To the casual observer, me, it seems the land market is a bit nuts. Certainly there is a sentiment of scarcity and urgency to buy land right now, as we crest the darkest, coldest snap of the mid-winter market. Looking at the prices of the deals, and doing a quick mathematical exercise, the forecast selling prices of these homes needs to be alarmingly high to make sense. Yet we could face even more rising rates which will harm buyer financing. Despite this, the builders are barging headlong into the murky future, in confidence. I don’t share the confidence, typically overt builder optimism is a topping indicator. Also, land deals aren’t stocks and indicators from that huge, liquid market isn’t the same as developers buying up all the land. More than ever, deep pockets are needed to build With the high land prices and still high construction costs, I don’t see how a builder can finance these spec projects
Calgary remains a reasonably priced market but only relative to everywhere else
Browsing the mls is showing how outrageous prices for housing is in canada relative to calgary. Calgary is a city that pays high wages and offers most of the amenities people appreciate, and a level of competitiveness that keeps pricing down. In this sense you can enjoy a lower cost of living in calgary than many other cities. Canmore is the place where price craziness is a real problem. Clearly their local government has failed to manage the housing situation and likely contributes to housing shortages. I know we’ve built and sold new luxury spec houses for a lot less money than a canmore renovated trailer. Is a serviced lot in Canmore really worth $700k?
Rental 4 unit - almost done or not able to be done
The four unit purpose built rental building is coming along nicely. At issue is the unhappy situation regarding the climate, and how hard it is going to be to get to completion. Given the schedule and start time, the garage could not be poured in the fall. There are many reasons for this, all difficult to overcome or cost prohibitive. With the interior of the building advancing to completion, it is now inevitable the units will reach occupancy before the garage is even started. Grading, concrete work, and other outside stuff is also impossible to tackle. Given the current blizzard and grotesque forecast, I can’t see finishing the project before May, or about 3 months. I guess another hard construction lesson about cold climate building is being learned again the hard way.
I’m either not good enough or not brave enough to build like this
I was browsing my media feed when an interesting rendering popped up of a tiered, attached garage fourplex. At first glance, it looks pretty attractive. Lots of balconies, rooftop deck outdoor living, appealing spaces, and sizeable units. Having three level townhomes to create big enough units that they function as semi detached alternatives presents a strong business case. Upon closer examination, this type of build is highly detailed, with many cladding styles, integrated screens, flat roofs, and complex concrete ground work. I’d not be comfortable building this at all, in fact, I’d run from this style of construction. Two scenarios are troublesome, first is that mid June cloudburst when massive rain falls in short period. These roofs may serve to collect water that eventually will overcome downspouts and cascade uncontrolled down the wall in a way that is highly unpredictable. The second is the winter condition when it snows, freezes, thaws, and drips everywhere, shaded north facing scuppers clog, water backs up, and lays siege to the roof membrane, slowly seeking out any weak spot. This building type requires impeccable and expensive detailing to function properly. Sure you can find those experts, but the cost of these materials and labour able to execute the envelope on this build is high. I’d prefer to be able to relax a little, under an umbrella roof that extend beyond the wall and provide top of wall protection with easy to service 3/12 pitches and minimal valleys. That means no roof deck bbq spaces, second floor balcony cantilever, flat roofs, hillside stepped footings and non vented or inaccessible roof cavities. I’m not a good enough or brave enough builder to face the high likelihood of failure.
Not surprisingly the housing ‘go zone’ called ‘hgo’ is taking off.
Some time ago the council passed into being the new housing ‘go zone’. I posted something on it and gave some favourable reviews. By adding this regulation to the rule book, it actually functions to enable, rather than disable development. In its past iterations, the zoning bylaw served mainly as a tool of segregation and use restriction, and it was unduly zealous and successful in creating the low density inner city areas that face intense market demand for new housing today. The go zone really targets busier streets, which we have many of, but often the land was the wrong shape to do much with. Even parceling two lots together would not do much for enabling the type of building that will work best. The hgo changes this essentially by creating a two building model with a corridor or communal landscaped area in between, then a lane accessed garage. It also makes stacked type of models work with major flexibility and doesn’t require so much parking the project is scuttled before it hits the planners desk.
