Beyond Luxury

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BEYOND LUXURY In-Between Bessard Studio Economies

Beyond Luxury For the fifteenth architectural biennale the Danish pavilion focuses in on the front line of ‘Humanism’.

Bessard Studio undertook a research and design proposal to understand the economics behind the modern humanist city.

The early twentieth century witnessed the foundations of the modern welfare system. This cultural and political momentum defined, in broad terms, an architectural heritage of designing for a common social good and collective responsibility.

However with liberalised planning laws and expanded globalisation from the eighties to the present day, architecture has become an all together different agent in the production of the city.

If the fundementals of humanism rest in the belief that collectively we can strive to improve our personal well-being and our quality of life, then we must assess the architects agency in the contemporary city. With this in mind the project aims to address two simple questions: How is architecture produced and what is it produced for?

It is our belief that what we are now witnessing is the peak of a financial and political framework that has come to produce a very particular mold of urbanism and architecture, and that it anything but harmless.

This booklet acts as an explainatory pamphlet and a guide to the transistion from urbanism 1.0 to urbanism 2.0

How is architecture produced, and what is it produced for?

Financial Humanism Urban architecture is, now more than ever, a function of finance. If we truly believe in the idea of great city for all of us, the discussion of how, and who, we pay to make out buildings must be front and centre.

Both models combine the a breakdown of construction cost, an average disposable income and the effect this has on the architecture.

The present (left) shows how speculative urban real estate values profit over people, with typically over a third of the build cost locked up as profit. This morphs the city apartment into financial asset and burderns the homeowner with ever increasing debt.

The proposal (right) proposes how a public initiated co-operative model can place the value and quality back into the physical structure of the building.

The finansialsation of the urban dwelling strips the idea of value from cost and shifts all the financial risks onto the owner; increasing stress while reducing quality.

Financial Urbanism

How did we get here?

Debt Rising property prices and speculative development have burdened danish households with the highest level of debt in the world.

source: OECD It G aly er m an y Fr an ce B Un elg ite ium d St at e G s re ec Fi e nl an d Sp a Po in rtu ga l U. K. Ko re Ca a na d Sw a ed Au en st ra lia Ire lan No d Ne rw a th er y lan De ds nm ar k

Hu ng a Sl ry ov en ia Sl ov Po lan ak d R Cz e ec pu bl h Re ic pu bl i Es c to ni a Au st ria

Household Debt As % of GDP

Debt

300

200

100

0

Household Debt

Real house prices

Debt = Mortgage The vast majority of that debt is made up of mortgage debt

1973

er

G

Ita ly m an y Fr an ce B Un elg ite ium d St at e G s re ec Fi e nl an d Sp a Po in rt u ga l U. K. Ko re Ca a na d Sw a ed Au en st ra lia Ire lan No d Ne rw a th er y lan De ds nm ar k

ia Po lan d R Cz e ec pu bl h Re ic pu bl i Es c to ni a Au st ria ak

ov

Sl

en

ry

ga

ov

Sl

Hu n

200

100

0

Household Debt

Real house prices

2013

Wages vs.

House Prices Liberal planning policies that were championed by the urban municipalities (especially Copenhagen) in the eighties and nineties, gave rise to unpresedented urban renewal.

Yet the expansion of mortgage credit that fueled it effectivly replaced wage growth and replaced it with lifelong debt. Here we can see the growth in property prices increase more than six fold in the capital when compared to the rest of the country.

City property price exploded, outstripping wage growth by more than 20 times. In this context it is easy to see how the city home becomes a very important asset.

