Graham’s attitude toward production builders is consistent with his conservative approach to development. A conventional development scenario entails buying the entire site, building the infrastructure, then selling the lots as fast as possible to repay the bank loan. Production builders are an essential ingredient in this process, since they alone have the resources to build — and market — large numbers of houses. Like Robert Davis at Seaside, Graham has opted to go slow. This is partly because, like Davis, he is highly risk-averse. “We’re a small family company — my father and brother are investors,” he tells me. “We simply couldn’t afford to buy the entire site and put in all the infrastructure at once. It would also leave us too exposed in case of an economic downturn.” Graham has an agreement with the landowner thatallows him to buy the land parcel by parcel, spread out over a ten-year period. He sells only seventy lots a year. As one parcel sells out, the cash flow pays for purchasing the next, and so on. “This also allows a slower rate of building, which increases the quality,” he says.
I ask Graham how going slow compares in profitability with a more conventional approach. “Initially it’s probably more expensive. However, since we’re selling the lots slowly, we’re able to benefit directly from increases in land prices,” he explains. “So I think that in the end, we’re ahead.” At I’On, the increases have been significant. The first lot sold in 1998 for about $45,000. Six years later, with the project still not finished, the cheapest lots are selling for $130,000, and choice lots are several times that price, although Graham is still paying the same buying price. “This year we met our sales quota by June,” he says. “We raised the prices of the last few lots, and they still sold. Can you believe that our current profit margin on a lot is sixty-four percent?” In terms of real estate development, this country boy has hit the jackpot.
When I tell Joe Duckworth about my visit to I’On, praising the quality of the architecture, he becomes a bit defensive. “I’On is a handcrafted, high-end proposition,” he says. “The reason that Graham is able to do what he does is that he is working with custom builders. In our area, custom builders only build houses over one million dollars. We will definitely be working with production builders, and probably with national builders.”
Home building is a $50-billion-a-year industry, but despite the early success of the Levitts, it has been slow to consolidate and is still made up of numerous small firms; according to the latest figures, 94 percent of the 100,000 U.S. builders have fewer than ten employees.2 At the other end of the spectrum, the 200 largest production builders in the United States accounted for 40 percent of all new houses in 2005.3 Fully half of this production was dominated by only ten large, publicly owned corporations, the so-called nationals.4 National builders are very large indeed; the largest, Texas-based D. R. Horton, builds more than fifty thousand homes a year. The nationals’ chief competitive advantage is financial: as publicly owned companies, they have access to cheaper capital. In addition, they build in multiple markets, which makes them less vulnerable to local slowdowns. National builders buy materials and components in bulk, operate their own manufacturing plants, and sometimes own their own building supply and mortgage companies.
Unlike the manufacturers of refrigerators or automobiles, national home builders do not have standard prices. A national builder sells the same four-bedroom house for $300,000 in upstate New York, $450,000 in Chester County, Pennsylvania, more than $750,000 in Prince Georges County, Maryland, and almost $1 million in Loudoun County, Virginia.5 The difference is not the construction cost (which in all cases is in the neighborhood of $90,000), but the cost — that is, the availability — of permitted land and the strength of demand. The profit margins vary, too, hot markets subsidizing lackluster ones.
The houses produced by national builders are not significantly different from those of their smaller competitors, except in one important aspect: consumer satisfaction. In 2003 the J. D. Power and Associates annual national survey ranked national builders first for customer satisfaction in twenty out of the twenty-five largest home-building markets.6 The most satisfied customers were in Las Vegas, Austin, and Phoenix, the least satisfied, scoring well below the national average, were in Seattle, Washington,D.C., and Philadelphia, where the score had actually fallen since the previous survey. “Philadelphia builders are not as quality-conscious as the builders in more competitive markets,” one builder was quoted as saying.7 Jason Duckworth agrees. “Supply constraints on land have dampened competition in our region,” he says. “While I think that we’re going to do a nice job at New Daleville, it’s really been self-motivated. The market has had little to do with it. The builders are so desperate for lots that they’d take most anything. In contrast, I think that builders in Las Vegas are very aware of competitive differentiation and value design more.”
Although some national builders, such as Toll Brothers, acquire raw land and function like traditional merchant builders, most buy permitted lots from developers. In regions where the supply of permitted land is limited, it’s not unusual to find them taking on as few as twenty or thirty lots at a time. Joe Duckworth hopes that he can interest a national builder in New Daleville. He likes the nationals, he says, because they have the financial resources to do deals and to carry them through, which is not something smaller production builders can do. He recognizes that it will not be easy to achieve architectural quality with a national builder. All production builders, largely in response to market demand, concentrate on the interiors rather than on the exteriors. At New Daleville, they will be asked to pay more attention to exterior details and materials. “To do a successful project, we’ve got to get the builders to do the best job they’ve ever done, and then some,” he says. “That’s why we hired LRK. They’ve developed a good method for communicating with builders without having them go batty on us.”