What is impressive is the way the design teams have hit the ground running with dp and land use applications reaching the planning commission and we will see these getting built in quite a few spots. Applications I have seen to build include areas such as glenmore park, shaganappi, capital hill, and beyond. With higher migration to calgary right now these easy governance tools may be just what is needed to welcome population growth vs other jurisdictions that are quagmired in their embarrassing nimbyism. Another fringe effect could be lowering land costs for those, such as myself, to assist in deal finding. When you basically enhance the development potential of massive tracts of land, perhaps a bit of premium due to scarcity is lost? Permitting these will lower the risk to the owner, adding a bit of certainty that the project, after huge investment in land and design, won’t get successfully appealed. These are some business friendly tactics that the city can do without spending any of its own money. Imagine that, cutting red tape by adding a page to the bylaw. These changes are indicative of a society that won’t be so beholden to narrow interests that it can’t build anything. This is a healthy sign that the development game is evolving as a meritocracy open to any operator rather than of money politics like in —- Vancouver, where the rules are there to keep the big fish fed.
Some floor prep to end the work week
The crew is back and equipped with a sanding edger and shop vac. This quickly takes the edge off the high spots where the floor sheets meet. The flooring to be used is a laminate. Can’t recall ever using laminate on a project. The box claims it is water resistant and won’t swell. I’m not sure of this claim but I want to test it out.
Working lots, posting less
Last Push to get the townhomes approved to drywall stage. Amazed how long it took, how hard we had to work to get it to the end, how much cash to burn to live up to my specs. Also satisfying and exciting to see this one progress.
No to the deal
Seeing some horrific deals out there. Thanks but no thanks
“OMG just some shiplap and it will be a new building, nobody will see the 50 years of neglect!”
12-2 Council votes to support infill development in North Glenmore Park
And the saga concludes with a 12-2 vote in favour of a RC2 land use change in North Glenmore Park to allow semi detached homes to be built, formerly only single homes could be built on these two lots. This council is starting to show a significant majority in supporting infill development, in accordance with broad city policy to reduce the rate of expansion of the suburbs. Councillor Penner is the representative of this area, and mentioned she had heard the complaints and wished to work on traffic solutions. Because there were two lots here, on the second vote, the tally was slightly different. That means one Councillor changed his vote on the second lot, the two were identical??? None of the most vitriolic letter writers arrived to City Hall to speak against the land use change, and it sailed through quickly. The owner of these lots can safely proceed to design development.
Councillor Chu votes against most if not any infill project. Where does he get this mandate from?
Westbrook Local Area Plan - first reading passes (almost unanimously)
Given the tenor of our recent observation of the nature of infill growth public feedback, the first reading passage of the Westbrook Local Area Plan is a significant happy moment, for yours truly. I sat on this thing for three years as an industry appointee to the steering committee, and have my own perspective given the effort and serious time invested. What do these local area plan ‘things’ do? They will help avoid the divisive, nasty, 50 ft wars we see erupt in our inner city communities related to growth and change of land use, such as the one in North Glenmore Park, and the replacement of the dated individual community plan system in place now. While I felt the overall Westbrook iteration had a few items to improve over time, and drafted a letter discussing this, I am pleased the final version is in the process of passing. The tremendous objections to the plan were rooted in the desire of each community to be seen as ‘individual’ and ‘unique’. What this meant in practice is many in the Rc1 areas mainly want permanent protection from any housing construction (other than mansion replacement of like (smaller/older) for like (newer/larger) single homes). As someone somewhat involved in ‘construction’, I heartily objected to this sentiment, and reject the notion that some areas deserve a continuous regulatory privilege against row housing and semi detached housing. Council earlier made what could have been a mistake introducing the potential for special Rc1 policy areas. If every community seeks this designation, it sort of rules out the ‘specialness’ of the designation, it is what we have today! The planning department, thus far seems to be showing some backbone in resisting the application of this Rc1 preservation in favour of the greater interest of offering inclusive communities (not wealthy enclaves), and more built form options (more doors per lot). Some on Council were extremely complimentary of the staff efforts, I agree. The staff leading the process were basically being targeted as incompetent by many in the public. I’d say, likewise, after hearing many of the usual tropes dragged out and displayed at the hearing. Another step, but this time, a big one, rather than a baby step toward modernizing infill policy in Calgary!
scale map of the Westbrook Local Area plan.
