Was browsing a proposed fee schedule for builders in Toronto. The cash requirements to do business there are simply massive. Imagine a fee of $460k to build a fourplex. Talk about risk and carrying cost on top of everything else that goes into building infill houses. At this level of fees, you’d wonder what value the city provided to justify the cash windfall. Will developers abandon the city? The city employees behind this fee structure must be really disconnected from the building industry if they believe these large fees can be absorbed. Hopefully these fee ideas are not a contagion adopted by city hall in Calgary.
Tough year for pace of work
It is always a relief for the builder to get out of the ground, that means concrete walls, inspections, subfloor install and finally dirt backfill. This puts us right at the stage where everyone else is, paused and needing framing labour. Perhaps the highest demand trade right now, the framers are super busy. This makes it really tough to get to the portion of the build where control of the schedule is more within the power of the builder. So we will play the start/stop game for a while, until we can get to lockup.
progress
some amazing production from a grade A level crew. to go from a hole in the ground to stripping off forms in 5 days, to having a sub with the confidence to order concrete for delivery before the form work has started. it is no exaggeration that a lesser crew could have doubled or tripled, the time on site, more cost, risk of problems, and delays would be certain.
Is anyone willing to roll the dice on a potentially contaminated site?
edit - November update, this one was posted as sold I would love to know the terms of the deal and the assumptions made regarding liability of potential contamination from the old gas station
I believe the standard contract requires disclosure of material defect in a property. A pretty significant defect would be contamination from the former gas station next door to your project. Should a property such as the one shown below even be allowed to marketed without a phase 1 or 2 assessment completed? I’d argue no. For the listing realtor to say they don’t have any environmental reports yet wants to sell anyway should create a serious liability for defect related compensation. But does it? If this property sells to someone and contamination is found, what happens next? While I believe this property is currently untouchable, if I did own it, I’d probably commission a drill crew to take soil samples to at least provide some information. If that sounds like no fun and expensive, you’d be correct. At that point you’d offer some certainty on a major deal breaker. Right now is there a buyer for this land?
Time to do something
In the tricky world of real estate development it is best to make the best call given the info you’ve got, and try not to look back with the benefit of hindsight. Always, there is some item that comes up that is sort of like ‘had I known x I would have done y differently’. In this instance, I have a house and I have been wanting to build on it for years. However, there was always an issue or something came up and it got pushed back over and over. The carrying cost on this land has been enormous and it is now vacant and ready to go. The first call is to proceed to demo, and then subdivision. I will start the wheels in motion on that and see where the process leads.
RCG rezoning, the never ending saga, the most politicized ongoing crapshoot in Calgary infill development
Edit - this post is getting very dated and lots of Rcg policy is more permissive as of 2024. Will leave the post up as is permanently and won’t revisit the content
When the former council introduced the RCG zone (the rowhouse zone), it was a patch, or a workaround to the archaic and inflexible land use bylaw that controls redevelopment in the infill areas. Lacking the means or political will to do the work of creating a new bylaw, the RCG chapter would at least become a meaningful stopgap measure until such time (a decade or more) that the new bylaw could be crafted. While flawed, because each land use change for the tiniest lot needs a vote by the full council and mayor of the day, instead of being approved based on criteria created by the planning department, it was a quick fix to introduce a ‘built form’ that the R1 and R2 areas could not. The outcome, years later, is more like a perpetual battle of urban planning guerrilla warfare, where the side of ‘goodness’, the anti development forces, line up and do battle against the evil developers, in front of the power brokers of council. It has now degenerated such that the same tropes are dredged out each application, anti-rcg bingo can be played in advance of reading any public submission. This is all tiresome to the max to any jaded industry member. After enough applications, the votes of each on council can be predicted in advance, most of the time. For applications where the locals can come up with a critical mass of petitions, letter writers, and hearing presenting attendees, some on council can be unreliable voters as they become inclined to forget policy and are swayed by emotional argument. Situations where the applicant has zero certainty on the outcome occur. A recent Killarney vote followed the script and resulted in an 8-7 vote in favour of the applicant. Notably, Councillor Walcott showed a willingness to vote against his own constituents to support the RCG file. That was somewhat of a surprise given the volume of voters that will remember this come election time.
