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Form Follows Finance


Reflections on the Small Developer Bootcamp continued…as seen by Elizabeth Ward.

Architects all know the phrase “form follows function.” It is burned into our brains at a young age: the modernist principle shunning aesthetics for aesthetics’ sake and praising the simplicity of functionality. The term was coined by famed Chicago architect Louis Sullivan, who is credited with the development of the skyscraper. But the form of the skyscraper was not merely following function; these tall buildings were shaped by a host of outside forces, including significant economic growth following the Civil War, increasingly intense demands on urban land and the advent of new technologies.

But what exactly does “form follow finance,” a term we heard repeatedly at the Bootcamp, really mean? Form has always followed finance, in some capacity, but the legal and financial regulations of the 20thcentury have led to finance actually dictating our built environment.

Think of urban sprawl: low density development patterns that eat up land and resources. This type of urban form is certainly not following function. The rise of the suburbs in the U.S. happened post WWII, when the federal government passed two significant pieces of legislation: the Federal Highway Act and the Serviceman’s Readjustment Act (the GI Bill). The first poured money into highway construction – making the urban hinterlands ever more accessible. The second poured money it single-family home finance. And here we are, 60 years and a few more federal financial incentives later, surrounded by sprawl. Form followed finance.

Fast forward to development today. Single-family homes are still the most heavily financed form of residence. But cities like Atlanta are seeing an increasing amount of large multi-family developments that take up entire city blocks and are made up primarily of parking. What gives? We learned that there are two primary types of investment property loans. The residential loans (FHA loans) are designed for properties with four units or less. Commercial loans are for properties with five units or more, or other non-residential property types; these loans typically have higher interest rates and shorter payback periods.  Essentially, if you are building more than four units, you probably are building way more than four units to maximize your investment. So that leaves us with a housing gap, “the missing middle.” The charming courtyard apartments, townhomes, live/work units, and other types of dense yet appropriately scaled housing types.

Finance is not the only thing driving urban development – regulations such as those that require large amounts of parking influence building design and form. But parking is expensive to build (very expensive) which leaves less money for good building design. So actually, finance does dictate.

All of this to realize:

1) Form really DOES follow finance. And perhaps it is time that we demand our financial institutions catered to a better built environment.There are workarounds in the meantime.

2) Duplexes, triplexes and fourplexes are all able to be financed by the current FHA residential loans. And there are some pretty inspiring investments and designs taking place out there right now.

3)What if we turned it around? What if finance followed form? We are still working that one out in our heads…but it sounds promising.


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