'appalling', infill redevelopment public feedback.
I suggested a brief peekaboo at the public hearing register of public submission in the previous post. This is for the land use change application for two lots, from Rc1 (single house only) to Rc2 (semi detached house allowed) in North Glenmore Park, a typical sw Calgary infill community. Please ensure your nose is plugged and anti—gag reflex engaged before clicking that mouse. For more background, see the Calgary Planning Commission comments made in advance of the council vote. The snippet of the opposition letter highlighted below declares the unwinding of the exclusionary Rc1 zone to allow two homes instead of one to be ‘appalling.’ Perhaps the personal views of this person are really what is appalling? If willing to submit to the permanent council record this ghastly feedback, one must wonder, how do they actually feel in private? What we can do is further deconstruct the ghoulishness of their case, point by foul point, to gain some insight into common public feedback typology.
‘we chose the location of our home intentionally’ - are you implying most people choose their home by accident? What profound wisdom these people have demonstrated by choosing their home. What do they really mean by this? Their classicism and narcissism led them to choose an exclusively Rc1 zone, because intolerance and contempt for other people, cars, houses and so on is the defining characteristic of the geography of where they wish to live, and who they can tolerate living among, given the superiority of their personhood.
‘our investment, our peace, safety of our children’ - here what they mean is their narcissism is so rampant and perspective too blinded by selfishness to negotiate, compromise, or the consider the needs of any household other then ‘ours’’. Any land use change is attack on their property value and even safety of their children. This point is demonstrable nonsense, a new semi detached home a couple blocks away, containing a family more than likely identical to their own (just modestly poorer) is somehow a war on their values and children is a degree of unfathomable gibberish.
‘rezoning is not for the betterment of this part of the community’ - here is the virtue signal, yes, understanding there is some need for new housing and land use evolution in a community 70 years old, just not here, not by me, not ‘this part’. One must understand, this part is just for us, we cannot share with deplorables (the standard to elevate one’s self above that of a mere deplorable seems to be just ability to afford a pricey detached house).
2023 is off to a great start given the appalling feedback we are seeing from inner city residents regarding infill growth. Check back later and we can review the public hearing record to gain insight on what happened, the Council vote is on Tuesday January 16th.
Maude Flanders would be proud of this member of the public, and issue her shrill cry of ‘think of the children’
A more activist and vocal calgary planning commission
A few recent appointees to the Calgary planning commission have made a practice of being more vocal with written feedback to Council pre-vote, on land use change they deem to be of minor significance and represent sensible infill growth practice. I appreciate the efforts of these two commissioners. Let us dig in a bit regarding what they actually said (some of this could have been written by me, but I can assure you, it was not). For those unfamiliar, this is related to a land use change on two adjacent 50 foot wide Rc1 lots to Rc2, which loosens the constricted type of houses that can be built from one detached mansion, to two semi detached homes, site coverage and height is the same in both zones.
On ‘spot zoning’, Com. T rejects the very notion of this concept. Where have we heard this before? He suggests the opposition letter was written by (my categories), a ‘spot zoning zealot’, who refuses any city authority on evolving land use, exhibiting signs of ‘classist narcissism’, which manifests in a refusal to consider housing diversity of any kind, except the most expensive and exclusive form, the detached mansion.
On ‘lack of accountability’ for what is submitted to the public hearing, Com. H deconstructs the argument that building two homes on a 50 foot lot instead of one home would cause actual damage or harm to the community. He suggest the opposition is just ‘thread pulling’ in attempting to find any possible weakness in the application because the land use change will mainly result in ‘allowing each property to have two front doors and homes.’ Com. H is publicizing what is rarely written about in these infill debates, he’s representing the needs of future families who aspire to live in this nice community, but cannot due to the exclusionary and preferential zoning, a relic of post war Calgary.
