayview, are you involved in
other developments that would be you know, lower of lower price,
lower value.
Speaker 4 (23:11):
No, But I think the extreme opposite of what I'm
doing is the other segment of the market that if
I was to do something, I would focus on that
because I think, like everything right now the middle is
a bloody disaster and it just I don't know how
to make numbers work in the middle anymore.
Speaker 2 (23:29):
And so what's the extreme opposite? Small cheaper buildings.
Speaker 4 (23:33):
Yeah, cheap and cheerful, no parking, Like you know, I
would look for something in this new sixth Street, six
story main street thing where I would do no parking,
walk up six story wood boom boom boom building in
a year and rent them out for like as light
as low as possible.
Speaker 2 (23:54):
So we've got a housing crisis supposedly in southern Ontario,
and the GTA CIMA Sea says we need three point
five million additional homes. They've reduced it for three point
eight because they've changed their baseline from two thousand and
four to twenty nineteen, but still it's you know, a
huge amount. How do we solve that?
Speaker 4 (24:12):
Well, I think, I mean, they're trying to do things now,
and they've implemented a lot of things in the last
couple of years that I would say are in the
right direction and positive for getting more units on the market.
The problem is is they needed to do this stuff
a decade ago, when numbers worked, project's penciled, and people
(24:32):
were willing to build stuff. Imagine how much more supply
we would have right now, which may or may not
be a good thing at the moment, but you wouldn't
have a crisis. You know, it's kind of hard to
tell if we have this housing crisis. I mean, I
know in my core I believe that there'll be a
glut again, and God knows what's going to happen when
that happens. But there is an extraordinary amount of inventory
(24:57):
out there now and I don't see that shrink anytime soon,
if anything. I mean, imagine every crane in the sky,
how many of those are not closing like I have.
I have partners who say people are not closing, they're
having to sue people.
Speaker 3 (25:11):
It's it's a real mess.
Speaker 4 (25:12):
Or people that bought five units, you know the flip
are being consolidated and allowed to just buy two of
them and let the other three go like people are
making concessions like crazy.
Speaker 2 (25:25):
But but I think, what is the What does the
developer do then if they're if they're if they're consolidating
to purchase a five ton to two, then they got
three more that they gotta they gotta bail out of
in today's depressed market.
Speaker 4 (25:37):
Yeah, Well, A big, a big buzzword these days is
inventory loans. I hear a lot of people talking about
inventory loans right now, right, and I.
Speaker 2 (25:46):
Hear inventory loans. Can you explain that to everybody?
Speaker 3 (25:48):
Please?
Speaker 4 (25:49):
Well, it's just a loan that the builder takes out
that replaces the construction loan so that they can kind
of close things off and pay things out.
Speaker 3 (25:59):
And I guess, oh, the next level of debt.
Speaker 2 (26:02):
And then what do they do with that inventory? Do
they rent it out? Do they just continue to market it?
What do they do?
Speaker 3 (26:07):
Well?
Speaker 4 (26:07):
I think a lot of people want to probably rent them,
but soon as you rent them, there's terry on implications
and it's no longer a new home when you sell it,
and it just changes all. I mean, people pay less
when it's not a new home. There's all kinds of implications.
So I think most people are trying not to do that,
but eventually, I mean, how long can you sit with
(26:28):
thirty forty fifty units that are empty or the deals
are falling? Apart or a combo both, and when do
we get a building where like nobody, all of them
collectively decide we're not doing this.
Speaker 3 (26:41):
This is dumb.
Speaker 2 (26:42):
Had conversation recently with some people that are doing work
in Texas and in Florida, and they were suggesting that
both those markets were like a year ahead of Toronto
where there was a significant amount of increase in supply.
And what's happened is prices and rents have come down,
and yet they still of some housing challenges. And so
therefore the states needed to ensure that there was even
(27:05):
in a depressed market, can continue building. And in Florida,
what they did is they put in something called Local
Act where if you build housing a certain percentage of
market pricing, you get twenty five years a seventy five
percent reduction in property tax. So it's a huge incentive
for people to build affordable housing. In Texas, there is
(27:26):
this new state law that has come in and have
said if a city has a certain amount of density,
we're going to ply it everywhere, rather than all these
different zoning density rules in different areas. And so it's
a dramatic increase in density. And so therefore both Florida
and Texas. You know, different jurisdictions clearly have put in
huge incentives to developers to keep building. Do you think
(27:49):
we need that kind of of provincial action to put
incentives in place instead of all these taxes and development
fees and rules and red tape and restrictions that we've got.