The solution needs to be a broad policy backed by a new bylaw. The RCG (actually rowhousing) needs to be allowed everywhere, fairly, distributed in each infill community, or nowhere. At this stage of society and its need for housing, particularly affordable ground oriented rental that isnt in sprawl areas, it seems unfair to politicize this type of development. The more politically powerful communities put up a better defence and this will create areas where the old land use patterns are frozen in time, while the ‘go zones’ become chronic construction sites, with the associated noise, mess, and hassle. The city planning department favours moving on from the rigid hierarchy of the R1, R2 style and go toward ‘something else’. This would merge the zones into a built form based regulation of housing intensity. I favour this option, but not the amount of time and energy it takes to get there. Is there another temporary stopgap measure, such as simply abandoning the R2 and RCG zones, and combining them into a new, more permissible class?
This was a really tight vote. Often these pass 12-3, where a few predictable members vote against any change in land use. I don’t see why a small rowhouse file should be voted on by the full council anymore. this is a 50 ft war reminiscent of the old secondary suite battles that took a decade to fix.
Inglewood brewery lands update
update - there is a downloadable file from the applicant that contains 50 plus pages. Check it out for exceptional historic details, green space drawings, and an engagement timeline. It sounds like a year long process until the final public hearing early 2023.
After much anticipation, information on the brewery lands is now available. sounds like a big launch in March of some engagement and filings already made at city hall. That’s great news. So much potential and the market is maybe even good enough to sell a huge project like this too.
https://mgcp03.engage.squarespace-mail.com/r?m=620ee187e8e0c66cea9120ca&u=https%3A%2F%2Fwww.BreweryRailLands.com&w=611fd8b3ecdf6c512c9e298f&l=en-US&s=DEj7kg9fX1UxsHMvgKoqH9Md3JA%3D
Notable sales and advanced math
Noted a few more noteworthy sales, some defying my math skills. For most of these sales you’d like to meet the buyer and learn from their assumptions. Past experience suggest some of these deals will prove disastrous. Past experience can be wrong too. This buyer may be a real estate Nostradamus and in a year we will be commending him on his real estate wisdom. Offering 140 k over the list price (which seemed realistic) couldn’t have been the easiest thing to do without a matching confidence in market outlook and builder capacity. I lack both characteristics relative to these buyers. What do they know that I don’t? The current mantra is ‘out of town buyers from Ontario’, ‘market will rise 20%’, ‘oil is going to $200’, ‘interest rates will never go up’. All of this cannot be true because these prophesies will shift market conditions but result in a feedback reaction to revert to the long term trend. Anyway it is interesting to watch.
thoughts on revolutionary new construction products, techniques, and systems
The industry is filled with innovation, the home builder, looking for an edge, may be seduced by revolutionary products that appear, surficially, to ease a pain point, save time, lower cost, perform better, ‘green’ it up, reduce waste, and so on. My experience of these, sadly, do not often concur with the marketing material promises. If the new product is so good, why was it not developed many years ago and already become a standard practice? If the new and improved product currently holds a fraction of the market share, but was truly better than the conventional approach, it’d be subject to mass adoption in a hurry, and by now be the status quo. Here is a series of comments on why these products fail to deliver;
cost savings - these do not materialize vs standard techniques that have been optimized over decades of installation. standard techniques can be so perfected there may not be some ‘revolutionary’ new process that can be measurably better.
ancillary benefits - the new product comes with bold claims of savings or economies down the chain, however, the person making the pronouncement of savings does not actually have real data on what the savings are. Thus the savings are overstated and cannot balance out the higher cost new product
time savings - same as above, except trade cash savings for time savings. the proponent of the new technique isnt aware of how quickly the work can be done using standard methods. if they knew more about how the schedule looks, they’d see there isnt any real saving of time, and often the new technique can take longer
overhead - the new technique has more overhead, factory production, modular, more shipping, more craning, premium materials embedded, higher cost and lack of scale. the standard technique is so optimized it allows that business to pass on less cost to the builder
overstated performance - the bold claims of improved performance dont live up the billing, or they don’t appeal to the market so the performance could be better, but the standard technique was already performing well enough that it was never a problem.
