Man who Presided over Biggest Housing Bubble in Western World could be Next BoE Governor – WTF!

Mark Carney Governor of the Bank of Canada

The biggest housing bubble in the western world world Canada.  House prices rising 20% since 2007, with prices 54% above real rent based levels (source Economist)

It is difficult to see how Canada’s stratospheric growth can continue much longer. Canadian banks have been less reckless than their American counterparts but that simply means them taking longer to get to the same point.

McCleans Magasine

Since 2008, Canada’s ratio of debt to after-tax income has exploded. By the third quarter of 2011, Canadians owed an average of $1.53 for every dollar they brought in, up 40 per cent in the past 10 years and just below where the U.S. was before its housing crash. By the end of 2010, the average homeowner had just 34.3 per cent equity in their home, the lowest level in two decades and a 20 per cent drop in just four years…

The biggest elephant of all is how much the boom has been fuelled by cheap and abundant credit thanks to a low interest rate policy pursued by the Bank of Canada, along with government-insured mortgages.

Indeed one of the reasons Canadian economic management looks so good is that home equity withdraws have contributed to as much as 4.5% of GDP growth in some states, higher than the 3% contribution at the height of th Brown Boom years, dangerous as that wealth is not really there as it is based on house prices which are not sustainable.

From searching Alpha

Mark Carney The Governor of the Bank of Canada is now being sounded out as possible government of the Bank of England.  No surprise he is a clone of Mervyn King and like him he takes every opportunity to sound out about private debt whilst doing very little to stem it either in terms of credit regulation or interest rates.

Now House prices have started to fall in Canada.  Given the degree of leveraging in the Canadian economy it could get very messy indeed and very embarrassing if the BoE appoint a new governor just as Canada plunges into debt deflation.

CBC news 5th April

Mark Carney has a dilemma: He views record high household debt the number one domestic risk to the economy, but believes he would hurt the recovery if he raised interest rates to slow borrowing.

But the Bank of Canada governor said in an interview with The Canadian Press that he would be prepared to intervene if things got out of hand.

“In exceptional circumstances, if there are issues that threaten financial stability, such as household debt … the bank could use monetary policy for that purpose,” he said. “That factors into our decision-making without question.”

But the time to act was four years ago now it is too late, the bubble has grown to enormous proportions and it is now too late.

Private sector economists are almost unanimous in the view that housing prices are too high in Canada in relation to fundamentals, such as incomes and the cost of renting. That suggests a correction is coming, in the neighbourhood of 10 to 25 per cent, with some hot markets like Vancouver and Toronto possibly facing an even bigger reckoning.

Carney said he also has spoken to bankers directly about curbing their lending practices.

He made clear hiking rates solely to restrain the housing market would only be considered if debt threatened the country’s financial stability and as a complement to other measures.

Of course other financial regulation measures in other branches of government may be more effective but these have been weak  so the market has climbed to a peak and the plunge has begun in the last 12 months, with the most dramatic drop in the most overheated marked Toronto.

Toronto has more skyscrapers and high-rises under construction than any North American city — almost three times as many as New York — the blind faith of an irrational boom, even as house prices collapse.  In large part driven by equity nomads from the Chinese housing bubble.  A recent study by the Bank of Montreal found that 4 out of 10 borrowers stated they could not repay their loan if interest rates rose slightly.


Even though Toronto is Canada’s largest city, that still doesn’t mean that there is an endless supply of buyers to keep the GTA real estate market on a continuous upward swing until the end of time. Toronto real estate currently costs 7.4 times the average family income which means even families that are stable with regular income will have to contribute well over 50% of their monthly paychecks to maintain a mortgage. This number is unsustainable for the Greater Toronto Area housing market. Torontonians assume that insane bidding wars and high priced housing are sustainable in the long term due to the fact that “everyone wants to live in Toronto.” While, Toronto is a huge destination for many Canadians (and immigrants) looking for work and a new home, do not over estimate the contribution that these people actually play on the Toronto real estate market. It is a FACT, what goes up, must come down, and that includes Toronto real estate prices. It is a myth that high Toronto housing costs can be sustained over the long term due to constant immigration to the city. In recent census estimates, Toronto real estate availability in a given year is greater than the number of immigrants moving to the city by a factor of 10 to 1.

