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Why great residential architecture doesn't pay.
By Daniel Akst
November 2002
The gods, it's clear, are traditionalists. My wife and I learned this firsthand
four years ago when we set out to build a home in New York's Hudson Valley.
Modern furniture may be all the rage, but embrace Modern architecture and
the universe conspires against you. Family members will discourage you;
friends will bite their tongues. The neighbors may even sue. But our most
disconcerting discovery about contemporary architecture--when we insisted
against all odds on committing it--was that the power of money was aligned
against us.
Consider what happened at the outset, when we approached local builder Reynolds
Tate to bid on the project. Bidding a home is usually a piece of cake for
a veteran contractor like Tate, but he took weeks and returned with a number
that made us blanch. Tate is an honest guy. The price wasn't due to the
scent of money coming from this particular job (although this often rises
like a pheromone from cutting-edge design). It's just that for Tate, Modern
architecture typically means doing things he hasn't done before. Customers
want fixed-price bids, so to protect himself he builds in a healthy
margin for error, which varies from project to project. "The bottom
line is that there are so many unknowns," says Tate, who learned the
business from his father.
One thing everybody does know is that most American houses built today are
banal at best. Despite the vogue for bigger and costlier new homes, few
of them are products of daring design. What is less appreciated are some
of the economic hurdles that clients must surmount to bring about an interesting
piece of architecture, even one designed to be built affordably. We faced
these obstacles when we hired Tate to build a nifty Modern house designed
by architect Walter Chatham and his associate, Evans Simpson. The plans
were blissfully simple, but to a builder they posed a number of risks.
Tate worried that the gull-wing roof would turn the place into a giant snow
cone, making it leak every winter. The corrugated steel siding was new to
him. "We put down tons of metal roofing," he says. "But
here it's horizontal. Could I get the stuff precut? What if I have to drill
every screw instead of using self-tapping screws?" Such questions are
crucial because labor typically accounts for two-thirds of construction
costs, and these seemingly minor issues can add up to a lot of time.
Rooms with unusual dimensions also require extra labor. The original plan,
for example, called for ultra-high ceilings, which Tate zeroed in on as
potentially time-consuming. Standard homes, he explains, are built with
precut eight-foot studs and drywall by men wearing stilts. If you raise
the ceilings too high you need to cut a lot of studs on-site then erect
scaffolding to put up the Sheetrock--and move the scaffolding every time
you complete a section. Then there were the moldings--our house doesn't
have any. It's a sleek look, but moldings cover many sins; eliminate them
from your plans and the builder has to make walls, door frames, and other
components meet perfectly, which takes more time. The quest for perfection
that makes Modernism so appealing--what might be called its spiritual dimension--also
makes it expensive. Indeed at every turn there were reasons to change Chatham's
brilliant handiwork on paper into a brainless Colonial on the ground.
To get the place built we took the radical step of enlisting Tate on a time-and-materials
basis. Normally a contractor agrees to build a house for a fixed price;
if it costs more, the difference comes out of his pocket. That's why bids
on unusual houses are inflated. To save this risk premium, we agreed
to pay an hourly rate plus the cost of materials. The deal worked out for
all parties: my wife and I probably saved $50,000 to $100,000 that we sorely
needed to complete the project, and the builders tackled the job with confidence.
Even if a family felt comfortable taking on this risk, they would be further
discouraged when they investigated financing. Almost everyone borrows
to buy or build a home, and the size of the mortgage you can pry out of
a lender depends heavily on the appraised value of the place, which is the
bank's collateral, after all. I am here to attest that unusual houses, no
matter how wonderful, appraise for less. It's not just that appraisers have
a hard time capturing the value of frozen music on paper--although of course
they do--but when confronted with an interesting work of architecture, they
often take value off. Bud Burdick, an appraiser with Concra Associates
in Hudson, New York, says an unconventional house often means fewer potential
buyers. To an appraiser, he says, this logically suggests a lower value.
"The less enlightened--who maybe haven't done that kind of work and
mainly understand subdivisions--deduct a good ten or even twenty percent
from the value of a contemporary house," Burdick says. "It's a
hell of a hit."
The story doesn't end there. In arriving at the value of a home, appraisers
look for comparable sales in the area. The prices of these recent sales
form a major part of the valuation exercise. But if your home is unique,
it will be tough to find truly valid comps. Most appraisers ended up
comparing our sweeping Modernist gem to the many artless vinyl-sided ranch
houses of similar size in our area simply because our house is on one level.
The result is that we've had some frighteningly low appraisals. Burdick
came up with $170,000, even though we invested $400,000 in the project.
One bank appraisal (these usually err on the high side) came in even lower;
fortunately another was high enough for us to finance about half the
project's cost. (In the silver-lining department, a low appraisal makes
excellent ammunition for attacking your tax assessment. But don't expect
local officials to give away the store; I suspect they assume people
who build houses like this have money--and they probably hate the place
anyway.) This business of appraisals will matter when it comes time to sell,
because it suggests you will need a buyer who is not only brave but blessed
with considerable cash, since a reduced appraisal inevitably translates
into a smaller potential mortgage.
Fear of what will happen at resale poses another hurdle for good design.
Theoretically a unique house should command a higher price. But think for
a minute about why hardly anyone builds a serious piece of architecture
speculatively. Spec builders aren't interested in paying high architect's
fees; they also know that the more unusual the house, the smaller the potential
market. What most home buyers want is the biggest possible house in the
best possible place, period. Companies such as Toll Brothers, America's
leading builder of McMansions, know that size and location trump all else;
from a financial perspective, money invested in innovative design at
the expense of size and neighborhood is wasted. People don't stay in houses
all that long anyway. Many Toll customers are executives who will be relocating
again and don't want a place that could be difficult to dispose of.
Nor do they want to go through the exhausting process of designing a home
from scratch.
If they did, they might want to use a stock plan; but here is another reason
why more interesting houses don't get built, even by individuals who care
about good design. Most of the house plans sold through books and on the
Internet are awful; a few decent ones are available (including some in the
Life magazine's "Dream House" series) but virtually none
are Modern, unless what you really want is a chunky-looking "contemporary"
with diagonal wood siding. The absence of good Modern stock plans means
that people who want this kind of house have to hire an architect, at fees
ranging from a few thousand dollars to perhaps 15 percent of the construction
cost.
Although Modern architecture remains suffused with the rhetoric of idealism,
even relatively prosperous families who are thinking of sponsoring it will
beg off unless the entire clanking apparatus of home-ownership--all of it
geared to the lowest common denominator of design--can be brought around
to accommodate something more interesting. Modular housing might be one
answer. Another would be the publication of some first-class stock
plans that specify standard materials to achieve quietly fabulous results.
The funny thing is that the more Modern houses there are, the easier they
will be to build, buy, sell, and resell. Perhaps what's needed is an entrepreneur
with sufficiently deep pockets and a way with marketing who can bring
to bear some economies of scale. Maybe technology offers the most hope.
Perhaps, when cloning finally becomes commonplace, some avid Modernist
will figure a way to reproduce Joseph Eichler.
Daniel Akst writes frequently about financial topics. He is the author
of the novel The Webster Chronicle.
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