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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