unfamiliarity - some training or teaching is needed to execute the new techniques, and it does not appeal to those who’ve perfected a different craft and are hesitant to invest in a new way
patent costs - royalties, tributes, marketing fees, etc, there are often costs with the new product that go to its inventor. the standard technique is not proprietary so anyone can use those methods or materials free of charge.
intangibles - the new product comes with it intangible benefits that don’t delivery tangible results, other than ‘good feelings’ or ‘green credibility points’.
benefit recipients - if the new system is beneficial, the builder, who is paying, may not actually receive a share of the benefits, but has to pay the higher cost up front.
risk - the builder may have a risk averse perspective on the new product
relationships - the builder has a long standing deal with the old guard, and isnt interested in a change that could harm pre-existing relationships.
only works in exceptional circumstances - where the new products can win is far from labour centres (rural) in a hard to get location, where extreme performance counts (net zero etc), or when budgets are so high that cost is less of a factor than branding, prestige or pace. I don’t encounter these circumstances routinely, in fact I avoid these situations. If a product only works if it needs to be deployed in a special circumstance, it wont reach mass adoption, even if it is better.
Given all these legitimate reasons to fear change, a new product has to overcome significant inertia of how homes are currently built, to gain any market share from the tried and true operators. Some of the dominant players may possess a level of business mastery and optimization that offers them the greatest defence of all against new competition, $.
Market has moved…and left me in the dust.
I used to curate the odd notable sale. Now the notable sales are posted daily, so they aren’t notable anymore. This indicates a market that has moved very quickly, and in the process left me behind. I don’t think I’m the only one that feels this way regarding market risk and overvaluation of land. My builder friends are sending back comments like ‘omg, wtf, crazy’. I have a definite sense of dread and dejavu on the market. Land has reached tops before, but the materials are now obscene with some products being 6x their former price. I don’t see retail buyer willingness to vastly increase their budget, but, it does seem the Ontario and BC FOMO real estate contagion is now impacting the Alberta market. From their perspective, Calgary is a cheap bet. I don’t need to be right but I do need to survive and I’m taking a wait and see approach on these crazy math land deals. If housing prices for finished models goes up 10% in 2022, and stays elevated, then the game really has changed and I will revisit my strategy. My Bridgeland and Inglewood projects literally cannot be touched by todays builder from a cost perspective. A true luxury in this market is the ability to site on the sidelines and focus on execution of the pipeline rather than being desperate and making a huge mistake.
How I got my permits for a new custom home in a historic infill area, quickly
“EDIT - a lot of the work is a credit to the design shop, they did a good job. It is their knowledge of the local customs that greatly smoothed the process. I may have steered the ship but I didn’t do any heavy lifting on plan prep. Despite this I have a lot of pre construction service embedded in the job, so much that I could hardly afford to pay a professional person to do it. Starting projects always reminds me how much work it is to build one single home, I’m impressed by teams that can do dozens of builds per year”.
This is not a post to describe how smart I am, though I have learned a few things from 25 successful custom infill projects (while suffering a fair bit of trauma along the way). How was I able to get a released development permit in under a month (for a full 2700 sq ft house and detached garage), followed by a comprehensive building permit in around three weeks? Horror stories abound in the industry regarding the DP side, where permits get tied up in purgatory for years. We deployed a few tactics for sure, and what we did worked. That in itself is quite impressive to me. Often even when you (as the applicant) do the right thing, you can end up eating a hammer. This time we breezed through to approval without having to incur cost for changes and delay. Time value of the delay hits home big time, I have huge overhead costs on my land inventory which runs into an opportunity cost on trapped dollars, that hurts when, self employed, you don’t take home a biweekly paycheque when projects go over time. Other fringe benefits abound with this project, first we didnt have to pay an offsite levy, generally that is $5k on my typical project, nor do we get hit with asphalt degradation which can be another $3-5k. The additive value of the stamped permits also have increased its value from raw land, to a turn key development site, in exchange for around $16k in design, DP and BP fees, warranty and filing cost. All of this is starting to feel really good, because my $400k empty lot is in a coveted area, extremely appealing, and fully in my control as the builder.