19
A Compromise
Why it takes two years to get approval for a development project.
Jason Duckworth asks Mike DiGeronimo, as town architect of New Daleville, to lead a design workshop for a group of builders who have shown interest in the development. During the workshop, DiGeronimo explains the design review process, which will involve several meetings to go over sketches, schematic designs, and construction documents. He shows the builders how a house should respond to particular site conditions, such as corner lots. He uses photographs of do’s and don’ts: shutters that are not properly sized for the window, for example, or poorly designed entrances. He explains the right way to detail a column, and to proportion a dormer. He demonstrates how a complicated façade, with too many architectural features, can be simplified and improved. It’s all rather straightforward, remedial teaching, really.
Once the final plan for New Daleville is approved by the township, Arcadia will invite the builders to submit bids for the lots, but for now, Jason just wants to create interest in the project. New Daleville will not have a guild, but he wants to establish a relationship with the builders. “It’s worked out well so far,” he says. “Not only has the workshop attracted half a dozen good builders, including three nationals, but Mike’s presentation has set high expectations for quality. Thanks to the reputation of LRK, and the design guidelines, the builders now see that New Daleville could be higher-end than they first imagined.”
During the workshop, several of the builders ask about the design guidelines. Who will be in charge of reviewing their plans, they want to know, the developer or the township? In other words, how bureaucratic is this process going to be? Jason assures them that design questions will be handled in a timely manner, but the truth is that the debate about the guidelines is far from settled. “One of the reasons that we brought in LRK was to try and convince the township, especially Tim Cassidy, to back off on their demands,” he says. “Unfortunately, it hasn’t worked. There are still about a dozen topics that Tim wants to see covered in the guidelines that I consider a matter of subjective taste. Things like proportions and window tr
im. He also wants the township to have an active role in reviewing house designs before they are built, which is something I’m totally against.”
Jason is cautious about telling the builders what to do. “The trick is to identify those guidelines that the builders see as adding value to their houses,” his father instructed him. “Anything that we ask them to do that the market doesn’t value means that they will just decrease the amount that they are prepared to pay us.” Since Jason has been unable to decide exactly what will add value to the house, the guidelines he has written leave as much as possible to the discretion of LRK’s review process. The neotraditional ordinance requires that a quarter of the houses at New Daleville have porches, but their location is not specified. Builders are not restricted as to exterior materials; they can use brick, stone, synthetic stone, stucco, wood siding, fiber concrete siding, or vinyl siding — almost anything. The guidelines forbid glass block, jumbo-size brick, and double-height glazed entrances (those monumental, out-of-scale front doors so beloved by builders), butthose prohibitions will hardly ensure that houses will be well-designed. Tom Comitta, who is reviewing the guidelines on behalf of the township, has suggested prohibiting fake window shutters, faux architectural elements, and plastic porch columns and railings. “We agree with your intent,” Jason writes in response to his suggestion, “however, we believe that this is a complex and subjective matter better enforced by LRK in the design review process.” In other words, trust us.
It’s instructive to compare the New Daleville guidelines with Vince Graham’s Newpoint code, which he wrote himself. He got a copy of the Seaside code and followed it closely. Since Newpoint was not a luxury project — the original lots sold for only $20,000 — and the market for such a development was untested in South Carolina, he simplified the rules. He did not require picket fences, for example, and he gave builders a choice of several materials for roofing, including conventional asphalt shingles. The Newpoint code was succinct — only two pages — and made clear and direct demands on the builders. One rule required that all houses have front porches at least half the width of the façade. At Newpoint, some of the builders followed the minimum requirement, others extended porches across whole façades, and a few even built two-level verandas.
Local regulations did not require the Newpoint architectural guidelines to be part of a municipal ordinance — they were attached to the homeowner agreement — so Graham was free to make changes to the code and grant waivers in exceptional cases. In contrast, at New Daleville, the guidelines will be part of the township ordinance, so future changes or exceptions will have to be formally approved by the township. Paradoxically, to ensure that he has discretionary control over design, Jason has had to keep design out of the guidelines as much as possible.
Until the New Daleville architectural guidelines are formally ratified, the township will not give its final approval to the project. Under normal circumstances, rural township officials don’t involve themselves in architectural questions, but Tim Cassidy is hardly a typical official. Not only is he an architect but he’s opinionated and occasionally even obstreperous. He has also spent a lot of time thinking about the architecture of Chester County. He says that if I want to understand his ideas, I should read his doctoral dissertation, although he warns me that it contains a lot of “architectural mumbo jumbo.” It turns out to be a study of the building traditions of the Brandywine Valley. Cassidy concludes that the area does not have a distinctive regional style; instead, its architecture is “regional” because of its “engagement with the region, not as a result of its formal characteristics.”1 This subtle but unsentimental view explains why he accepts a generic approach to domestic design — his own house could be described as generic traditional. Although he is no purist, Cassidy takes issue with the way contemporary builders self-consciously dress up their houses to make them look old-fashioned. “I object to the use of applied plastic moldings, which are a weak attempt to mimic traditional forms of ornamentation,” he says. “They are usually out of scale and are not integrated into the overall material assembly, simply screwed or glued to the surface after the fact. I think that the key to success with projects that have tight construction budgets and aggressive building programs is to keep the details as simple as possible.”