Carney Last Month

“There are issues, particularly in some parts of the condo market, without question, where activity has been particularly strong, has reached back to the levels of the late 1980s. And in some of our major cities, without question, valuations are extremely firm, to put it one way. And so some caution is warranted in that environment.”

Even wimpier than King in 2006, no wonder he admires him.

A Readers Guide to Unwin’s Town Planning in Practice – Part 1 – Town Planning as an Art

Raymon Unwin’s ‘ Town planning in practice; an introduction to the art of designing cities and suburbs‘  of 1909 (first Edition) is undoubtedly the best handbook on town planning ever written.  Neglected for many years it has been republished and popularised by Andreas Duany.  It is worth reading, I would say essential reading, for every town planning student.  Hence this readers guide to try and explain some of the back story and context without which it is difficult to understand any authors work.

Who was Raymond Unwin and Why Is He Important? He lived from 1863-1940.  He was an Engineer who worked in mining towns and villages, forming a partnership with his brother in law Barry Parker in Buxton in 1896 he had a passion for improving the housing conditions of the working classes and promulgated Arts and Crafts architecture, but of forms the Working classes.  Their popularity led them to not only be asked to design individual houses but a whole model village at New Earswick on the edge of York in 1902 and in 1903 they were asked to draw up the masterplan for the first Garden City at Letchworth in 1906.

This first decade of the 20th Century was when planning became an international movement rather than an activity of a few philanthropists and civic dignitaries.  Prussia had had a formal planning system since 1872 but this decade brought its ideas and debate to wider attention.  The evangelicism of Howard and Geddes has turned town planning from a civic function like public health engineering to a global cause.  Unwin travelled extensively in this period, especially in North America and Germany and collected a great deal of plans, drawings and photographs.  Unwins work and ideas were important because they acted as a work of synthesis, what was good and bad about the ideas from various schools, nations and thinkers.  But equally as a work of innovation, ideas and concepts of how to make a beautiful town that worked.  It was Unwin who developed ideas such as ‘Gateway’ ‘Centres’ and Vistas’ central to urban planning thinking to today. Unwin was influenced by but went well beyond the ‘architecture writ large’ school of thinking, as best summed up at the time by the Civic Design school of thinking based at the University of Liverpool.  An amalgam of Baraque, Prussian and City Beautiful concepts.  Unwin was equally influenced by classic English Landscape Designers with their vision of a whole landscape made beautiful, of the revival in traditional pre0industrial and pre-barque town planning ideas by Camillo Sitte, and of Patrick Geddes concept of town planning being not just about places in spaces but dramas in time. It was this holistic and visionary approach which was so influential, not just concerned with the big sweeping lines on a grand city plan but also about design of intimate space, or roofline, of details, of interiors, the whole thing meshing togther to create a beautiful, functioning, working place inhabited by people not simply a robotised workforce.

Town planning in practice is his only full book but it was an early work.  He later published pamphlets, chapters in books and of course masterplans and detailed book length planning studies such as of London.  A full understanding of Unwin requires an understanding of this broad oeuvre.  When it was written car use was insignificant.  He later wrote extensively of how to incorporate parking areas into designs but that played no part in this book.  For the same reason you have to understand that Unwins assumption throughout was that people would walk or take a tram or train to work or shop, for that reason he says very little about ‘transport planning’, but equally that makes his work all the more relevant today as we look at designing for a post peak oil post carbon world where car use will need to fall dramatically.  No longer can this be considered ‘old fashioned’.

Unwin is equally important in terms of those he influenced.  To mention only one his good freind John Nolen who went on to design more town and city plans than anyone who ever lived and who was a key influence on the ‘Florida School’ who revived urban design thinking and were not afraid to proudly use the phrase town planning.

The book has 300 illustrations, more illustrations than text.  It was originally designed as a means of publishing his collection of town plans, drawing and photographs from his travels.  These illustration often show up poorly or not at all in the free online editions of his book so I would strongly recommend the recent publication with its excellent introduction by Andreas Duany.

On Chapter 1 Of Civic Art as the Expression of Civic Life

Unwins book does not start out as many previous works such as Vitruvius do with an outline of how to survey and plot out a site.  No quite consciously it sets out a design philosophy.  That makes in a modern work.