Here are the tactics used to accelerate the permits and avoid vast pain at the development stage:
contextual route - the discretionary permit path simply adds more review time at the city. we made the conscious decision to stick into the box set out by the contextual approach. that meant all setbacks, heights and coverages hit the mark, boxes are ticked by the planner and we move on.
permitted use - the submission of a project in the ‘permitted category’ facilitates a pathway to ‘yes’ that needs less advertising to the general public, a major time saver on this one. No need to advertise approval because the permitted use is ‘not appealable’. Another benefit of the plan from the outset, it didnt get appealed. Often a neighbour will not like the project you are planning and file an appeal. That is tough issue because you must hire a lawyer, wait for a hearing, and so on, that cost is very large and potentially deadly to the project.
no errors of substance on the DP submission - avoiding using up the planners time on issuance of a lengthy bylaw check and detailed team review where many issues come up that are our fault. A common issue is calculating the site coverage, somehow the math is different depending on who does it. No relaxations means no haggling over bylaw interpretation either.
Next up was the building permit stage. This is simply an easier process, if you have the right files (all of them and there are many), you get approved. The right engineer helps smooth over any hurdles and engaging the consultants early (once your DP is nearing readiness), you can actually shave weeks off the overall process. that means sequential work is happening on the BP while the DP is in pre approval. You can commission the technical files once you have certainty that the project will be a ‘go’. I was able to reduce the time from DP approved, to BP ready to file (I narrowed that gap massively). More specifically;
relationships - be on a first name basis and have the cell number of the key 3-4 parties you need to hire to get the BP assembled. All of these consultant types delivered my needed files in reasonable time. Will detail below what those are.
structural drawing package (roof and truss) - this is the bottlekneck of the industry. The staff at the lumber yard are inundated with work, and they can’t get to your drawings fast enough to turn them around. This has been a challenge now for years, and recently become acutely problematic. I don’t get it, the one truly white collar job in a blue collar business and it is the slowest? This is work that can only be done with proprietary software by the dealer, no shortcuts (we looked into it). Here is where we leveraged some relationships to have ours done with haste. Thanks Wade.
Energy model, hydronic, engineer - sure the hydronic drawing is a quick one, and the energy model is software driven using the inputs we recycled from the last job and can be done in a week. Repetition helps here by having standard furnaces, water tanks, HRV to draw from. The engineering, I would say, is sort of boilerplate (if the project is not unique or diverging from normal practices). You get lateral stability drawing, footing detail, pad sizing, rebar drawings, and a tall wall wood spec in short order from the engineer (if you have a contextual like building, I’m afraid boutique architect will not help here, but the right draftsman will).
reaction time - the BP plans examiner called me to iron out some details and notify me that I was missing a page or two. That helped and lot and I immediately prioritized the gaps. My turn around time on the details missed was over a week. I could have had the BP in less than two weeks had I been ‘perfect’ on my submitsion
ownership of the vista system account - the city created the online submission system, and the builder must maintain access and know how to use it to submit files, link all the sub contractor licences to the file, and fund the BP. As the builder, I have taken on this task rather than delegate it to someone else, because #4.
This was the best process I have encountered, the fastest, and most scaleable of all my builds to date. There is some compromise and tough decisions made at the beginning, but the avoided brain damage is simply priceless. To be able to go from raw land to owning a permit in two months gives me the sense of control that I crave over any project. The quick permit ‘de-risks’ the build, saves me a full season, and allows me to schedule the upcoming project with confidence that I already ordered the windows and am working on the appliances, before we put a shovel in the ground. Good news for sure.
Plenty of deals falling out of contract… why
I’m going to go ahead and make the assumption that the typical entry level home buyer should avoid buying a 110 year old house. The likelihood of a few gremlins covered by paint before the sale is ‘fairly’ likely in these deals. Are buyers rushing out and getting these under contract with an inspection condition, paying for a inspector to come and then getting a horrific report and backing out of the deal? If someone is buying a place like this and needs an inspection, they already are demonstrating that they aren’t equipped to own a 110 year old house. Anyone owning a house that old needs to be able to operate and maintain it on their own otherwise the cost of living there will be too great to justify the purchase price. These ancient homes may make sense if the price of entry is low enough that funds remain to pour ample major rehab and end of life replacement dollars into the structure. However they aren’t as the homes tend to trade well above land value right now. I guess my point is if the house is cheap enough that you get it free with the land, then maybe it is a cheap futures option on land speculation and a house hack that lets someone live for free. More likely the house is just a money pit and endless energy drain for a new buyer. A buyer who stretched to get a house wants to live trouble free for a few years and rebuild their savings. In a 110 year old house is that likely ?
