Why three-bedroom condos will remain a planning utopia?
Understanding urban economics shouldn't require navigating a complex maze of Greek letters and equations. Instead, maps depicting socioeconomic behaviour, particularly housing outcomes, are far more effective tools for grasping the fundamentals of urban economics.
Continuing the discussion on the location and size of dwellings, the media often questions why three-bedroom apartments are so rare. The reason is that at the price point of a three-bedroom apartment, a household is typically better off acquiring a low-rise dwelling with the same number of bedrooms, which also offers additional living space above and below ground. These dwellings often come with recreational spaces such as backyards or front yards.
Even when the purchase price is comparable between a low-rise three-bedroom dwelling and an apartment of the same size, the condominium fees for large units can be a significant deterrent. At just $1.00 per square foot, a large three-bedroom apartment of 1,200 square feet would incur an additional $1,200 condominium fee. This amount is on top of the mortgage payment for young families, reducing the demand for large condominiums among this demographic.
The fundamental principle governing the size and location of dwellings is the trade-off between proximity and space, a concept I have previously discussed using Chicago as an example. Now, let us turn our attention to Toronto. The map below illustrates the spatial concentration of single-bedroom dwellings in Toronto, which are predominantly located in and around downtown. Land values decline as one moves away from the urban core, and the concentration of single-bedroom dwellings decreases accordingly. Very similar to what we saw for Chicago.
Contrast this with the following map, which shows the spatial concentration of three-bedroom dwellings. This map appears to be an inverse of the previous one, with the concentration of three-bedroom dwellings being lowest in downtown Toronto and much higher outside the urban core. Again, it is worth reiterating that the underlying phenomenon is the trade-off between space and proximity. Those who desire more space gravitate towards suburban locations where land is cheaper, making three-bedroom dwellings more affordable than downtown Toronto.
For good measure, we have also plotted the location of two-bedroom dwellings on the map below. So what's the lesson? Home builders economize on land by constructing smaller units in places where land is more expensive. Since land is most expensive in the urban core, high-rise towers comprising smaller dwellings are concentrated there, as the first map above explicitly illustrates.
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Additionally, if demand persists over time, land becomes even more expensive. As a result, subsequent construction on increasingly valuable land leads to even smaller dwellings. Hence, the condominiums and apartments built in downtown Toronto over the past 20 years are smaller than those constructed earlier. If land values continue to rise, we will likely see a further decline in the size of new condominiums and apartments.
Consumer tastes and preferences have evolved despite the increasing cost of suburban land. Low-rise homes now serve as more than just places to sleep, unlike the post-war bungalows of Toronto. Basements double as recreation areas with TV lounges, pool tables, and even mini-movie theatres, although they often remain empty. There are more bathrooms included per low-rise dwelling now than before.
The COVID-19 pandemic further underscored the need for larger homes, where children were homeschooled, knowledge economy employees worked from home offices, and ample storage space became crucial for stockpiling supplies.
In summary, taste preferences matter. Those who desire proximity to work or leisure gravitate towards smaller dwellings in or near the urban core. Those who prefer more living space, where home-based activities are central, will move to suburban areas where space is cheaper and more abundant.
If these economic realities persist, three-bedroom apartments or condominiums will remain a niche market segment.
Planning Data Analyst
6moDr. Haider, as always, your insights on the factors influencing the urban landscapes of Montreal, Toronto, and Vancouver are enlightening. The size and proximity to workplaces are indeed leaving significant imprints on these cities’ maps. We are witnessing a waning echo of the downtown growth boom. The competition for prime locations is leading to smaller units with fewer bedrooms, and potentially fewer residents. The lofts of yesteryears are feeling the pinch of a triple threat - high mortgage rates, maintenance costs, and city taxes. This is indeed leaving a noticeable mark on the map. However, this trend aligns well with Ontario’s growth targets, specifically the People/Jobs Per Unit targets outlined in their Growth Plans. While smaller units may be acceptable, the question arises - who will qualify for downtown living, and how many, apart from the vacancies? To echo your sentiment, while a picture may be worth a thousand words, maps indeed speak volumes - they are worth a million words! As always, your article is insightful and thought-provoking. Thank you for sharing your knowledge.