Before attempting to consider in detail the various practical problems of town planning, it will be useful if we can understand something of the reasons which exist for the general lack of beauty in our towns, and further if we try to arrive at some principles to guide us in determining in individual cases what treat-ment is likely to lead to a beautiful result and what to the reverse.

The backdrop of course was the chaotic Victorian City

this rapid and disorderly increase in the size of towns and their populations. Miles and miles of ground, which people not yet elderly can remember as open green fields, are now covered with dense masses of buildings packed together in rows along streets…

To-day it is hardly necessary to urge the desirability of ‘a proper system of town planning. The advantage of the land around a growing town being laid out on a plan prepared with forethought and care to provide for the needs of the growing community seems self-evident ; and yet it is only within the last few years that any general demand for such powers of town planning has been made. The corporations and other governing bodies have looked on helplessly while estate after estate around their towns has been covered with buildings without any provision having been made for open spaces, school sites, or any other public needs. The owner’s main interest, too often his only one, has been to produce the maximum increase of value or of ground rent possible for himself by crowding upon the land as much building as it would hold. The community, through its representative bodies, having watched the value of land forced up to its utmost limit, has been obliged to come in at this stage and purchase at these ruinous values such scraps of the land as may have been left, in order to satisfy in an indifferent manner important  public needs.

Unwin sketches out the influences in the early years of Town Planning of both  Howards ideas and Horsfall’s less well known today ‘The Example of Germany’ (1904) which was highly influential in poularising the successes of German Town Planning.  Then Germany was the great imperial rival and it was of great concern, especially during the Boer War when 25% of conscripts were rejected as unfit and not even capable of being fit after fattening up, then German Cities enjoyed greater public health.  This book led directly to the first town planning act of 1909.  At that time Letchworth was still just a few houses and mud words and Unwin himself used the words ‘ecperiemental’ and not yet appealing widely, this was to change towards and after the first world war as it and Hampsetad Garden Suburb, which at that time Unwin and Parker were designing, got built out.

Unwin acknlowged that the bye laws secured by victorian public health reformers had greatly improved the snaitation and health of cities yet

the remarkable fact remains that there are growing up around all our big towns vast districts, under these very bye-laws, which for dreariness and sheer ugliness it is difficult to match anywhere, and compared with which many of the old un-healthy slums are, from the point of view of picturesqueness and beauty, infinitely more attractive…

We have forgotten that endless rows of brick boxes, looking out upon dreary streets and squalid backyards, are not really homes…and can never become such, however complete may be the  drainage system, however pure the water supply, or however detailed the bye-laws under which they are built. Important as all these provisions for man’s material needs and sanitary existence are, they do not suffice. There is needed the vivifying touch of art which would give completeness and increase their value tenfold.

Think today of our endless rows of brick boxes produced to conform to building regulation, safe, and sanitised but having no life.

This then was the mainspring of the book, to make towns beautiful.  He was influenced by Professor William Letherby an architect and architectural historian, one of the founders of the  Society for the Protection of Ancient Buildings and William Morris., as well as the founder of the  Central School of Arts and Crafts in 1896.    Letherby believed that the barrier between design and production needed to be broken down, “A house should be as efficient as a bicycle” , “Art is the well-doing of what needs doing” he was the spitual father of Johnny Ive.  Similarly Unwin wanted to break down the barriers between art, design and the making of towns.  Towns would become a work of civic art.

It is the lack of beauty, of the amenities of life, more than anything else which obliges us to admit that our work of town building in the past century has not been well done. Not even the poor can live by bread alone ; and substantial as are the material boons which may be derived from such powers for the control of town development as we hope our municipalities will soon possess, the force which is behind this movement is derived far more from the desire for something beyond these boons, from the hope that through them something of beauty may be restored to town life….

The artist is not content with the least that will do ; his desire is for the best, the utmost he can achieve. It is the small margin which makes all the difference between a thing scimped and a thing well done to which attention must be directed. From this margin of well-doing beauty will spring. In desiring powers for town planning our town communities are seeking to be able to express their needs, their life, and their aspirations in the outward form of their towns, seeking, as it were, free- dom to become the artists of their own cities, portraying on a gigantic canvas the expression of their life.