Labour increases, who is to blame?
I received another labour price increase contained in an estimate for an upcoming job. I’m not exactly sure the source of the increase, just the amount, which is 50%. Is this routine inflation, or the additive sum of a bunch of years where there was no labour change at all. How much of the labour change is passed onto the guys vs retained by the owner? A lot of questions but few answers. Is there a substitute or a different contractor I could use? Perhaps, but my loyalty to certain trades is very deep, into its second decade. The root of our problems in society appears to lie with the financial system and credit explosion of money creation by the banksters. Each person has to make a conscious decision to be victimized by the bad actors in the financial system or to attempt to work it to their advantage, which is what I do. 2022 does seem to be the time when the past decade of bad governance is really hitting home.
Open house Sunday
Sunday afternoon will be a open house at the parkdale project site. It looks great with the furniture. Nice park and skating rink across the lane too at the community centre. Parkdale is one of the premier places to live in NW Calgary, close to everything and easy access to the mountains.
Already a great start to ‘22?
It does appear that I’m closer now to the end of my building career than the beginning. If market action dictates I won’t build then I don’t have an issue hanging up my contractor licence. What is more likely is the madness ends and there will be opportunities galore to come at an unknown future date. Will keep some powder dry.
2022 prediction edition
The simplest prediction is volatility and continued craziness. If that is the prediction I make, given my horrible prediction success ratio, perhaps we will actually have a boring, steady construction season. I’d take that. Instead here are some more detailed picks;
City of Calgary attempts at modernization of itself make little headway - a continued disconnect between the left hand and right hand characterizes city hall. The left hand contains ‘leftist’ ideas, and lots of politically correct woke policies, where the planning department staff tend to reside. The right hand contains ‘conservative’ ideas, which means nothing is allowed to happen because the bylaws are rigid, and any change that does occur is grudgingly incremental and drags on for the better part of a decade. The barely concealed classism and other ‘ism’s’ of the premium R1 communities live on the right and focus on political influence. The builders live in the real world where residing in the left or right has no utility. Instead the builder assesses risk and makes snap investment decisions and ultimately is accountable to the marketplace, policies be damned (actually never even read by any builder because builders don’t care for policy), work must get done.
Infill housing market - I am forecasting a modest price (mid single digit) increase for 2022, largely below real inflation and impacted by inescapable factors. The first and of utmost importance is the assumption that the builders spent 2021 building out and burning up the cheaper land purchased in 2020 when the market was in rough shape. Builds starting in spring 2022 are significantly ratcheted upward in cost base due to land value. Over the past year I have highlighted numerous crazy land ‘deals’, in heavy quotation marks, where I felt the math was really suspect (suspect meaning awful, hideous, or grotesque). Someone now needs to put this dirt to work unless they enjoy cashflow negative alligators, and holding costs. If the builder paid $100k extra vs what I thought was rational for an r2 lot, then each of the new builds must be $50k more just to cover the purchase price, and that does not address the cost of capital for the land deal money, which is unknown, but surely more than zero. Enough posts on this site have referred to commodity and supply chain issues. These are real concerns but just because the poor builder pays double for lumber that arrives a month late, it doesn’t translate into market price changes for the infill product. Unfortunately. Eventually these input costs will result in less supply and that could drive up infill prices, but as soon as that happens the liberal government will ask its friends at the bank to raise interest rates.
labour is the bottleneck for 2022 - there is simply too much demand and the Calgary labour marketplace is unable to tap new willing workers. The type of work needed is from those in the trenches doing the heavy lifting, bringing impressive skills and muscle to the table. Maybe the construction worker zeitgeist is unhappy with the lockdowns, public sector enriching itself while hardly working at home, and inflation of necessities for living, and have tapped out.
