Building Madness: How the Boom and Bust Mentality Distorts Architecture
Architects are economically bipolar; for us it is either the best or the worst of times. And it’s not just architects. The entire construction industry is tuned to these extremes, but only architects are psychologically validated by booms and crushed by busts. All professions have a larger source of dependency—medicine needs insurance, law needs the justice system—but the construction industry has a starker equation: building requires capital.
Contractors tend to react to market flows in purely transactional ways. Booms mean more work, more workers, more estimates, business expansion. For architects, a boom means life validation. Every architect wants to make a difference, and many want to offer salvation, like the architect Richard Rogers, who once said, “My passion and great enjoyment for architecture, and the reason the older I get the more I enjoy it is because I believe we—architects—can effect the quality of life of the people.” But salvation can only be earned if buildings are created.
When the economy tanks, it fulfills our worst fears, reinforcing the realization that what we do requires two things, independent of our work: money and faith. Architects always have faith, but clients only have it when they’re flush. Like most fine arts, architecture surfs on the money available to fund it.
Maybe the last decade can teach us something.
Ten years ago, architects—especially residential architects—were giddy. We’ve always responded to the free market roller coaster—it’s endemic to the profession—but in 2007 residential architects were at the center of a juggernaut. Unprecedented growth in home building overroad the usual cycles of supply and demand.
So, for a brief period, the building of the American Dream dominated the world’s economy. Magazines, new media, institutions, entire marketing efforts, were based on this phenomenon. The popping of this mammoth bubble in 2008 changed everything. The U.S. economy lost $14 trillion in economic activity from 2007 to 2009. The housing markets in places like Las Vegas and Phoenix went from boom to depression. Michigan, California and Arizona saw homeownership decline by more than 20% after 2007.
This was nothing new. I am old enough to have ridden through four previous crashes since entering the profession in 1978, during the Jimmy Carter Gas Crisis (remember those lines?). In the insanity of those economics, this translated into mortgage rates in the high-teens. A lot less design happened because far fewer buildings were financed.
A handful of years later, I experienced the excitement of the Reagan Revolution, when McMansions began flooding suburbia. A stock market crash in 1987 put a hold on that. Rebound was swift and sure in the late 1980’s, until there was a Savings and Loan Crisis. Then new technology helped the economy rebound. A huge influx of venture capital followed the digital revolution that created internet websites and net-based businesses. But in the early-aughts, early online enterprises failed to generate revenue, so venture capital vanished and the tech bubble burst.
Then came the great American House Boom. But unlike the other booms, this was a tidal flow that elevated residential designers beyond any objective value. This boom was located directly in architecture’s wheelhouse: it grew to three-million new homes a year and helped lead the economy through the tech collapse. Home values outstripped the stock market as a wealth creator for the middle class; ownership reached a record 69% of adults.
Everybody was fully engaged and making money, because a common good, the buildings we lived in, was part of a government-backed, bank-enabled effort at universal home ownership. Eventually the profit motives of banks and bond markets overwhelmed the realities of cost and value.
In some markets, you could buy a wreck, add paint and pansies and make five figures in five months. Even though residential architects designed a tiny percentage of new and renovated homes, self-declared residential architecture firms almost doubled as a percentage of the American profession: trending to 20% of all firms, up from about 10%.
Once again, architects were shot out of the economic cannon: we were benefitting from circumstances that we did not create. Unlike all those other booms, however, this one was built on a foundation of deceit and exploitation. There were predatory lenders, lying agents and profit-driven market gamers, and their larceny could not go on forever. Without a greater-than-inflation value explosion in homes—the rocket fuel that fed the boom—the market crashed to earth.
For the first time, a building type in one market, the American home, helped wreck the world economy. The stock market crashed, unemployment spiked, and spec building ground to a halt. The first seven years of the 21st century offered a tsunami for us to surf upon. Architects were wiped out in the subsequent flood.
Why? It’s personal.
If architects valued helping people to build what made sense, they would create a microeconomy of value that is less subject to boom and bust. Doctors work on every illness, not just the glamorous and paying ones; many lawyers help those who are in trouble. Architects need to know that our culture can value design at any level, and not gorge on the crazy hubris exclusive to booms.
The busts should teach us that. When the housing market crashed, we saw an astounding 90% reduction in new homes. That starvation reality is virtually unheard of in other industries (even buggy whip manufacturers had a generation to go bust).
Architects often believe that in booms the truth comes out and our real value is revealed; in busts, we all-too-quickly become irrelevant. We seem unable to realize that neither is true: the rush to build is not a reflection of our inherent value; but neither is the absence of building proof of our irrelevance. Our value, to clients and to society, is timeless: design is a necessity in every market.
Building booms are self-justifying, but the fulfilled lust often compromises the value of architects, beyond design. During flush times, it’s easy to accept huge price tags and expedient builders. When you’re in love, your judgment is impaired.
This last decade of change, this reset of the architecture professions, has radically increased productivity while decreasing job opportunities. But, for me, this doldrum decade has done something else; it has reinforced my belief in our usefulness. We provide a service that has value, regardless of economic climate or cost.
Why do we do this to ourselves? Building is an elemental human act. This last decade of change, this reset of the architecture profession, has radically increased productivity while decreasing job opportunities. But, for me, this doldrum decade has done something else; it has reinforced my belief in our usefulness. We provide a service that has value, regardless of economic climate or cost.
Of course we are form-givers, innovators, even aspiring Master Builders, but after a 10 year crater, we survivors know better than ever that architecture is first, and always, a service. We have unique knowledge, creative synthesis, but most importantly a wide and deep perspective that is not limited to the manic extremes.
But architects keep following the money, instead of the value found in our expertise. Does every doctor consult result in surgery? Does every lawyer interview result in a lawsuit? Those professions get paid and take pride in the importance of knowing more. Architects should become the open, honest and willing experts in planning and construction, but avoid the insanities of the building boom mentality. That value will sustain in any economy, boom or bust.
Featured image via Forbes.