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The Untold Story: The Continuing Demise of the Construction Industry

Sustainable Land Development Initiative | Thursday February 9th, 2012 | 2 Comments
For over 115 years architecture and engineering students at Georgia Tech have watched the Atlanta skyline grow upward and outward. Now a seeminingly chronic recession has stopped growth. Credit: Courtesy of Georgia Institute of Technology

By Richard Thornton

It is all too rare to read news about the continuing catastrophic problem in today’s United States land development industry. In many parts of the country, the better part of two generations of highly educated construction professionals have been wiped out financially. Another is graduating from college to find almost no job openings. Meanwhile those primarily responsible for creating the catastrophe are denying their culpability for the multiple human tragedies that their actions and inactions have caused.

Like generations of aspiring architects and civil engineers before them, students at the Georgia Institute of Technology look out the windows of their dorm rooms to the dramatic skyline of downtown Atlanta. However, unlike all students before them, going back twelve decades, they will see no construction. Private sector construction came to a sudden halt in the Atlanta area in 2007. In 2008, state and local governments canceled projects because of the stark drop in tax revenue. By late 2008, prominent Atlanta architecture firms were going bankrupt. Some had survived the Great Depression, but were put permanently out of business by the lack of projects to pay rent and payroll.

The situation in many former boom cities like Atlanta is not likely to change soon. According to the national real estate research firm of Jones-Lang-LaSalle, downtown Atlanta currently has a 22.5 percent vacancy rate and slim chances of new construction in the foreseeable future.

The forebears of these Georgia Tech students dreamed of following the paths of brilliant design professionals in Atlanta such structural engineer T. Z. Chastain or architect John Portman. This generation can only ponder ways of surviving after graduation, until perhaps some day there is a job opening for an internship in their profession. Like most of their counterparts around the nation, though, that day is not likely to happen. They are a lost generation without dreams.

Those young men and women around the nation, who have chosen career paths in engineering and architecture, are the cream of America’s educational systems. Their high school grades and SAT scores would assure acceptance to virtually any institution of higher learning in North America. They are the future of technology in the United States. They are the creators who can make life better for all. Nevertheless, the loss of human potential for those not shuffling money does not appear to be an issue of political or economic concern.

Three decades of change

Design professions are unique in that while their titles require state licensing, exceptional education and continually expanding professional skills, they must also produce physical products like factory workers. This has led to them being increasingly viewed by corporate management, financiers and attorneys as commodities.

Typical entrance standards for most university architecture programs are being in the upper 5 percent of a high school class and 1150 on the SAT. Most states require that architects successfully graduate from six years of rigorous education, plus complete three years of structured internship and pass a 48-hour national exam. Of the 187 students in this architect’s freshman class, 18 graduated and eight eventually became licensed architects. Only three are actively calling themselves architects now.

The majority of two generations of architects and civil engineers have lost their financial assets, offices, equipment and trained employees due to the continuing mega-recession. In far too many cases, desperate firm owners took out personal loans to pay employees. Banks sent deputies to seize the personal belongings in their homes along with the contents of offices when these loans defaulted. Most items seized by banks were either auctioned off at a minute fraction of their value or dumped into public landfills. The banks wrote off the depreciated value of seized personal items as tax losses, while those whose homes were foreclosed on owed additional income taxes for the difference between their home value and the foreclosed loan.

Unfortunately, one cannot push a button on an assembly line when the economy gets better to mass-produce new baby architects and engineers. Experienced professionals have been stripped bare of the financial and technological assets needed to restart new offices. Wal-Mart cannot legally go into the architecture and engineering business. Young graduates must work under the supervision of experienced professionals for at least three years to be licensed. Creation of an architecture or engineering office is not in the same genre as investing in a restaurant or automobile dealership.

Architects, civil engineers, landscape architects, site planners and surveyors create construction drawings and written specifications to describe a construction project. These are called professional services, but in the public’s mind, they are products. When hand drawing and typewriters were required for these products, they were very labor intensive. Even the plans for a house might take two months to complete. With the advent of computer-based drawing technology (CADD) in the late 1980s, the productivity of architects has increased approximately 500 percent, according to the American Institute of Architects (AIA).

There has been an improvement in the salaries of architects since 1990, according to AIA, because of this improved productivity. In 1990 the median salary of architects was $34,000. In 2011 it was $73,000. However, these statistics are misleading. If architects had been rewarded by a “free market economy” for increased productivity, their median salaries would have been $170,000 by 2012. If architects had merely been compensated for 175 percent inflation since 1990, their median salary would have been $59,160. Even this median salary figure is highly misleading because it includes architects in government, who make much more on average than those architects actually producing architecture. The majority of private sector architects have little or no work. They can not afford AIA membership and are not being surveyed.