DEBT - DEBT IS HIGHEST IN THE WORLD - WHY? = MOST IS HOUSING DEBT - DEBT HAS REPLACED WAGE GROWTH - TO JUSTIFY INCREASED DEBT, YOU MUST CREATE AN INFLATING ASSET THE CITY - THE LIVABLE CITY - SUSTAINED MASS URBANISATION AND URBAN REGENERATION - HOUSING SPECULATION IS ONLY POSSIBLE WITH SUSTAINED DEMAND - URBAN - BUT WHAT HAPPENS WHEN THAT SPECULATION COSTS MORE THAN PEOPLE EARN? - EXPANSION OF CREDIT AND RELAXTION OF PLANNING LAWS TO FUEL THE SYSTEM - THE HOUSE BECOMES YOUR PENSION - AN ASSET RATHER THAN A HOME - THE DEVELOPER TAKES ON GREATER RISK - TO MITIGATE THAT RISK THEY MINIMISE TIME, SKILL AND DESIGN = ARCH. BECOMES A FUNCTION OF PROFIT, RATHER THAN NEED. - A LIFESTYLE BRAND IS ATTACHED TO THE PROJECT (‘THE BEECH HOUSE’/’THE HARBOUR PLAZA’) TO MAINTAIN ITS MARKETABILITY. - THIS DETATCHES QUAILTY FROM COST - NOT ONLY DOES THE RESIDENT HAVE NO POWER TO DEMAND FOR QUALITY, THE ‘BRAND’ OF ARCHITECTURE HAS LEAD TO A LACK OF FAITH IN THE ARCHITECT TO BE ABLE TO DELIVER IT - THE FINANCIAL STRUCTURE HAS DESIGNED THE CITY HOME BEFORE THE ARCHITECT HAS EVEN BEGUN - SO WE MUST ADDRESS THE ECONOMIC CONCEPTION OF A PROJECT AS A DESIGN PROBLEM - URBAN CO-HOUSING - A NOT-FOR-PROFIT MUNCIPAL BODY IS CHARGED WITH RELASING LAND FOR SELF ORGANISED GROUPS OF INDIVIDUALS - ON THEIR OWN THESE PEOPLE HAVE LESS AND LESS AUTHORITY TO GAIN ACCESS TO CREDIT AS THE MORTGAGE IS PAYING FOR THE SPECULATION, NOT THE QUALITY - TOGETHER THEY ARE ABLE TO LEVERAGE ENOUGH MONEY TO EITHER COMMISION THEY’RE OWN PROJECT (WITH STATE HELP) OR BUILD IT THEMSELVES. - THIS RE-ESTABLISHES A LINK BETWEEN QUALITY AND COST WHILE ALLOWING THE CITIZEN AND THE CITY AUTHORITIES TO HAVE A DIRECT INFLUENCE IN THE FUTURE WELLBEING AND SUSTAINABILITY OF THE CITY.

Rest of DK

CPH

384 % 2014 479,000€

63 % 2014 168,000€

19 % 25,500€

18 %

27,950€

€ 21,500€ Wages

House Price

1991 103,350€

€ 23,300€ Wages

House Price

1991 98,925€

Private House Building Dominates the City The collapse of one of the corner stones of the welfare state - social and collective housing - in preference for private construction, shows how city authorities have institutionalised house price inflation.

Key Public Authority Housing Association Non-Profit Building Society Private

%

1985

1990 1980

1995 1985

2000 1990

2005 1995

2010 2000

House construction by type - Copenhagen

1980

1985

1990

1995

2000

2015 2005

2010

2015

2005

2010

2015

%

1985

1990 1980

1995 1985

2000 1990

2005 1995

2010 2000

2015 2005

2010

2015

1980

1985

1990

1995

2000

2005

2010

2015

House construction by type - Rest of Denmark

How Mortgage Debt Drives the Economy For years the economy has only been able to grow by increasing debt. The easiest way to do this is through housing.

To keep the city affordable and mitigate rising prices, mortgage credit became more readily available.

Although this is utlimately a self defeating game, it generates a housing bubble and for a short time makes the economy appear to be growing. Until it pops.

More money is directed from wages and investment and into real estate, making the current way we finance and build our housing more and more unafforadable.

RTGAG MO REDIT E C

THE BUBBLE POPS House price fall

THE BUBBLE House price rise

SAVE! SAVE! SAVE! Negative equity

DEBT

ASSET INEQUALITY Harder for those without capital to buy

Mortage and interest payments rise

Low productivity & wage stagnation

DEBT

Households decide to save which weakens consumption & construction

Cumulative Breakdown of Mortgage Payments on a Typical Loan

Maintenance Interest Mortgage Payment 500,000

Total Housing Cost [individual] - â‚Ź

400,000

300,000

Ave. loan (after deposit)

200,000

100,000

0

5

10

15

20

Years

the urban developer model Total Cost of House Maintenance 17 %

Interest 30 %

Mortgage

53 %

Total Sales Price 11 %

VAT

18 %

Profit & Financial Cost

7% 17 %

source: Statistiksbanken,Realkreditinstitut

Land Cost Construction Cost

25

30

The Free Market City Over the past 20-30 years this model of urban renewal has been incredibly successful in creating a modern sustainable post-industrial city.

Government fiscal policy has reflected this by tweaking intserest rates to adjust the housing economy.

Yet we are now at an urban peak. This model of speculative development is becoming increasingly unafforable for individuals, developers and even the city.

URBANISATION CPH

SEHO HOU DI LD EN TURE EXP

+

INTEREST

20%

RATES

mortgage

HOUSEHOLD ENDITUR EXP E

mortgage

20%

NATIONAL BANK Less borrowing

More borrowing

House price fall

House price rise

Less money in the real economy City real estate becomes expensive to develop Cost is recuperated through design cost saving or a different client base

Stimulates the economy DEBT

Encourages spending Discourages property investment

Spatial Segregation

From an urban perspective this mode of housing development has necessitated the preference of the city and an urban utopia.