I will focus again on rental construction - I believe there is no greater contribution I can make than turning a decrepit shack into premium housing, purposefully designed and executed for the rental market. My rentals will contribute to the lifestyle of four lucky households and enrich the community. My related prediction is the planning department will work with me to expedite the permits needed to allow me to really get going on the pre-construction services I conduct for every confirmed project. This is the phase of the project where a decade of experience and connections is leveraged into launching the most efficient, scheduled and budget friendly build possible, where every decision is vetted and second guessed, and the wheels of the trades mobilized to build out the dream.
So there is a quick list of predictions for 2022. See you in December…
This is Prince Charles Martin. He made a valiant attempt to upset King Kong Ortiz, but was bludgeoned by a vicious left hand and got stuck in the ropes and counter out. This image is a metaphor of building houses today, but instead of the match getting stopped by the referee, the builders get bludgeoned routinely by the market and must be resilient to start over again on Monday morning.
2021 year in review
2021 is over now, it will remain a year in infamy for the builder. Never before was it so hard to get any work done, or so expensive relative to earlier years, to get the materials, if even materials were there to buy. Anyone who purchased a finished house in 2021 should consider themselves fortunate, as that same house would cost significantly more to build by December than it did in January. The year could be broken down into a series of unfortunate circumstance;
labour - typical small business owner would have a couple install crews. One key member would quit, and a second stay home and find other ways to get money. Now his crew is halved and the available jobs are everywhere. Or the best crew would quit and decide to freelance and double their rate. Now the business owner is screwed even more, the installer is making more from the same job than the business owner but doesnt have any of the responsibility to quote, supply, administer or service the client.
materials - typical small business owner has a longstanding wholesale relationship allowing expedited shipping and good pricing. Due to shortages, the wholesaler jacks the prices and the terms change from great service to ‘its coming sometime’. business owner caught in the middle and cant do anything right, scrambles around to fill orders, schedules are not met, the efficiency that allowed a company to run on big volume and smaller margins is disrupted. Every relation sours among everyone.
Infuriating as the year was, the material pricing and availability scenario has gotten worse, as some sector would recover, another would have an issue. The suppliers exercised a lot of pricing power, often they’d book a series of regular price increases that would compound. So raising prices 5% a month for 5 months results in a much larger than 25% increase to the end buyer. Diminishing quality was also noted of metal containing product. Throughout the year, it did seem that the productive crews that used to be busy became swamped. They’d try to hire and get no applicants willing or able to do the work. This has culminated now in some major price increases for crews able to offer good service. Maybe some of the labour increases were long overdue, and with a supply imbalance, skilled labour is really taking its piece. One anecdote from a skilled exteriors guy related to how he hadn’t touched vinyl siding for a decade, until he stumbled on a job paying 4x what he last was paid long ago. The vinyl job got done and some other builder had to wait. Now there will be an hourly wage expectation for any type of work. This is just inflation unfolding in front of our eyes, as the value of the dollar has completely diminished at a rate not seen by anyone.
In business news, we finished five homes by the end of the year, and sold four, with a new show home opening this week. Each had various trials and tribulations. Clearly we need to do things different and stick to procedures that work given the landscape has changed in what we can deliver. Expectations have never been higher while ability to get work done lower. We purchased a couple great properties and are really hesitant on acquiring any more. Prices are just too high and the uncertainties and downside risk too large to overextend. So many deals were done on property I felt was overpriced, undesirable, or just bad business. Will I be proven right or wrong does not even matter, when I see land sold for prices that don’t make any sort of sense I want to sit out. Inventory of inner city homes does seem to be really low, but will prices rise enough to account for high land, material, and now labour costs? Im suspicious of this market and what changes can happen in 2022. In 2021 we offered exceptional value in the buildings we created, something to be proud of, although the personal price of the management of these projects has never been greater.
here is a repost of some sales stats on 2021 for detached homes. what we see is remarkable strength in November and then December the level of sales smokes the available inventory selling 113% of homes listed. This is something not witnessed in my memory, though I don’t have a lot of market data at hand.
Show home open
We are putting the last touchups and missing details into our show home in parkdale. It looks great already at that 99.9% level of completeness. As usual the last bit is extremely difficult to get to. Like a process of construction whackamole.