The comments from the Commissioners is quite a forthright and direct rebuttal to the community association letter opposing the land use change. What I found interesting is the practical application of my categorization on typical feedback types received from the public on this file. Once you’ve reviewed a few of these public letters, you cannot unsee the pattern of intolerance, classism, and selfishness displayed in our inner city communities regarding growth and change. For further enlightenment, see the full public hearing section on letters from the public, in that dark place we see foul stink bombs being lobbed onto the public record, for eternity.
2023 prediction edition
For whatever reason, have lost interest in making 2023 predictions. It isn’t because of my past poor success rate on these predictions, mostly just not sure what sort of calls I can even make given the uncertainty out there. While we have long suffered in a Calgary infill market with little appreciation, and some stinging negative years, prices and sales were really good over the recent past. A flat year in terms of sales volume and price won’t do us harm. Contrast this with detached homes in the Frazer valley, apparently now down $600k from the March 2022 peak. That is much nastier and likely to cause all sorts of collateral damage compared to a more fundamentally sound Calgary, the likely target for new arrivals (interprovincial migration) which was all time record setting in Q3 2022. Here’s a few predictions for the inner city in 2023;
less volatility - land, labour, interest rates, commodities, bankster rug pulling, in all of this I think we will find less volatility than over the past two years. This doesnt mean low volatility, just lesser craziness than before.
infill home values flat by year end - I am going here with a prediction that prices of Calgary infill housing will go up and down a bit over the year, and end up fairly close to even. Too much rate hike headwind, which hasn't really percolated throughout the economy yet to foresee price gains, yet lots of demand and lower supply than average to set a price floor. plenty of price increases on inputs are pre-destined, unfortunately, making it expensive to build, also an apparent lack of good land listings on the MLS.
a year of finishing - fingers crossed this is correct. I need to finish seven houses, and start two, plus start another large rental project, and
effectiveness of the inner city builders association - many upcoming complex and difficult negotiations need to take place, the association will draw from its strength of membership to tackle these.
thoughts on role of public in infill development matters
2022 was a year of significant public engagement in matters of infill development here in Calgary, regarding big picture policy, at a community level, new bylaw review and public hearing, and individual project. What has come evident is pattern among the discourse you often see from the public. At a theoretical level, we want to see meaningful public engagement improve the quality of a policy, or the design of a building. I think we tend to not see that outcome, as many issues are all or nothing, yes/no votes or passage/failure of new bylaws. It is really hard for a bylaw to both approve a new category of project (like row housing in an R1 area) yet satisfy public feedback that opposes the existence of row housing. Equally, an emotionally fraught debate doesn’t lend itself to thoughtful positions when somebody’s ‘property value’ or ‘children’ are at stake (edit - this is not hyperbole, property value and children are now used in most land use debates, as in both are at risk of serious adverse impact).
Here are some of the key points of observation regarding poor public discourse noted over the past period.
The unaccountable commenter - blinded by self interest and emotional, an individual makes shockingly intolerant or selfish statements (on the public record), yet somehow evade feedback on the merit of what was said at the podium. The observed level of discourse is lower than what would be expected from an educated populace. The commenter often has failed to read and comprehend what is at stake. The fallback ‘I’m not a professional planner’ so here is my knee-jerk nonsense that I can utter without accountability is heard. After a few of these types hit the podium, the cringe level is palpable, hard to watch without muttering a cynical play by play.
Future family denier- the needs of those who do not yet live among a given community are ignored. the developer is the only voice for the future household who desire to live in the community but cannot, likely because of a rigid and exclusionary regulatory system. anything the developer says is immediately discounted due to it being ‘self serving’, but any commenter decrying ‘property values’ is unaware their position is demonstrably ‘self serving’ . The planning staff perhaps tackle this by supporting ‘housing choice’, through local area planning processes and drafting bylaws (they hope dont get neutered by council). Staff inevitably report to an unknown executive back at city hall, and the Overton window is fairly small (but growing, yes). One item staff refrain to utter in public would be repopulation of diminished communities with specific growth targets. This is a peeve of mine with the staff. Perhaps there is a way to tackle this using the inner city builders’ society that has more political muscle?
