“How weary, stale, flat and unprofitable seem to me all the uses of this world,” said the Prince of Denmark, and housebuilding executives probably think something similar when they wake each morning. Changes in the planning system, and the scrapping of housebuilding targets by the coalition government, have affected developers by depressing land values – and of course they are still struggling with poor demand for their product.
Now, the value of housebuilders’ land banks, as well as disused buildings prime for conversion, have dropped, which is in effect a double hit. Share prices were already depressed by the firms’ low output, and now the property assets on their balance sheet have been written down. The companies are toiling because they can’t sell houses, and the land they bought is depreciating, too. It’s ironic, then, that the subject of my previous piece, General Motors, offloaded old factories, a New Jersey golf course, and an abandoned church in Indiana, during its latest “fire sale” a couple of weeks ago. I think the old investment mantra goes something along the lines of – “Always sell at the bottom of the market…!”
When the market is working properly, commercial firms often find that their old factories or offices are worth more as a piece of land than a working part of the company. Although it seems crazy, the one-off receipt for the sale of the site is often more attractive than long-term returns from a manufacturing plant or warehouse built on it. Perhaps there’s something in the old adage that land is one of very few things that they’re no longer making, and that finity used to push land values ever higher. No longer. Now most housebuilding firms are struggling to sell anything.
Last week, the Aberdeen developer Cala (aka The City of Aberdeen Land Association) went to the High Court in London to challenge the scrapping of those government housebuilding targets. Cala argues that without primary legislation, the move is unlawful – and anyhow, there are no alternatives in place. Their case is based on a 2000-house scheme in Winchester which has been refused planning approval by the local council. That in itself is unremarkable – but Cala’s position is that it would be futile for it to appeal the decision, as there is no planning policy to judge it against. It may become a test-case for the industry, because the National Housing Federation reckons that another 80,000 houses are caught in the same cleft stick.
How ironic that several seemingly paradoxical things are conspiring against the housing industry, just when the economy desperately needs it to receive a kick-start. We are heading for a housing shortage – yet the government has scrapped building targets. There’s a shortage of loan capital out there, lenders want 30% deposits, and the mortgage market is dead – yet we’ve just seen the first round of quantitative easing for decades. Land is the cheapest it’s been for years – yet demand for it is even lower. Tony Pidgely of Berkeley Homes says he’s even been offered land for nothing… unthinkable in normal times.
What happens next is anyone’s guess, but property analyst Alastair Stewart, of Investec, reckons there is a serious risk of a double-dip in house prices and land values, and he believes that the housing market is grinding to a standstill. Given how many sectors of the construction industry have been devastated by recent government decisions – health spending curtailed by the end of PFI/PPP projects – education in England hit by the curtailment of Building Schools for the Future (BSF) – and defence by the recent spending review which indirectly threatened to close Scotland’s last three big shipyards – housing was one area where we might have hoped for an early recovery. At the moment, the only active housebuilding sites are in east London where supply is enormous, thanks to the forthcoming Olympics.
The market elsewhere seems, to coin a phrase, weary, stale, flat and unprofitable.
My next piece will try to avoid politics, the recession and Shakespeare. ;-)
If … land sold at a fair price, rather than being speculated upon. If … there weren’t bandwagoneers at each stage of the development process, extracting “excess value”. If … capitalism worked as Adam Smith intended. If … we really wanted to, we could solve the recession by turning on the taps. If … only things were as simple as those quotes would have you believe.
Yet it’s true that architecture is beholden to money, because it facilitates construction work. Professional institutions crow about the added value which designers bring to a scheme, but that only serves to obscure the difference between value and worth. You may feel you have got good value from your architect, but perhaps what you need is someone who can increase the worth of what you build. Yet the architect can only go so far down this road before they destroy the essence of their value to the client – and General Motors can suggest why.
A couple of years ago, the company which was the world’s largest car maker, and once the world’s biggest corporation, filed for protection from bankruptcy. General Motors, founded by a guy from Arbroath called Buick, was on its knees. However, the root of GM’s troubles was a shift in the corporation’s emphasis half a century ago. In 1958, GM president Federic Donner spent daily meetings with his divisional heads talking – not about cars, as was the tradition – but about how to drive up the company’s stock price. For Chevy boss Bunkie Knudsen, it was then that he realised that the purpose of GM had changed from making products to making profits. As the influence of designers and engineers declined, the power of the bean-counters grew. Divisions lost autonomy, a Cadillac became a Chevrolet with more chrome, and the competitive internal market that won GM 50% of the American market began to break down. The decline of General Motors began then, half a century ago.
