Crowdfunding incentivizing building projects

The American Institute of Architects’ Stalled Projects Database

A recent study in the US has found that crowdfunding is becoming a driving force behind building and community projects. Whether this is the case in Australia is still unknown, yet Mathieu Gallios’ Reincarnated McMansion project which has had difficulty taking off for a variety of reasons, may just be the Australian test case.

Crowdfunding is the practice of investing in projects through the use of a crowd-supported web-based fundraising campaign. Campaigns can be donation based, reward based or can offer financial returns.

Usually, crowdfunding is applied to projects that may perform a common good or service, or represent a new and innovative idea, while it rewards the donor in a variety of ways working on a scale of benefits. At the upper end of the scale you may receive naming rights or an edition of the product. The Kickstarter 3Doodler, the world’s first 3D printing pen is a point in case. Depending on the level of your support, you will be entitled to your very own pen or more.

Crowdsourcing, through recent research by the American Institute of Architects, shows significant promise for attracting investors to smaller real estate projects and getting them off the architect’s drawing board.

According to the white paper, Crowdfunding Architecture, the increasingly popular tool is being used to gain community support for financing an assortment of infrastructure ventures that would ordinarily have difficulty finding money due to their smaller size. Perhaps this is the result of recent economic difficulties and cutbacks in the US but nonetheless it represents a new way of getting a project off the ground.

The report concludes that ‘donation-based crowdfunding holds the most potential as a financing tool for beleaguered developers and architects. According to massolution’s May 2012 Crowdfunding Industry Report, the amount of money generated by crowdfunding was close to $1.5 billion in 2011, of which almost half was raised via donation-based crowdfunding. The Massolution 2013 Report can be found here.

Why such a high level of donation based funding? It is speculated that not only does the crowdfunding model provide tangible returns for the success of the project or venture to the donor, it also  reflects “the enthusiasm of a local community for causes such as covering an individual’s medical expenses, political campaigns or community projects that would otherwise require municipality or government funding for completion”.

It is a model of altruism. Perhaps this is a successful working model where communities experience considerable financial hardship, as we have seen in recent times in the US.

Would this model work as well in a buoyant economy as that of Australia? It will be interesting to monitor whether architectural projects get off the ground in this way in Australia, if not now, perhaps in the near future.

“Crowdfunding Architecture” details specific examples where crowdfunding has already had an impact in providing financial support for community projects that were too small to get started with traditional financing methods. A link to the report can be found here. A link to the AIA’s database of Stalled Projects can be found here.

Developers Ben Miller and Daniel Miller and architect Tobias Holler, AIA, share their experiences on the best practices and successes of crowdfunding in this webinar hosted by the AIA on January 31.

AIA media release here.