Hard liner - virulently anti development community types make negotiation impossible, the self appointed woke type that opposes sprawl, cries about climate change, yet also opposes any non sprawl project, for all the familiar tropes, like ‘character’. This hard liner crew is sprinkled among every community. Once they gather petition signatures, it is hard to make a deal about how to proceed. ‘Consultation’ to this group means wielding a veto, the councillor is there to take orders on how to vote, not to evaluate a project merit.
low cost crutch crew - this group opposes new housing unless it meets a low cost barrier. However, they secretly know that no low cost housing is possible because the land, labour and commodity inputs are so costly now, nobody could build low cost housing, even if they do it for free. In any debate they demand to know what the future rents would be for the unit in the project, and if too high (as in higher than their personal payment on their paid off 50’s bungalow), they get on their horse and rodeo about how it should be denied. The concept of ‘filtering’, where the new supply attracts tenants, and frees up older, more depreciated and lower cost base units is not acknowledged by this crew. Perhaps the only market technique to ‘add’ affordable units is to…make the existing stock vacant by offering better/more options to the market? Calgary wins on the livability and cost of living/housing stage against the bigger and more locked up tier 1 cities, why? Because we allow supply so much easier.
the mutiny community - this group launches a parallel planning process with zero legitimacy. During the Westbrook local area plan process, one of the communities decided it ‘didn’t like’ the ‘direction’. These mutineers launched an insular plan, free of the shackles of city staff, or any stakeholder involvement that would offer expertise. Predictably, the outcome of the mutiny was to ring-fence the community with economically unviable and wanted towers to shelter its valued core area from any change. This straw man plan was circulated, eventually to me. The plan was awful, and it went nowhere, other than to delineate on paper the community position. It made them look unschooled, unrealistic, and harmed the legitimacy of the broad, multi year, multi stakeholder staff led process. Shame on them.
hands off my sewage team - this scattershot approach to legitimize a veneer of technocratic opposition is heard often. ‘Sewage’ and ‘ground water’ is the rallying cry, used interchangeably, yuck. This team utters definitive statements on sewer capacity, or someone, somewhere had an issue with ground water. The city must take this as gospel, and of course, project should be denied. Nowhere is a civil engineer found on the sewage team, nor would they invest in any analysis to back a claim. The flowing sewer capacity is theirs, not to be shared with new residents. This team that takes pride of ownership in its sewage flows, also would be the first to oppose contributing to cap ex when the time comes to replace the aged mains in street. The builders should pay for the upgrades entirely.
Thread pullers - this approach is deeply cynical because it involves exploiting any weak spot in a project, all have some deficiency. Then attempt to exaggerate whatever the issue is into something so insurmountable the project should be canceled. My response to this is we need not cancel a two million dollar injection into our economy because the thread puller is pulling so hard at one loose thread in attempt to unravel the scarf. The builders identify a hole in the dike or a leak in the boat, and plug it. The thread puller is a critic without a portfolio of his own work, craven, expert enough only to tear down what he could never achieve.
classist narcissists - classism is all too common in the inner city, this type thrives on social media and the nextdoor app is its heartland. Thinly veiled classicism is the last bastion of prejudice that people would pridefully post for eternal scorn. It manifests in the, ‘how dare you build something in my community that isnt a single detached home’ thread. Ideally this is read out in a mock Greta Thunberg voice. It is evidence based, as in, my evidence based objection to this project is ‘I dont like it, thus you must reject it’ sentiment. Haughty indignation helps this team, ‘how dare you build a basement suite, density is not welcome here’, is juxtoposed with how friendly and cohesive their beloved community is (that is being ruined by any density). Predictably, when the sign goes up of some boutique, luxury mansion builder intent on mansion building, the narcissist swoons, counting on higher land value for a future sale of their own home (to a developer of course).
