Dumb Question Dept : "Why is New Housing so Big and Lousy?"
by Lloyd Alter, Toronto on 08.13.07
When we asked for dumb questions, we got some very smart ones, including dwightstreetrenter's very long "Why don't housing architects design more energy-efficient homes in large subdivisions? When they cut down all those trees, they're basically building huge homes in a desert of dirt...and encouraging people to consume massive amounts of electricity for air conditioning.... and suburban sprawl is promoted in such developments."
Why do builders build these homes? Because they could, and it was more profitable to do so. There were a number of reasons:
1) The building industry in America is surprisingly efficient at building inexpensively; pumping up the volume and adding a bit more drywall and cheap plastic carpeting costs very little once the fixed costs of sewers, roads, kitchens and baths are in, so the best way to get more money from a customer is to make it bigger. Incremental square feet are cheap to build, and as long as energy is cheap, purchasers don't think about operating costs.
2) Housebuilding used to be a local industry with local banks giving mortgages; in the last five years banks were happy to lend to iffy customers and the homebuilders themselves became lenders, since they could all bundle the mortgages and peddle them on Wall Street and hawk them to hedge funds. The bigger the house, the bigger the loan, money is cheap and controls are lax. In the last year as sales started to slow, “homebuilders really started to push more aggressive mortgages down the throats of potential buyers to boost sales.”
3) Develoment is sloooow. By the time you rezone, service and build, everything you assumed at the beginning can change but you cannot, the approvals are in place, the purchasers have made deposits, it is a train going in one direction. Peak oil and global warming are barely on the radar now in suburban America; imagine five years ago when most of these monster house subdivisions were conceived.
4) People stopped buying houses and instead purchased investments, after all real estate can only go up in value, and for some insane reason, in America mortgages are tax deductable. Why not pile on some more? How can we lose?
The good news for anyone interested in sustainability and urban design, but the bad news for everybody else, is that it is over. Just like in the last real estate depression of the 90's caused by the S&L easy money crisis, when the banks turn off the taps the building stops dead, and last week the taps were slammed shut. Some, like James Howard Kunstler (and if I may modestly say so, this writer) have been predicting this for years and were laughed at as the market kept spinning out houses and condos; Kunstler goes so far as to say
“ The bottom is falling out under not only the housing market (as in houses up for sale) but on the whole apparatus for delivering future houses, and the car-oriented crap associated with it. The production home-builders, such as Toll Brothers, Hovanian, Pulte, et cetera are going down and they will not be coming back. There will be a great deal of wishing that they might come back, but they won't. Likewise, the commercial builders of all the various forms of suburban retail will be waiting to "turn the corner." But they will discover that the wall they have hit has no corner. It's just a wall.”
Developers don't borrow money to build, they build to borrow money. All a house is to them is a way to use leverage to turn a cornfield into a more valuable crop, turning dirt into gold. It takes a huge amount of cash and without lenders it doesn't happen. Now the mortgage lenders are going broke, the hedge funds are shaking, and the quants, the rocket scientists, are proving to be like every other genius who makes money in a rising market but folds in the turn.
As families see their houses sink in value and their subdivisions unfinished they will toss their keys to the lender and walk away; this is 1992 all over again, a speculative bubble has just burst and a lot of people who got caught in it are going to get hurt.
However, perhaps a few good things can come out of it:
1) Municipalities that are stuck with unfinished subdivisions and no tax income to pay for the operation of the services that they now own will start to think twice about approving low density development where they cannot afford to pick up the garbage or run the schools. The politicians that approved these developments got elected with developer money, and there will be a big reaction to the inevitable tax increases as existing taxpayers have to support this new infrastructure. Expect a lot of throwing the bums out and new anti-development candidates in the next election cycle. Better planning may come of this.
2) Anyone who wants to buy a house should expect to have a big down payment, perhaps back to the 25% down days, and severe scrutiny of the percentage of income going to the mortgage. This will immediately result in any developers still standing offering smaller lots, smaller houses, townhouses and quads as the monster house becomes a dream again. Sprawl is dead.
3) Any big builder, prefabber or manufactured housing company that depends on volume is dead and gone, and your new house will be built by local trades and financed by a banker who can look you in the eye.