Prediction review edition 2021
Once again it is the year end, or close enough to it that the prediction overview edition can commence. Looking back, the 2021 predictions were sandbagged a little to give me a better score, a couple of the predictions were basically ‘gimme’ level. Regardless here we go.
Inflation of building inputs and easy money loans bumps up the Calgary inner city house price - verdict - TRUE. This was a fairly easy call, however, I didnt get the actual magnitude of the change of how busted the supply chain was, and how much scarce goods can ramp up. I complained about OSB prices tripling, but the actual top of market price was more like 7x. Lumber could have added 20-30k per house for a typical home, and a lot more for large homes in 2021. The yards can’t even guarantee timely delivery and windows were months delayed creating so many hardships on site.
Another issue was the continued availability of super cheap variable loans, below 1.5% all year long. With 5% inflation (calculated by the feds, really?) negative real interest rates, a 1.5% loan is like borrowing at a -3.5% real rate for hard assets and that proved irresistible to the market. Every HGTV subscriber became an aspiring flipper making any junk house be bid up to the max price (or higher) and this showed how volatile to the upside detached homes could be, while condos continue to languish.
The municipal election is a dud - verdict - TRUE - Unfortunately I picked this one too. The mayoral campaign in particular was poorly contested and the winner, conveniently enough, was sworn and then apparently just went full NDP. We knew the mayor would be unable to play nice with the provincial gov, but to jump into the big chair, declare a climate emergency, meddle in dirty Quebec affairs, and screw up the arena deal on twitter in the first weeks is a bit beyond what anyone could have predicted. It seems the election played out that the wokiest candidate slate would win. Despite this, I have some optimism on the inner city development side, because oddly enough, the industry and woke urban politics seem to be allied.
The planning department lacks courage on inner city development policy - verdict - TRUE. This was a really wise call. I saw all the precursor of this during my limited interaction with planning staff during the local area planning exercise. The planners themselves, they are good trained people. No business understanding perhaps, and used to those regular paycheques regardless of outcomes, but are principled on planning policy. But the department is a political beast, the planners take direction from above that they dont personally support, and they present it as the public face (while privately cringing, must be tough to do). The guidebook fiasco is worthy of a dissertation on public engagement and NIMBYism, but I wont be the one to tackle that beast. The vilification of elbow park community as racist NIMBY’s was certainly a low point. However, I do agree that this R1 cage match brings out ugly character traits of the classist Calgarian rhetoric, and classism remains a singular force in segregation within the city. I’ve come to see the planning policy process as too flawed by being done before the land use bylaw can be updated. The bylaw is what needs changed first, and I don’t understand why the bylaw renewal process is languishing. A society can tear itself apart and crumble while fighting over policy that could be better laid out in a concise and contemporary land use bylaw. Do we need this policy stuff?
The inner city builders association is effective - verdict - TRUE. Definitely on a roll this year. What a great group of business owners. Early wins and low hanging fruit were tackled. One example was making it much easier to get a demo permit by removing the $4250 water disconnect refund process. This is a clear example of a smart regulator, willing to adapt, that simply ‘cuts’ a rule that was of no value, saving the city massive staff time too. This is an administrative win and wouldn’t have been done unless the CICBA pushed it. Next up is how to speed the more complex development permits through the process. Bizarrely, projects that do not reflect the municipal development plan get fast tracked to approval given the current rules, but projects that do reflect the municipal development plan face a lot of business unfriendly obstacles. How can this be tackled, or even reversed? This is all politics of course, and some of the levers are in place to change it. I think we can see some progress made at the highest levels with the new Council and an industry partnership approach.
My shift to building more detached homes continues - verdict - TRUE. Three of five finished homes in 2021 were detached, and for 2022, three more detached are planned. The downside is these detached homes are quite expensive, and as of year end, getting a lot more labour pricing updates from builder friends, we are looking at massive price increases. Will the market support higher prices for land, labour, and commodities? I don’t know, but I assume yes. Every time you launch a project you get a new understanding of how much better it is to invest in single homes vs multi family and how risky the city makes building. Any tactic to take some risk (and costly time) out of the process is a huge incentive.