Speaker 4 (27:59):
Yeah, of course, I mean god, I mean who doesn't
do anything based on incentives? I mean developers just get
the short end of the stick with everything, Like not
only do we have to fight for the right to
build these things, after we do them, we're bastards for
making money on them if we're lucky enough to make
money on them. Right, People have this weird conception of
(28:20):
us as like these evil profit makers who were doing
Like if people saw the bottom lines on some of
these deals, they would be so shocked at and realize
their perception is so wrong.
Speaker 3 (28:33):
The incentives drive the market.
Speaker 4 (28:35):
If we look back in the seventies and sixties at
the stuff that they built, I mean you can see
what the incentives were.
Speaker 3 (28:42):
Their purpose built rental, you know, block buildings everywhere. Right,
you just didn't have enough people with balls enough.
Speaker 4 (28:49):
So I don't know if I could say that with
enough bravery to actually do it back then. Right now,
you've got people coming from different countries, different provinces, all
over the place. Everybody wants to try and be the developer.
It's like the it's like a cool thing to do,
but we don't have any incentives. We disincentivize us every day.
We CMHC had things going perfectly about a year ago.
(29:13):
Everybody loved the system, everybody loved the program, things were
getting done, and then they just changed it and just
it annihilated the market overnight, and then everybody had to
scramble again. We're constantly scrambling to figure up, figure out and.
Speaker 5 (29:30):
Like keep up with the city's like crazy ideas, because
they'll come up with something on the surface that's like, oh,
this is going to be fantastic, and then you look
under the hood and there's nothing there.
Speaker 3 (29:42):
It's like spaghetti and elastic bands.
Speaker 4 (29:44):
Right For example, on this they come out with this
wonderful main street policy that allows six story buildings on
all these streets that were never allowed.
Speaker 3 (29:55):
Okay, but they leave this one ruling.
Speaker 4 (29:59):
So I mean, it's not they can't think of every scenario,
but they have a rule or a guideline that tells
you that you have to the maximum length of your
building is twenty five meters in a residential area. Okay,
so fine, that's the rule, okay, but in a commercial
(30:20):
building it does not count the underground the parking. Okay,
so the parking you can go whatever. The setbacks that
you need to go are, but up above ground twenty
five meters in this new policy, because they're all residential zone,
they're not commercial zone, underground has a twenty five meter cap.
(30:41):
So now you could build two buildings like with setbacks
and everything perfect as of right, but you have to
build two underground parking garages.
Speaker 2 (30:51):
You can't combine them.
Speaker 3 (30:52):
You can't combine them.
Speaker 4 (30:54):
And even the ramp that combines them is a little
iffy in the idea.
Speaker 3 (30:59):
Okay.
Speaker 4 (31:00):
But so they give you the ability to do stuff
as of right, but then they like they limit you
and they do stupid stuff, and then when you call
them about it, they're like, they can't do anything.
Speaker 3 (31:11):
Well that's how it's written.
Speaker 4 (31:13):
I don't know, okay, I guess you're gonna have to
go for an amendment now, right, And then you go
for an amendment, and then the whole city comes down
and starts chasing you with the pitchfork and flaming brooms.
Speaker 2 (31:25):
This has been a fasting conversation. I really appreciate it
to If people want to check out your podcast, how
do they do that?
Speaker 4 (31:30):
Best best way would be to go onto YouTube and
check out Under the Table podcast or Spotify, Instagram, We're everywhere.
Speaker 2 (31:39):
We're gonna have to have you back talking about some
of your other issues at some point in time. This
has been a fasting conversation. I appreciate it.
Speaker 3 (31:45):
I appreciate you having it. Thanks so much.
Speaker 2 (31:46):
We're gonna take a break and come back in just
two minutes. Stay with us, everyone back in.
Speaker 1 (31:50):
Two No Radio, No Problem stream is live on Sagay
nine sixty dot com.
Speaker 2 (32:11):
Welcome back everyone to the Brian Crombie Radio Hour. I
have just done two interviews on the last two days
with two experts in the housing industry. Al ed iberwas
a deputy chief economist of a C and Richard Lyle,
the head of the Residential Construction Council of Ontario. Both
of them have talked about how this is a crisis,
(32:33):
and I think that we've got to really give some
detailed thought to how bad this crisis is, how a
bust boom boom bust boom scenario can can destroy a
lot of people's lives. I think that we've got a
situation where, you know, we have this intergenerational inequity where
it's completely unaffordable for young people to afford housing. Uh.