So, to dwightstreetrenter, the simple answer is that your question is that it is all about the money. When the money is gone then the development of the monster houses stops, and it just did.
This writer thinks that a bit of a time-out is a good thing, that we can use it to rethink how we build our cities and plan a more sensible future. Kunstler, who suggests that the entire economy was running on empty but kept going by the monmentum of development, is more dire:
“Those who keep wringing their hands over the bulldozers leveling the plots of prairie, or cornfield, or desert -- those distressed folks can direct their anxiety elsewhere. Worry less whether one final strip mall will tilt up out in gloaming, and think harder about how you are going to feed yourself and your family in a couple of years when the stupendous motorized moloch of American life begins to sputter, and the Cheez Doodle shipments can no longer make it to your supermarket shelves, and all that is "normal" melts into air.”::Jim Kunstler; read also ::Business Week
Good time to remind ourselves that no person or organization can predict the single most likely future. Though, it is reasonable to construct a handful of plausible scenarios, two of which are presented here, others are possible.
The key to envisioning how the future impacts us is to identify "predetermined elements" of the most plausible scenarios. Things like much more expensive fuel and asphalt are pre-determined. At least a decade of expensive loans is another. Weather extremes. Brownouts. Cheaper solar photovoltaic cells. And so on.
A huge change in Fed loan policy could take these bets off the table. As could an especially violent tropical storm season, for example.
Great post! Note that it's not by any means "over" - the politicians are still willing to offer free infrastructure to the suburbs. That will continue for quite some time, although it's starting to slow due to aging infrastructure in the core needing to be replaced instead.
In places like Portland (and more recently Seattle), infill development is starting to catch on. Hopefully that'll eventually happen in LA!
Great post. I am amazed at the amount of space, resources and energy wasted in building and maintaining these mega mansions. How much space and stuff do human-beings need in order to live comfortably, not very much.
I hope, the hosing crash will make us all think harder about what our real needs are and how we are impacting the environment, and lead to more sustainable, smaller, energy efficient homes being built.
The first law of construction: Never pay now for something your buyer can pay for later.
I'd like to bring up a few issues regarding this post; both journalistic/editorial and content-wise...
First, I realize Treehugger has an editorial slant, how could it not? However, I think articles in this vein really bring down the rest of sites content and credibility (and as a disclaimer i do work in development - urban redevelopment primarily).
Let me explain.....
The editorial uses quotes quite judiciously, and to make the argument/point rather than support it, but doesn't explain where the credibility of Jim Kunstler comes from (except perhaps because Lloyd used his "full" name, middle and all) nor does it credit the quote in the second bullet of the "why do builders build these homes".
The original question was a good one, and the answer first given basically explained that the reason is cost/profit. I agree on that point; builders want to make money and its cheaper to build "non-green". You also have to consider that MOST homebuyers will not pay a premium to cover the additional cost of a LEED or similar design. Some might, but not certainly in the volume of a Pulte or Toll Brothers development.
The editorial goes on to make several claims that come across as overzealous and a bit unfounded; mainly that the mortgage lenders are "going broke", builders are "dead and gone", and that municipalities "no longer collect income". While some of these are bombastic predictions, others are simply inaccurate, such as municipalities and the tax income they're "not collecting from the empty subdivisions".
For the most part, these developments are built on former farm land, large office parks, etc. I'm not saying thats a good thing, but once the land is rezoned/subdivided the owner starts paying property tax and applicable municipal bills. You'll also find that many of these developments actually lower tax rates for each assessed dollar of property value being that the new properties are often assessed at their sale value while older properties can benefit from having their share of the pie, albeit a bigger pie, reduced.
Which brings me to the last point; the primary thrust I'm finding in this article is a sort of happiness about people getting in over their heads by buying too much home and pointing out that "for some insane reason" one can deduct mortgage interest in the United States... It comes across, to me at least, as more angry and petty than answering the original question. I feel like it could've served the questioner and Treehugger better to have had the original cost explanation slightly more in-depth, and then segueing into topics like how to make "green(er)" development more cost-effective, why builders are moving towards urban redevelopment, and other relevant info...
I guess my point here is twofold:
1. Please support/source all of your quotes. As far as I can tell the primary backup for this article is some random guys blog...