So there we have it, five predictions, and I am five for five. This is a very rare outcome. For 2022 perhaps I need to make some bolder calls. I am thinking of what topics to even make predictions on. Market direction, yes, political stuff is not clear, input prices for sure, and maybe something a little crazier. Stay tuned.
THE TEXT OF THE 2021 PREDICTIONS PASTED BELOW:
1.inflation of building inputs and easy money loans bump up the Calgary inner city house market transaction price - We’ve all complained long and loud about a piece of OSB increasing in price from $13 to $34 in a couple months. The government may pretend that its basket of goods only increased annually by one point something percent, but that does not really tell a true story of cost pressure on housing, the single greatest component of a household budget. I have no idea about the broader Calgary market, or what the MLS stats show, my gut instinct here is a significant price increase in new infill prices. Will this be a byproduct of a debased currency, I can’t say. Maybe it will have a placebo effect and make everyone who bought a house in 2020 feel better about their decision. I’ve come to see no rational limit to what the government might due to prop up the market if it feels threatened in an election year.
the municipal election is a dud (and sub prediction - a fair bit of change of membership this time) this may be my easiest prediction yet. Somehow, we will have another election where you don’t really know the policy position of the newly elected council on any issue, or if the group as a leadership entity reflects your personal values. As an example, City leadership regularly asserts that if you dont agree with it, you simply dont know enough, or worse, that you are spreading disinformation. On issues like certain highly paid admin staff taking three pensions, the public is wrong to question this, because, there really is only ‘one’ pension. How does the communication staff not gag on its own tongue when speaking like this I cannot say. I’d assert 2020 was a bizarre year on many levels, but the home-grown virtue signalling among our political elites (conspicuous communication of woke-isms while the virtue signal utterer evades paying any personal price, eg. this institution I have overseen for the past eight years is irredeemably ‘ist’ or ‘phobic’, lets flagellate ourselves (but I wont be resigning in shame, instead I will cash that publicly paid cheque while sitting on the beach). I’d prefer a new group of accomplished individuals join council, and the incumbents find other work. Culture change definitely needed.
the planning department lacks courage on the new developed areas guidebook and when drafting local area plans for the inner city - I’d like to be wrong here, but I don’t see a lot of business friendly streamlining of how to go about rebuilding the city from the inside out. Instead, much of the best areas to redevelop, the choicest locations and largest lots will remain off limits to any sort of reconstruction other than replacing smaller older expensive homes with newer extremely expensive larger homes. Other issues like lack of infrastructure re-investment and inability to capture the tax uplift from development remain unchanged. While this all plays out in a multi year process, I can continue to operate with plenty of opportunity, so don’t feel particularly impacted. I do view the high cost of the inner city does drive out investment to the periphery, which I find undesirable. By end 2021, I may have some real insight into how this plays out.
The new inner city builder association mobilizes itself against delays, fees, red tape and anti-business policies of ‘big’ municipal government, and is highly effective. This is a fantastic development, while in its infancy, a united voice to advocate and defend the interest of the home builders (you know, those guys that hire everyone and take tremendous personal risk to build houses) is needed. I’ve met some really capable business owners in this industry, their culture is fast moving, decisive, innovating and creative, risk taking and impatient. This clashes with a bureaucracy that prioritizes its own internal struggle for increased wages and benefits while operating in a slow and cumbersome manner, and lacks a mission of service for the builders that pay dearly in time losses, fees and taxation. I am a member and hope to contribute in some small way. I fully support making it easier for builders to do what they do best, create house, and as a byproduct spinoff so much in wages and benefits back to Calgary.
My shift to building detached homes continues - this trend is ongoing, but I still keep one foot in the semi detached business with the 2021 Parkdale build. I have had some interesting options in the purpose built rental market as well, and will pursue that too. It looks like I will be all over the place building in 2021!
Another notable sale
One cannot help but remark on sales that push the limits of what the math says is sensible. We all share the same calculator but our finger that does the inputting of the theoretical model, obviously diverging a little. Are we at that frothy part of the cycle where reality detachment has set in among the usual culprits (the builders). Never will you meet a more optimistic group than the calgary infill builders. Or maybe nuttier.