But art for him was not baroque decoration

We are too much in the habit of regarding art as something added from without, some species of expensive trimming put on. Much of the restless, fussy vulgarity we see about us springs from this mistake. …. Civic art is too often understood to consist in filling our streets with marble fountains, dotting our squares with groups of statuary, twining our lamp-posts with wriggling acanthus leaves or dolphins tails, and our buildings with meaningless bunches of fruit and flowers tied up with impossible stone ribbons… the beauty which he regarded as necessary to life is not a quality which can be plastered on the outside. Rather it results when life and the joy of life, working outwards, express themselves in the beauty and perfection of all the forms which are created for the satisfaction of their needs.

And applying this design philosophy

Does the town need a market-place, our rule would teach us to build the best, most convenient, and comely market-place we can design ; not to erect a corrugated-iron shed for the market and spend what would have done this work well in “decorating ” the town park with ornamental railings.

Here was the distaste at Victorian civic aggrandisement from the Arts and Crafts movement which so influenced the early modernist movement.

In talking about the impulse to move to cities Unwin speaks of not just the economic impulse but the opportunity for ‘the common life for the noble end’ quoting Aristotle.  But what is stopping this?

we do not realise what a remarkable and unique feature the ugliness of modern life is. We are apt to forget that this ugliness may be said to belong almost exclusively to the period covered by the industrial development of the last century.

Unwin refers to the many feature of beauty in pre-industrial street and towns that remain.

there seems to have been such an all-pervading instinct or tradition guiding the builders in past times, that most of what they did contained elements of beauty and produced picturesque street pictures….The influence of the tradition we have mentioned was not confined to the buildings themselves, but seems to have extended to the treatment of streets and places as well as to such minor details as steps, entrance gates, walls, and fences, which often enhance the beauty of the picture…

two prominent elements in the tradition which influenced builders in old times were that the work should be well done, and that it should be comely to look upon when finished. While obviously the cost was carefully considered, it was not deemed legitimate to sacrifice proper construction, good design, or good finish in order to attain the last possible degree of cheapness.

We should add though that the most cheapjack pre-modern buildings, particularly of the very poorest, simply havnt survived.  In the Weald of Kent for example it is Yeoman houses which survive very rarely cottars cottages.

How different is the spirit in which the modern suburb is built up ! …There is little thought bestowed on the individual buildings or on its adaptation to the site and surroundings, no imaginative fitting of it into a picture. Instead, some stock plan of a house which is thought to be economical is reproduced in row after row without regard to levels, aspect, or anything

Unwin then introduces the next chapter.  He stresses not to be backward looking as the conditions under which organic building by building, extension by extension town building no longer exist in an ear of rapidly growing towns and cities, and having lost a culture of unconscious design we have to replace it with one of conscious and order design ans a matter of practicality.

We find that in the few instances in which towns were laid out as a whole in ancient times the plans usually follow very simple rectangular lines, and are quite different in character from those which developed by slow, natural growth. A short examination of the different types of town plans will perhaps be the most helpful way of approaching our subject.

That is not the way modern historical geographers will describe it.  Current thinking is that most medieval towns not growing from villages were laid out initially by kings agents and therefore were at least initially consciously planned.  Next chapter in next section.

Why Debt and Debt Deflation Matters in One Para

If you are a firm and demand falls you can cut back, perhaps sell some assets and stay in the black.  But if you owe debt or have high fixed operating costs you can be driven into the red, perhaps having to sell all assets and with the risk operations and employment ceasing – knocking on to the rest of the economy.  But economists say credit = debt so it all evens out?  Not if you are bankrupt it doesn’t, then the creditor no longer has an asset they thought they had.

A Fair Nomination for Carbuncle Cup – Victoria Hall Wembley?

A slightly surprising nomination for the Carbuncle Cup – Victoria Hall Student Accommodation North End Road Wembley, near Wembley Park Station and the Stadium.

Not a truly dreadful, just like so many disappointing compared with the computer renderings which tried to hide the western lumpen block which looks like a Travelodge.  A bolder and more consistent approach would have made it more interesting.  Part of the problem as well is that the two tone approach stops it being read as a single building.  Ok for a large block scheme but here the aim was to create a gateway landmark.  Near miss rather than a carbuncle.