2. You may or may not have problems with large subdivisions & development. I'm not a fan myself... but please don't "spin" the information at hand or make overly strong statements in the course of an explanation to make what seems to be basically a political gripe about zoning boards and the US tax code's allowance for the mortgage interest deduction.
Sorry for the long comment, but maybe it makes some people think a little bit....
P.S. Lloyd, PLEASE don't change between carbon dioxide and carbon when discussing emissions and be clear about which you're discussing... Saying something creates "XYZ billion tons of carbon" is very misleading when you mean carbon dioxide.
We live in a small town that started becoming a suburb back in the '60s, in a development dating from that era. We have a 1500 sq. foot house on an acre of land, walking distance from the town center and biking distance of the supermarket and the farmer's market and CSA. My preferred solution of the problem of suburbia is to put the land back to work. I have an application in with the town for permission to keep chickens and ducks. There's still a dairy in town that delivers and we're members of the CSA. It's not perfect, but it's a start. And our town is on the commuter rail as well, and our house is in longish walking distance of the station.
And people thought I was crazy when I:
- Bought a 1250 square foot rowhome within walking distance of just about everything (WalkScore: 94/100), including an Amtrak station.
- Got a 30 year fixed mortgage rather than some crazy Interest-Only, Adjustable Rate mortgage
- Did business with a large credit union rather than a bank
- Bought a motor scooter that gets over 80mpg
Who's laughing now?!?
Re: James Howard Kunstler
I went to a lecture where James Howard Kunstler spoke and ended up buying a copy of his book, "The Long Emergency: Surviving the Converging Catastrophes of the Twenty-First Century" - I really recommend buying a copy or finding one at your library.
Rolling Stone ran an abbreviated essay based on his book in 2005:
http://www.rollingstone.com/news/story/7203633/the_long_emergency
The opening paragraph asks "Why don't housing architects design more energy-efficient homes in large subdivisions?" Well, it's because architects aren't designing these subdivisions--developers are. No architect coming out of school these days would ever willingly design such a subdivision. No, these places are devoid of design, ethic, compassion. They're just a place to make a buck.
I may sound cynical, but I'm an architect and it pains me to hear people confuse the work of architects with that of developers. These major--major--corporations either get by without an actual architect or they hire some spineless "architect" to stamp their drawings.
In the forums here, I posted a query as to wether or not there was any kind of mailing list that one could sign up for which would let developers and realtors and architecs know that I as a consumer of fugture buildings would only be interested in a LEED certified structure.
Since both a Developer and an Architect posted here, any advice in establishing that communication?
I have always bought the smallest home in my town. It has proven to save energy and go up in value faster. All my neighbors have their big SUV's and big homes and big fancy mortgages that they do not even understand the terms for.
I had a 15 year fixed that forced me to pay it off before all the hard times would hit.
Good luck to all the people who are defaulting on their homes. It does not help the environment or the people them selves to do what seams to be the poular thing to do.
I'm an architect and do everything I can to convince clients to build smaller and more efficiently. Please don't blame architects for the McMansion and sprawl problems. Start with the municipalities and address the zoning issues that make density almost impossible. Then work with lenders to offer location efficient mortgages and discourage investment in builders that perpetuate this crap. Then educate real estate agents about how to sell high efficiency buildings to clients.
Real estate agents are one of the biggest obstacles that I face in working with clients. Their agents are telling them that they can't sell something without granite countertops and stainless steel appliances, giant walk-in closets, two car garages, and those silly half-baths adjacent to the dining room where your guests can hear you pee. If agents would stop pushing luxury and start pushing efficiency then things would get a lot better.
My biggest pet-peeve: Code officials are obsessed with arbitrary lines in the sky that they call "height restrictions". Instead of restricting height, if we started restricting the number of stories then we would get much better buildings and have greater control over density. Leon Kreir has written extensively on this subject for those who are interested in learning more.
Note to Svirrer: James Howard Kunstler isn't just some random guy with a blog. His books " Geography of Nowhere" and "Home from Nowhere" are some of the best texts advocating for smarter, denser development and less homogenization of our built environment. He's a must read for any young architecture or urban planning student.
I live in an area that have loads of McMansions. I cannot for the life of me imagine why someone needs that sort of space. Of course the irony is that they never want to entertain because they are afraid of ruining their houses. I have a small house and always have kids over. I thought that was the point of having a house, to enjoy it.