(32:56):
And then at the same time, we've got a whole
bunch of people that have built up a big net
worth in housing that probably they should have been investing
in other things to ensure their retirement. And if we
have a bust, they're going to lose money. And particularly
if they entered into home equity lines of credit or
(33:16):
mortgages or something like that to maximize the leverage on
overinflated housing, they could end up having a problem. So
it hurts people on the boom, and it hurts people
on the bus. And we got to realize that as
we go through this, and it's the same as almost
any other boom bust cycle where it can harm people.
And housing should go up by GDP. It shouldn't be
(33:37):
an investment. It should be something that is, if not
a right, damn close to a right, and should be
the same percentage of income over time or the same
multiple income over time the same percentage from a mortgage
carrying standpoint, and the fame multiple from a total price standpoint,
(33:57):
from generation to generation, from year to year, from decade
to decade. There's no justification for it to increase at
dramatically higher rates other than maybe if it's you know,
on water or uniquely positioned at Maine and Maine or
Bay and King or something like that. So, yes, location
does warrant some appreciation above what average appreciation would be,
(34:20):
but general housing shouldn't. We should make enough of it
such that it goes up by GDP. So I've got
a ten point program that I want to propose that
I think we need to address because I think we
need politicians and we need the public to realize that
we in a crisis situation. And we really have gone
from two years ago FOMO fear of missing outsets that
(34:41):
everyone was overbidding and prices were booming and prices got
to a high to today FOOP where it's a fear
of overpain and no one is willing to pay. And
as Richard Lyle talked about, he's worried that we're going
to have hundreds of thousands of layoffs leading to a
one point five percent to two percent decline in GDP.
We can't miss. We can't risk the layfts, we can't
(35:01):
risk the unemployment. We can't risk the devastation to our economy.
We can't risk the decline to GDPA. We can't risk
what's going to ultimately be the result of that, which
is going to be another boom in a couple of
years because there's no housing available and our young people
become even more sentenced to a life without the Canadian
(35:24):
dream of owning a house. It's wrong and we need
to address it. So here's my ten point plan. First
of all, I think we need to change the whole
attitude of government and particularly people in city planning and
city councils and planning committees, et cetera, from the Planning
department attitude that's been we want to stop development in
(35:44):
the past, to more like the Economic Development department, which
is we want to attract development to our cities, and
they need to become customer focused. They need to become
focused on what we can do to build great cities
rather than what we can do to stop development from happening.
So I think we need to have a complete change
data to it, and if we believe that this crisis
is happening and it's going to cause laffs. It's going
to cause devastation, it's going to cause drop in GDP,
(36:06):
it's going to cause housing and affordability, and we need
to have an attention to it like we did in
the pandemic, like we are I think in regards to
the threat of Trump tariffs, then we'll take the kind
of action that we need to take. So Number one,
change the whole attitude within municipal politicians and with the
missile planning departments to be more like the economic development.
We want to attract building. We want to attract development
(36:28):
rather than we want to push it away. Number two,
development fees should go to zero right away. A couple
of years from now. If you want to increase them again,
we can talk about it, but for now, in this
crisis scenario, this should go to zero, and I don't
think there's any other choice. We need to take that
one to one hundred and fifty thousand dollars, which is
(36:50):
equal to the kind of down payment that a lot
of people would pay. This unbelievable growth pays for growth.
Incorrect belief that developers pay for the development fees, not
the end consumer. This unbelievably probably the most progressive tax,
as Richard Lawle has talked about, a syntax comparable to
cigarettes or alcohol, which is discouraging people to consume, which
(37:15):
is not what we should be having. On housing, we
need to eliminate it completely right away. Zero. Do we
need to come up with another way of funding infrastructure,
no question, And I think it's the way that the
United States funds it, whether the whole society pays for
it by way of municipal tax bonds, or whether it's
just funded through property taxes, or whether it's funded by
(37:38):
infrastructure that comes from provincial or federal government. Yes, we
need to come up with a different way. But to
have these development fees that have gone up by one
thousand percent over the course of the last decade, that's
creating three billion dollars worth of a surplus for the
City of Toronto. That is regressive that the people that
can least afford it are asked to pay for it.