spot zoning zealots - spot zoning is the rallying cry, what lies beneath is assumption that planning department exist to protect entrenched interests. Attending the public hearing and decrying ‘spot’ zoning, is actually insulting the role of the department, and council in land use evolution (i.e planning). Spot zoning advocates believe in the sacredness of the R1 zone, as if 1962 was the definitive peak in the art of urban planning. They demand their R1 enclave remain intact and like to use militarized language, fighting battles, penetrating of lines, a creeping attack, evil enemies (like me), etc. The fear is precedent and changing context will lead to further opportunistic spot zoning applications, a contagion even. This is of course, inevitable, over the coming decades these communities, endowed with huge lots and tiny homes will see redevelopment pressure. Where else is the building to take place?
One open question is how much weight current residency should carry in these infill development and policy debates. Note, these local groups and individual property owners choose to ignore other stakeholders (the market, city management plans, new ideas, renters, new households/immigration, industry) when deliberating. Some decisions (like a Local Area plan) adopt policy which extend beyond our lifetimes potentially, and surely beyond the time any one person would own a house in a redeveloping area. I’ve complained many times regarding ‘planning from beyond the grave’ and ‘snowbird planning’. This is how older, long term resident seem to hog the mic in processes, but aren’t impacted by societal outcomes from their winter home in Arizona. Or restricted covenant are placed on title which overpowers modern day need to be more nimble, while the large legal department at City Hall washes its hands of its central role to remove these. I think the staff did a good job in the Westbrook process to prevent a group of frozen in amber curmudgeons monkey-wrench the process and represented their work honourably at committee. The staff is too young and over qualified to cave on core deontological planning principles, provided it feels higher up admin has its back.
In all the debate and public feedback heard, only one comment has really struck home with me. It is how the more politically connected, high wealth R1 communities have kept out development, while others have become chronic ‘go’ zones. Only the city can tackle this inequity, it must not allow certain communities a ‘pass’ on sharing in growth. My plan is to build a rowhouse in elbow park before I quit this business!
2022 year in review
Overlooking the obvious, manipulation and gouging in lumber, interest rate shock, lack of labour, crazy inflation and scarcity of every meaningful input, we still did what we could to make the best of it. Low points were the gaming of the system regarding lumber products, the hoarding and allocations, and the endless delivery fiascos. My reliable crews proved to be good, as they always are. the work is the same regardless of the marketplace machinations. We saw other investors or builders enter into land deals I thought to be nuts, but outcomes are not yet written for these. Sure you can think (without comparable even) that you will build and market a semi detached in hillhurst for $1.6 million for each side, but in the real world a detached build, also in hillhurst, just sold for considerably less, and was nicely built by one of my Albanian friends, better lot too. Real world bites everyone.
My bridgeland project is coming along despite some hideous obstacles, both overcome and yet to be defeated. My main mission before escaping the deepfreeze was to get the thing to lock up. Achieving that, plus starting plumbing and Hvac, stairs in, groundwork inspected, slabs poured, basement framed, elevated patios poured, water/sewer connected in the street was a big win for ‘22. Not bad in three months for a project we were running mainly part time, without full time crews available, with a basement poured September 16th. Now I need to look at the cost of this beast vs a sensible budget and put a plan together for the finishing details.
The Inglewood house has just been an unmentionable series of seemingly impossible to overcome delay. Delay after delay and the time horizon to completion is stretching to infinity. Just frustrating is how to describe it. Inability to impose any discipline on schedule has been maddening. The delay has really dulled the fun on this one and made it more of a chore than hobby, particularly the last 10%.
The other Inglewood project has really taken a leap forward into drywall and siding being pretty close to complete. That one is a simpler battle, with lesser brain damage, more like tiny agonizing pin pricks recurring often but easier to overcome too. I think the biggest lost battle was just the pace was too slow at the beginning to get the garage done. garage completion to a larger extent than one may think, drives semi detached completion. lacking the garage, you’ve got to wait until may to realistically reboot the project. That is five months from today, basically doubling the duration of site work.