Architectural practices – once they grow to the size of Aukett, RMJM or Archial – begin to suffer from the symptoms which GM experienced. They begin as architects, and their product is design, but as they grow, financial management becomes more important. Once they reach a certain size, they become machines for making money. The ambitious ones list on the stock exchange, although listed architects never seem to make successful investments, and it isn’t clear why they need to raise the large amounts of money which the market offers them the chance to. From working for big business, they gradually become big businesses themselves, and their emphasis changes; rather than existing because the person in charge of the practice enjoys designing buildings, they become a board of directors whose main aim is to keep the shareholders happy.
Earlier this month, Archial went into administration. From reports in the press, this has little to do with the quality of the buildings they designed, the hard work their architects put in, or the awards which the practice won. It has got more to do with the shareholders, who lined up like hungry vultures perched on gateposts. Faced with a deepening recession, many of us wonder what tomorrow will look like. Perhaps there will be fewer mega practices like Archial; or maybe the future lies in larger practices, but working on a different economic model. Perhaps they were unlucky, and the type of work they sought was hit hardest by the recession. Irrespective, it’s difficult to predict how the larger beast called “Architecture” will be shaped in the next few years – but the salutary lesson from history is that many familiar names disappear during an “age of austerity”.
If I can use the car-making analogy again, I will consider the fate of some pre-war marques. During the 1930’s there were many medium-sized firms making interesting cars which pioneered new ideas, and offered alternatives to the mass-market Austins and Morrises. Today’s architects offer a similar alternative to the package deals of serial developers, and standard products of spec. housebuilders. Firms like Delahaye, Essex, Hudson, Railton and Terraplane survived the Great Depression of the Twenties and went on to develop new models – elegant, modern and relatively expensive. Some of them didn’t restart production after WW2, and of those which did, most didn’t survive for long. The austerity of the post-war years did for them – partly because the economy was on its knees, but also because mass opinion has become pessimistic about the future. The advent of peace hadn’t brought about a utopia, but instead the Iron Curtain and the H-bomb. Progress appeared to be dystopian.
Environmental disasters such as Deepwater Horizon, the crash of Air France’s Concorde at Gonesse, and the collapse of Ronan Point, are visions from a dystopia where technology fails. They may provide dramatic images for the television news, but their message is bleak, and sometimes like something from Hobbes’ Leviathan. Leviathan’s war of every man against every man is the ultimate dystopia, although the battle for ultimate self-preservation is one we have managed to avoid for the past 60 years. So we appear to have come a long way, since the Great Depression has almost passed out of living memory, and World War Two is similarly distant … but it is to the consequences of WW2 and its aftermath that politicians suggest we will return. Unwittingly, they allude to life in wartime, even whilst trying to put a brave face on the recession.
The last Labour government planned “pathfinder” projects to renew inner cities – little realising that the first Pathfinders were lone Mosquito bombers which flew deep into enemy territory to drop flares on targets, ahead of the massed Lancasters which followed minutes later to devastate them. The current Tory-Liberal pact has predicted a new age of “austerity” – if that truly comes to pass, they may find themselves pushed from office by an army of angry “consumers” denied the chance to consume. If austerity means giving up luxuries, such as video games, foreign travel and brand new cars, not only will millions feel hard done by, millions more lose their jobs in the service industries which provide them – including architecture.
Last time austerity was visited upon us was the late 1940’s, when the theories of Utopians like Le Corbusier and Tecton collided with the dystopian ruins of wartime Europe. Yet where utopia and dystopia are both predicated on a fast-changing world, austerity lives in an era of stagnancy. Despite a handful of architectural statements such as the Smithsons’ Brutalist school at Hunstanton, and ACP’s rubber factory at Brynmawr, the vast majority of building work was plain, stripped back and sometimes brutally simple, because the government only found cash for essential reconstruction work.
That architecture was based on rationalism which went far beyond the “functional” design of the Bauhaus. These buildings were built in brick, because it was the cheapest cladding available, and where frames were needed, concrete was often used because it required less steel than other alternatives. For the most part, clients did not worry what their buildings looked like: during the War, they had seen the beautiful people of the pre-war world without their mascara, and knew that they were just the same as everyone else. Ironically, that gave the buildings of this era a strength of character lacking today. Pared back, plain and undemonstrative was a rarity in the Nineties and early years of the new millennium, so much so that it would make more of a statement than an “icon” does today.
Fifteen years after the armistice, the post-war expansion of the 1960’s described in Oliver Marriott’s book “The Property Boom” led to the import of utopian architecture from the US – skyscrapers, supermarkets and malls. Austerity had passed, an era of consumption was ushered in (the retail disease as opposed to the bronchial disease…) A building’s image became important again. Society’s values changed, and architecture changed to suit them. Who can say when that will happen, this time around.