We need to get rid of it, and rid of
(37:58):
it right away, zero away. Across the board Number three
GST HST on housing. You know we put in this
consumption tax. You know Brian mulrooney did back what was
it forty years ago, and it may have made sense
to be as broad based and across the board as possible.
(38:18):
But we've taken it off et and oil at different times.
We've taken it off different items that have been deemed
strategic to our economy and important to people. We need
to take it off of housing right now. If we
want people to be building housing, if we want people
to be buying housing, we need to take it off
right now. You know, I think that taxation is one
(38:40):
of those things that you increase in good times and
you decrease in tough times Keynesian economics. This is a
crisis time. The GST, the HST, the provincial sales taxes
on housing, on all things that go into housing eliminated
right now. We're in a crisis situation. Number four, provincial
(39:01):
rules should be imposed that effectively provide as of right housing.
I'm doing development in Texas. Everyone in Texas is talking
about this new Senate build that effectively means that you've
got a zoning within a city that's over one hundred
and fifty thousand population where the most beneficial density zoning
(39:24):
applies across the board. So if a city has decided
that a certain density is appropriate, they applied across the board.
And I think it's a simple way of simplifying how
many different zoning designations we have. I think what we
need to do is we need to get rid of
a lot of these rules and regulations that different cities
put in place, that different municipalities put in place, that
(39:45):
different wards within municipalities put in place, and frankly, different
councilors and different planning people in different parts of different
wards of different cities end up putting in place. We
need to simplify that. We need to quicken up the
process of getting approval. It makes no sense that it
takes two to three times as long to get something
improved as it does to build it. We need as
a right zoning. I think that the MTSA rules that
(40:08):
were thought about that dramatically increase density and height around
major transit station areas and not just down the streets,
but in a circle radius as people thought about walking
to major transit. That's the right type of change, and
we need those types of zonings around major transit station areas.
We need the main street zonings, we need the six
plexes as a right on regular streets. We need to
(40:30):
dramatically decrease the rules and regulations in regards to what
you can build and make it as a right so
people can quicken up the process of getting approvals, submitting
building plans, and getting under construction. Number five inclusion the
inclusionary zoning, where we give more affordable development available to
(40:51):
people is critically important, but it should be done by
way of an incentive, not a disincentive. By having the
inclusionary zoning, the ten percent of the homes that you
want at below market rates being paid for by the
other people in that condo building or apartment building makes
no sense. It's a regressive taxation on the people that
can least afford it. It should be something that is carried
(41:13):
by all the society. The bill that was passed in Florida,
which effectively means that if a developer builds inclusionary zoning,
they get a reduction in property tax for the next
twenty years, makes ten of sense because what that does
is it means that all of society shares the cost
of providing inclusionary zoning, not a regressive taxation on one part.
(41:34):
So affordable housing is something. We need to do it,
but the way that we've been enforcing it is wrong
and it needs to change. Number six, I think what
we need to do is we need to think of
housing as the best social program out there. I think
that the statistics and this book called Abundance that's been
(41:54):
written in the United States is excellent. What it does
is it shows where we've got increase to supply of
housing home, homelessness goes down dramatically. And so we've got
to take a look at all these progressive people, these
left wing people that say that they want to decrease homelessness,
but come up with all these massive programs to deal
with it. The best program is to take them off
(42:15):
the street and give them a home, and the best
way to do that is by way of dramatically increasing supply.
Across the United States. It's been proven in Canada as
well that if you have an increase in housing supply,
you'll have less homeless and so we need to make
that available. Does it need to be affordable, Does it
often need to be social housing? Yes, but we need
to make sure that people have an opportunity to put
(42:39):
a roof over their head. I had one interviewee that
told me that homeless people visit on average emergency wards
one hundred times a year. I don't believe that statistic.
Maybe it's homeless people with mental health issues. I'm not sure.
I want to find out. But it makes logical sense
that if you're homeless and you need some care, if
(42:59):
you're cold, you're hungry, if you need some drugs, medication,
et cetera, you're going to go to emergency. And that
is one of the reasons why our emergency room waits
are too long. If we give them a home, I
was told that it costs less than one hundred thousand dollars,
but if they're on the street, it costs us an
excess of half a million dollars. So it's a five
(43:20):
times increase for society to not give them a home.