Another interesting adventure was putting back into safe, clean, and functional habitation a house abandoned for a decade, or two. I didn’t want to do it, didn’t have time to do it, yet it still got done and by the end I was in there as if it was my own build. Throughout it all enmax just utterly egregiously robbed us on fees for disabled services, while preventing us from hooking back up to those same services, thanks enmax. Also hilarious is how much money we lose renting these houses as we subsidize half of the true cost out of pocket. I once calculated the inventory carrying cost of capital, and we were at $12k monthly at todays GIC rate, double at builders cost of capital. Reducing that cash burn has to become a priority. The blinds guy feels happy to have someone shovel the snow, and I do too, but the pace of these projects leading to construction is just way too slow.
I launched my tiny home community by buying some land, which soon morphed into something much more viable, made conceptual progress, met with the planners, who seemingly offered thumbs up, and moved deep into design. Now we must mobilize and get this one into production in spring or we will face all the same hiccups as the Inglewood projects. At the same time the Spruce Cliff singles subdivision and permitting sailed through leaving the project truly idle and ready to go. Time to build or sell that thing and move on.
Looking over this list it reads as a massive diatribe on unfinished business and stretched me too thin at times. If 2022 was the year of getting started, 2023 needs to be the year of finishing work.
2022 prediction review edition
When starting the post, the spell checker changed ‘prediction’ in the title, to ‘perdition’. What a fine omen for those of us building full time in ‘22 and beyond, an eternal sentence of punishment and damnation for the unpenitent. Well, consider me unrepentant at a minimum, having already schemed up some good stuff for ‘23. But we can get to that later, here is an overview of my predictions made last January.
My first comment was volatility and craziness, that was bang on. Volatility now needs to be baked into any venture, problem being, any venture is now subject to possible extreme volatility. It is tough to make a business run with likelihood of extreme downside volatility. As far as craziness, q1 was barreling full speed into a speculative mania, which smashed its face into a bankster rug pull that carries us into ‘23.
Prediction 1 - City attempts at modernization of planning policy would make little headway. I think the actual outcome is false here. The city really reinvigorated itself with the passing of the HGO zone, plus rcg changes to make a responsive and flexible, grade oriented zone that works mid block, by design. The planning staff did a good job of taking a middle road on the perspectives in the Westbrook LAP, and brought it to committee to get crapped on. The staff showed some backbone getting asked to do things (neutralize change to placate the vocal crowd) by some of Council that should know better, but don’t. Without too much detail, I am more impressed by the core of dedicated planners than I am the Council in 2022. Look how far we’ve all come since that absurd secondary suite battle that dragged on for decades. Incremental change adds up in the municipality that become bylaw, and small victories are way more possible in Calgary today than most anywhere else (looking at you Van).
Prediction 2 - infill housing market performance - I think I was mostly correct here but on the low side, just needed to be annualized as the q1 vs q4 performance is far apart. I posted a few infill land sales that appeared to me at least to be a train wreck of poorly made assumptions reliant on the trend to continue to track in the correct direction (i.e up and to the right). Sure enough those assumptions that I assumed had to be to be made, were made, and now the chickens I thought likely to return to roost are stampeding to the barn.
Prediction 3 - labour is the bottlekneck - I think definitely true here. Some issues with lumber supply, for sure, but the crews willing to build the houses were scarce, busy and expensive. There likely would have been a lot more houses built a lot quicker if we had more crew members. That millennials prefer to stay home and trade crypto for a living was a common theme of the year, maybe a fringe benefit is crypto was exposed as a fraud by legendary fraudster SBF. There are problems in our society where the laptop class is coddled too much with guaranteed salary and benefits, so of course everyone wants to join that zoom meeting from their pajamas, and somehow earn wages from it. I think the people in charge will have had their fill of this and push back, or just outsource any jobs that can be done from anywhere, to anywhere, mainly the Philippines. Outsourcing a drywall guy? I dont think likely.