Cassidy believes that the New Daleville guidelines in their current form will not prohibit the kind of banal suburban houses that have been built in his backyard. “The onus is on the developer, that is, Jason and company, to come up with a vision for what they want New Daleville to be,” he says. “I’ve tried not to influence them stylistically, but they have to set some rules for themselves. When we went on that tour of developments, I would point out something in one project, and he would say, ‘Great, we could do that.’ Then we would see something different in another development, and he liked that, too. I think that Jason doesn’t really know what he wants. He wants the builders to tell him what they want.”
Cassidy has tried to convince Jason to make the guidelines more rigorous. He finally has come around to the realization that this is not going to happen, and that the quality of the project will depend on the review process. That’s all right with him. “I’ve talked with Mike DiGeronimo, and we agree on most things. I have confidence in his judgment,” Cassidy says. “But I’m concerned that if he makes recommendations that cost too much, or slow things down, Jason and Dave will just ignore him.” As an additional guarantee, Cassidy has suggested that the builders’ plans should get a final “cursory review” by a third party, an architect working on behalf of the township.
Jason doesn’t like this idea at all. “We have a big problem with the township reviewing the designs,” he tells me. “A lot of municipal consultants see their job as dragging out the process and extorting money from the developer.” He quickly adds that, on the whole, Londonderry has been very cooperative. “We have good communications with the township staff, and it’s definitely the best township to work with of all our projects. But what if the political winds were to change, and an anti-growth group of supervisors came into power in a year or two, when we were halfway through the development? They could delay approval of a design modification to slow up or even stop the project. I’m not being paranoid. There’s a subdivision in Chester County where builders are refusing to buy lots because it takes three to six months to get a building permit. I’ve been told that the township is doing this on purpose, to discourage development.”
It is now more than eight months since the developers brought the architectural guidelines before the planning commission. The two sides have been going round and round in circles, their positions unchanged: Arcadia still wants the freedom to do anything it wants, and Cassidy still doesn’t entirely trust the developers to do the right thing. It’s a standoff.
A month later, I ask Cassidy if there has been any progress on the guidelines. “It’s not settled yet,” he says. “Everything’s still up in the air.” Well, not quite. The previous week, while Cassidy and his family were on vacation in Maine, the question of the design guidelines was more or less resolved. Bob Harsch, the township engineer, invited Dave Della Porta to discuss the outstanding issues pending final approval of the plans. They breezed through all the issues, which included sewage and water supply, traffic, the homeowner agreement, the transfer of the park to the township, and the financial assurances that the developers would have to provide in the form of an escrow account. There was only one sticking point, the design guidelines. Cassidy’s suggestion of having a township consultant look at the builders’ plans after LRK’s review was brought up. Della Porta asked what would happen if there was a disagreement. Who would be the arbiter? Would they bring in yet another consultant? “The township understood that this process didn’t make any sense,” he told me later. “The clincher came when I told them that since we had already hired LRK to work with the builders, we didn’t see why we should have to pay for a second review.” His message was clear. Consultants are generally paid
out of the developers’ application fees, but if the township wanted architectural advice, it would have to foot the bill.
Della Porta could see that, while the township didn’t want to be involved in reviewing house design, neither did it want to ignore Cassidy. So he offered to incorporate the latter’s concerns in a handbook that would be part of the homeowner agreement. This would make them binding on the builders, although not subject to the township’s review. He also suggested that the township could look at a draft of the handbook, although he was careful to specify that this review did not constitute approval. The design guidelines would remain as they were, and there would be no external architectural reviewer. It was agreed that this arrangement would be presented to the planning commission at its next meeting.
“I think Arcadia may be exploiting the summer apathy of the township leadership,” says Cassidy of the tentative agreement. “They don’t seem to want to trouble themselves with details.” The truth is that nobody at the township, other than Cassidy, has strong feelings about architectural design. Unless he volunteers to review the builders’ plans himself, which he has already said that he is unwilling to do, it looks as if he will have to accept the compromise. In fact, Cassidy says that he has no objection to leaving the guidelines vague and putting the details in a handbook. His problem is that, as far as he knows, such a handbook doesn’t yet exist. “New Daleville seems to be Arcadia’s first project, so they can’t even show us a comparable document. But I want to see something, before I approve this,” he says.
Last Harvest: From Cornfield to New Town Page 17