Sam-Hec:
Try the US Green Building Council's website. You can search LEED accredited professionals by profession and region. One cautonary note: Not everyone that is interested in green design is LEED accredited (like me) not is every green building going to have the LEED certification (it's a costly and paperwork-laden procedure to get LEED certification).
http://www.usgbc.org/LEED/AP/ViewAll.aspx?CategoryID=1306&CMSPageID=1585
@ Sverrir:
It's their blog. They can say whatever they want.
My wife and I were in the market about a year ago for a house where we live the housing market falls into to eras, the 1950's and before with major structural problems or the 2004 and newer with 2xxx+ Sq Ft. "McMansions" (as mentioned before). After about 15 months of searching in the area we found one Energy Star home but local prices were still on the nutty end with these sub-1/4 acre lots near factories. In the end we will be staying in an apartment for the next couple years until we can move so a 5+ acre wooded lot in a more rural community to build probably a sub-1500 Sq. Ft. house.
I am a huge un-fan of development in general. In my area, new houses sit empty and the real-estate agent turned state representative keeps urging loosening of the environmental laws in order to promote more development. I am seriously considering becoming an anti-development candidate. How does one get the point across to people who believe that the only way to keep thier regional economy alive is to subdivide land and build more houses? If anyone has suggestions, I would love to hear them!
PUT DOWN THE FANCY HOUSES AND LEAVE HOMES FOR THE FORSEST ANMIALS FOR GOODNESS SAKE,I'M SICK OF LOOKING AT THOSES STUPID HIGH PRICE HOUSE WITH LITTLE LAND AND NO LOVE FOR THE MID-WAGERS HERE. (WHICH I DON'T WANT TO LIVE IN THOES TYPE OF HOMES I WOULD LOOVE TO LIVE IN A CABIN).
http://www.sciencedaily.com/releases/2007/08/070814102510.htm
"Green McMansions" -- a dangerous oxymoron -- are making their way into the American Dream
I agree with "P-Style" that the economic predictions in this piece are unsupported. Nevertheless, the topic is timely.
Over the last two years it's become increasingly clear to me that our traditional building energy codes that only measure RELATIVE EFFICIENCY are just not getting the job done. It's the ABSOLUTE CONSUMPTION of our increasingly obese building stock that is the real issue.
Out here in California we've had "Title 24" new building energy codes for almost 30 years now. Despite making great progress on efficient building techniques, its a fact that the average NEW home here still uses significantly more energy than the average OLDER home. This is primarily because newer homes are so much larger (but also because it tends to be hotter where they're built and more stuff gets plugged in).
My dear boomer friends (and everyone else watching us spend so much), this has to stop.
So, going beyond the traditional PER SQUARE FOOT efficiency metrics (e.g., kWh/sf) that almost all current building codes are based on, I think that we need to consider policies to address (cap? trade?) how much absolute energy (and other scarce resources) may actually be consumed on a PER HOME basis.
Most home builders trying to maximize $/acre probably won't like this -- But Realtors -- who have to sell and resell all these older homes -- probably will (at least once they figure out that this is a benefit to many older homes that they can take advantage of).
For example, Marin County now has an interesting "Big n Tall" ordinance which states that no new home may use more NET energy than a home that is a maximum of 3500 square feet (basically if you want to build bigger you have to add solar PV to offset).
And here's a story about the "McMansion Backlash" where other locales are trying to deal with this same issue.
What do you think? Are we ready for this?
Don't be so glub about the slowing of the housing market. I am heavily invested in high density urban infill projects that are the epitomy of all things that are good in sustainable development but when the bottom falls out for the sprawlers it slows significantly for us as well. Granted we still offer a great alternative to the standard suburb but it's harder to get financing. How will good things get built if we don't have a good market?
If you want to change the system we must educate.
The idea that CO2 causes global warming is contradicted by weather balloons, satellites, atmospheric surveys, ice core samples, and historical temperature records - in short all scientific data. Even so, volcanoes produce more CO2 each year than all the factories, planes and SUVs combined. Shockingly, bacteria produce even more than this; far more than the humans they inhabit. We're left with no reason to believe in global warming and every reason for hippies to finally take a bath.