The house price seperation between city and country (see opposite) has grown ever wider for the previous 20 years, meaning that development in the preferals of the country is no longer a viable option.

Herning Mariagerfjord Vejen

Lolland

Ă…rhus

Ballerup

Copenhagen

Hvidovre

Ringsted

35

Copenhagen

30

25

Hvidovre Ballerup Ă…rhus

20

15

Ringsted Herning Mariagerfjord Vejen

10

15

0

Lolland 1995

2000

2005

2010

2015

The Current Model Model 01.

Architecture as a ‘profit function’.

Apartment spec.

CURRENT TREND

The model shows the breakdown of the average cost of a single apartment in Copenhagen city district. It compares the market pricing (left) with personal expenditure (right). The house is at the intersection and portrays the architectural output of the financing model; its construction type, materiality, size and layout.

Speculative Urban Development Model

This model shows the status quo of urban development, not only Copenhagen, but many post-industrial cities. Here, profit is the biggest design influence; repetitive pre-cast concrete slab housing units are built as fast and as simply as possible while remaining commercially attractive.

70sqm

Area

4700

â‚Ź/m2

30yrs

Ave. Mortgage Length

1470 ( â‚Ź / m 2)

Construction Cost

C o n cret e s l ab

Construction type

Profit & Financial Cost Living

Living

Construction Cost/ Mortgage

Land Cost

Profit & Financial Cost Land Cost

Mortgage

Household Expenditure

Construction Cost

Total Sales Price

VAT

Ave. Build time

VAT

2.5yrs

The architecture is a reflection the financial mechanisms that fund urban regeneration; institutionalized house price increases that promote large scale, short term investment.

This method of building places a squeeze on our incomes and makes housing increasingly more unafforable, while at the same time detaching the notion of quality from the price tag.

The Proposal Model 02.

Co-housing to re-establish the ‘right to the city’.

that if Denmark is to continue on the course of increased urbanisation, that speculative property development must be challenged.

al for sing

So the starting point for this model is to propose that each The proposed model is a simple, yet radical one. It suppose citizen has a ‘right to the city’ and that the municipality ‘(CO)-PENHAGEN’ that if Denmark is to continue on the course of increased Proposal for housing development organisation in organisesConcept a non-profit urbanisation, that speculative property development must be Urban Co-housing order to keep the city affordable for the challenged. average person.

eakdown of the average nt in Copenhagen city market pricing (left) with ht). The house is at the the architectural output s construction type, ut.

So the starting point for this model is to propose that each

has a ‘right the city’ and that the municipality Municipal and state owned land is madecitizen available forto urban a non-profit housing development organisation in co-housing; where a group of people areorganises allowed to become order to keep the city affordable for the average person. the developers of their own future home. Their combined Municipal and state owned land is made available for urban income is used to leverage the construction costs and co-housing; where a group of people are allowed to become ownership is shared. the developers of their own future home. Their combined

atus quo of urban openhagen, but many re, profit is the biggest ve pre-cast concrete uilt as fast and as simply ing commercially

income is used to leverage the construction costs and ownership is shared.

00s qm

1740 € / m 2

This Co n s t r‘mode’ u c t i o n tof y parchitecture e C . L . T.

This ‘mode’ of architecture therefore shows that the lifetime

mortgage loan doesn’t have to reflect financial speculation, but therefore shows that the lifetime can support the crafted and robust structure, as well as the mortgage speculation, but A v e . B u i l loan d t i mdoesn’t e 3 y r s have to reflect financial future well-being of each individual. can support the crafted and robust structure, as well as the future well-being of each individual.

Construction Cost VAT

Total Sales Price

Land Cost

Land Cost

Mortgage

VAT

Mortgage

Construction Cost/ Mortgage

Household Expenditure

Hopes & Dreams

Construction Cost/ Mortgage

Household Expenditure

Hopes & Dreams

Living

Living Construction Cost

yrs

Construction Cost

VAT

VAT

places a squeeze on our sing increasingly 740 € / m 2more same time detaching the e priceT. tag.

C.L.

2

Ave.

Land Cost

Total Sales Price

0yr s

Land Cost

ection the financial ban regeneration; 200 rice increases that rt term investment.

Here the value is placed directly into the individual and the the value is placed directly into the individual and the quality of theA rhome. simple 0 s q mmodel shows aHere e a 1 0The quality of the home. The model shows a simple per-manufactured timber panel construction.

A generous gridconstruction. A generous grid 3200 €/m per-manufactured timber panel allows for lifetime flexibility through generations. allows through generations.

M o r t g a gfor e Llifetime e n g t h flexibility 30yrs