So let's deal with our homelessness problem by making more
housing available. Seven. We need CMHC to become more aggressive.
This change that they've taken the amount of debt that
they're willing to finance from ninety five percent down to
seventy five percent and putting the risk on rents on
private developers. You know what, they should take some risk,
(43:41):
but it's not that kind of differential in leverage, because
what's happened is purpose built rental has gone down dramatically
in that regard, and so we need to have CMHC
more aggressive in providing financing and shouldering some of that risk.
The whole idea here was that they were going to
take some risk of the house leverage, and we need
(44:02):
to have increase the amount of funds they've got available
and increase the amount of leverage that they're willing to
provide to developers. Number eight, There's been a real lack
of productivity within housing, and I think that's caused by
this plethora of different zoning, the plethora of different building codes,
the lack of modernization of building codes, the changing, constant
(44:24):
changing of building codes, et cetera. We need to focus
on making sure that we've got some consistency and zoning,
consistency in building codes, focused on productivity, less rules and
regulation so that we can become more productive. Why do
we have far smaller housing companies in Canada that don't
have the economies of scale that they would elsewhere in
(44:46):
the world, particularly in the United States. We need to
think through that. We need to have the role of AI,
the role of digital twins, the role of economies of
scale like we've got in every other industry in the world.
Apply to housing and figure out how we can do that.
Number nine tariffs reciprocal teriffs, tariffs in the United States,
tariffs on furniture, tariffs on HVAC, tariffs on electrical equipment.
(45:07):
We've got to solve this tariff for We got to
solve it for the economy in general, but we got
to solve it in housing particularly. And the fact that
the Americans are taxing our lumber at outrageous amounts, that's
that their housing is going to become more expensive doesn't
make sense. And the fact that we then put on
reciprocal tariffs on aluminum, steel, mechanical equipment, electrical equipment that
is coming into Canada we need for housing makes no sense.
(45:29):
We need to solve that problem. And Number ten, we
need more people in the housing industry. We need more
skilled laborers. We need to do training, we need to
do apprenticeship. We need to think about immigration that attracts
people that have got those skills sets that we can
bring them to Canada to work. I'm really worried about
what Richard Lowles talked about about mass layoffs and then
(45:50):
what do those people do? They move into other industries,
they move into other geographies, and we can never get
them back. We need to be thinking about having the
right kind of deployment and housing given this crisis scenario
that we would have for doctors, that we would have,
for nurses, that we would have for people with STEM experience,
that people would have for quantum computing, you know, areas
(46:11):
of industry that are critically important. We need to have
a labor market strategy. We need to have a labor
market strategy for housing. So crisis situation we need to
acknowledge and admit and put an all government and all
business industry effort into solving. We need to have an
economic development attitude. We need to have elimination of development fees.
We need to have an elimination of the GST on housing.
(46:33):
We need to think about provincial rules rather than a
plethora of rules in all municipalities. We need to think
about market housing, affordable housing from all of society standpoint,
rather than the inclusionary zoning that we've had in the past.
We need to get rid of homelessness by providing or
housing and make housing or right. We need to have
CMAC and government support housing with more financing and higher leverage.
(46:56):
We need to have productivity orientation to housing and think
anybody n the scale. We need to eliminate tear us
on the inputs to housing, and we need to have
a labor market strategy for our housing. That's my ten
point plan to solve the housing crisis. But the most
important thing, the old thing about draining the swamp, is
I understanding you're in one. We've got to understand where
(47:18):
we are in a housing crisis. We've had a boom,
We're having a bus. We're going to end up having
another boom. That's not the way to manage an industry
or let alone. Something that's so and critically important to
our economy and critically important to all of us. Making
sure that we don't have this intergenerational inequity such that
people my age have huge net worth in their homes
and people my kids age can never afford a home.
(47:40):
It's just not fair, it's just not right. We need
to address it right now. We need to take attention
to this crisis that is at our doorstep and address it.
Thanks for joining, Thank you for listening. I'm Brian Cromby.
Brian Cromby Radio Hour on every night six o'clock nine
to sixty am. You can stream online at Triple WSGO
nine sixty dot. You can get on my podcast videos
on my website Brian CROMBYTCK on YouTube channel, on social media,
(48:02):
on podcasts, Thanks good.
Speaker 1 (48:03):
Day, No Radio, No Problem. Stream us live on SAGA
nine sixty am dot c a
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