Prediction 4 - focus on rental construction - this was an easy win for me as it wasn’t much of a prediction. I have and continue to build rental townhouse type units, and will carry on doing so until the time comes when I can’t fund or finance these ventures. These are hard to build and finance, but nonetheless, for those who can do it, makes a lot of sense when weighing the pros and cons of the spec market. Better to overspend on lumber and labour and keep the building for multiple decades than to sell immediately, churn through capital, overhead, time and energy, while not gaining any premium on the risk and liability in the business. An eventual rolling ladder of refinance income is part of the end game here, a way of keeping the government fingers out of the kitty while keeping the kitty growing.
So that is all for 2022 prediction review, I did ok this year but some of my predictions were too likely, more like prophesies to expect crazy lumber highs and lows. Will try and be more ambitious for 2023.
City Councillors crapping on 3 years of work by the planning staff is worthy of a Mexican beach sign that we found highly amusing.
Race to the end
With chilly temperature forecast for next week we are pushing what we can at each project this week. Windows and shingles at the townhouse, siding and electrical service at the semi detached. Overall, December has treated us well enough and progress will now slow as we enter the holiday season. With all the construction battles we’ve waged this year, we have come out ahead, mostly. Actually completing work has been next to impossible for us, others have done better. I will prepare some year in review summaries and take a look ahead at 2023 over the remainder of December.
Designer euro tiles. Worth it or not ?
On occasion we find ourselves in the boutique tile shops that display the Italian and Spanish tiles in magnificent showcases. Even after negotiating some builder discounts the stuff tends to cost a lot, have lead times exceeding an Italian summer holiday, and risk of running a tile short is held by the misfortunate person who did the takeoff, typically me. Despite these obstacles, the tile install is one of the project highlights. While my aversion to throwing money at a project is well documented, especially for materials invisible to the buyer, the tile is among the most prominent interior features.
Throwing money at problems
‘22 will be remembered as a year where you had to dump buckets of money at construction sites in order to achieve any meaningful forward motion. The revolving shortage problem has meant you must outbid someone else to compete for whatever product is in scarcity. The lack of willing workers has allowed the good guys left standing to name their price and you either agree or don’t get past go.
For a project owner who likes to stay on budget, some difficult decisions must be made. Each time you drastically overspend, a typical knee jerk is to assume you can make it up on the next category. This is now unlikely. The second reaction is to assume each overage, while hard to swallow, can be digested in the context of the overall budget. More likely is some builders will build and sell their house but end up with empty pockets at the end of it.
Each thousand of overage could need ten thousand of work being completed on budget, to allow the builder to dig out from his hole. This suggests overspending is detrimental because it harms the future business viability, a lot of free work will be done to create the funds to backpay the surprises. Experience will guide when it may just be worth it to blow the budget though. Critical paths in the schedule when winter is approaching, a key supplier fails or delays, and necessary outdoor work means hiring a different and more costly crew that can actually deliver comes to mind.
Each blown category creates a bad precedent for next time. Wages and especially material is sticky on the downside. As the total project cost ratchets up you’ve got to be able to pass it on. This is where selling the houses, at whatever the market value is, conflicts with the escalation in most of the categories of what goes in the build. The magic happens when the individual Lego pieces cost less than the completed Lego tower.
Nutty pricing still featured in the calgary market. But for how long?
One must assume the purchasing power of the typical calgary home buyer is measurably damaged now by rising rates. Qualification and the stress test at elevated rates makes for arduous financing. This has to hurt the higher end market much more than the starter home market. But how much and how harmed will the infill market be is hard to say. There is a still a lot of strength in older detached infills coming to market at high prices. Purchase cost of carrying of these tends to be way delinked from cost to rent the same type of house, if a wholistic model is used to compare rents to property tax, upkeep, and interest. The latest cost to consider is the risk free rate of return on down payment money. At the beginning of the year, a 200k nest egg waiting to be dumped into a house purchase would earn 0.25% at the local branch. Now they can get you 5%. Just the risk free opportunity cost on a down payment is $10k per year. That pays for a lot of rent while waiting for a correction. So does $5k in property tax.