From a personal perspective, here is the reality of the American economy that most everyone seems to be ignoring. All of the realtors, commercial developers, structural engineers, mechanical engineers, landscape architects and surveyors that this architect has done business with in the past 22 years are no longer in business.

Political expediency rules the day

A few weeks before the State of the Union address the White House sent out a questionnaire to those in the media who focus on specific aspects of the economy. The recipients were asked to specify their primary areas of concern and make recommendations for policy changes. They were also promised that all recommendations would be read by the staff.

That promise obviously was not kept. The White House was sent specific statistics by this columnist on the actual state of the economy in the Southeast and the virtual extinction of construction professionals. It was pointed out that architects and civil engineers had disproportionately suffered from the failure of the federal government to enforce the laws governing banks, financiers and attorneys, yet these same elements of the economy were the primary beneficiaries of the Obama Administration’s federal assistance.

Foreclosure attorneys are still being paid exorbitant commissions drawn from federal funds awarded to Fannie Mae. The federal government has spent over $1 trillion to subsidize Fannie Mae and Freddie Mac during the recession. In most foreclosures of lower and middle income homes, the commissions paid to the foreclosure attorneys greatly exceed the amount of past due loan payments owed by the now homeless owners.

The White House eventually emailed back a mass-distributed glorification of the State of the Union address to those who participated in the survey. The press release describes a solution to the current economic swamp which is based on creating new export-based industries in the United States and establishing higher ethics on Wall Street. It was addressed to “Dear Friend” and does not mention the word construction, architect or engineer. The White House ignored the proof that this administration is subsidizing foreclosures, while doing little to help distressed homeowners.

While the Obama administration seeks to draw attention away from specific issues, Republicans overwhelmingly cast blame on Obama for the economic collapse that occurred during the last two years of the Bush administration. The reality is, they’re all part of the problem. Even today, the proposed solutions to the economic crisis are entail returning to the policies which created the crisis in the first place!

One need only to follow the money trail to find the talking points of the day. Politicians apparently do not have a politically expedient solution to the holocaust within the construction industry, and therefore do not want to discuss the issue. With few exceptions, candidates are not touching the dire state of the development and construction industry. One of those exceptions is Ron Paul, who in a February 1, 2012 public statement, wrote, “These people invested time and money in training and spent years establishing careers in real estate, mortgage lending, construction and contracting, careers that all vanished into thin air with the burst of the bubble.”

The current situation

What is most noticeable among the political and economic power base is the general detachment from the realities faced by the American middle class. In his historic book, Collapse, scientist and author Jared Diamond studied the downfall of previous civilizations. One common theme he expressed was, “a society contains a built-in blueprint for failure if the elite insulates itself from the consequences of its actions.”

In contrast, design professionals such as the hard working students at Georgia Tech made a “contract with America.” They chose to assault difficult academic programs with the anticipation of being proportionately rewarded by our nation’s economic system. As professionals, they continued to work hard, producing real products that improved the quality of life of their communities. Then one day, they woke up to discover that because money handlers had been slopping at the nation’s economic trough, all that hard work would be rewarded by being homeless and unemployed. That is a very different perspective.

If the politicians, economists and mainstream media won’t discuss it, someone else must.

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Note: When the current US administration took office four years ago, SLDI proposed a new approach and a solution to the recession and despair that had already become embedded as a result of actions of previous administrations of both political parties. That proposal, too, fell on deaf ears.

 


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  • tmock

    Salon – Feb 4, 2012 
    The architecture meltdown – One of the coolest creative-class careers has cratered with the economy. Where does architecture go from here?

    By Scott Timberg – http://www.salon.com/2012/02/04/the_architecture_meltdown/singleton/#comments

    ” A once-thriving profession, one that requires considerable education
    and work ethic, and which has traditionally served a wide range of
    functions — designing mansions for the 1 percent as well as public
    libraries — is in trouble.”

  • SLDI

    Stockman’s Corner
    Janet & Ben’s Swell Housing Recovery: Sales Booming For The 1%; Heading Down For Everyone Else
    by David Stockman • May 28, 2014

    … Once upon a time even mainstream economists understood that the secret to sustainable economic growth and real wealth generation is investment in new productive assets, not the inflation of existing financial paper and its derivatives and re-hypothecations. But we are now so deep in the Keynesian ukase proclaimed by the self-perpetuating academics and monetary policy apparatchiks which control the Federal Reserve System, that we have reached this strange pass: Namely, that even by their own dim Keynesian lights, the Bernanke/Yellen cabal claims that $1 of wealth pumping translates into only 4 cents of added consumer spending!… http://davidstockmanscontracorner.com/janet-heading-down-for-everyone-else/?utm_source=wysija&utm_medium=email&utm_campaign=Mailing+List+AM+Wednesday