Accounting for Differences between
the Two Systems
In the last two chapters we have highlighted some of the main differences between the performance of the American and British housing systems in terms of supply and investment, quality, cost, equity, choice, mobility, and security. In this chapter we shall try to account for these differences.
The first important factor to recognize is that housing consumption and housing investment have been substantially higher in the United States than in Britain. From 1975 to 1987, using the average exchange rate over the period (£1 = $1.78), annual per capita expenditure on housing (excluding property taxes) averaged $1,200 in the United States, compared to $544 in Britain (calculated from UK National Accounts). As noted in Chapter 2, per capita housing investment during the same period averaged $662 in the United States, compared to $279 in Britain. These factors obviously help to explain differences in housing quality (particularly size). They also relate to differences in housing production. The divergence between the two countries in per capita housing consumption is striking, but not surprising, given the contrasting levels of per capita income between the two countries (see below). However, housing consumption (and, as noted earlier, investment) as a percentage of national output is also higher in the United States than in Britain. Housing consumption accounted for 9.9 per cent of GNP in the United States in 1987, compared to only 7.3 per cent in Britain (data contained in National Accounts for both countries).
What can account for these differences in housing expenditure and investment, and hence in housing quality, between the two countries? There are various possible explanations. These include, inter alia, differences in: the stage in the economic development process and the extent of urbanization and industrialization; the level and rate of growth of income; the demand for housing relative to other goods; demographic characteristics; the cost of producing housing and relative rates of return on investment; cultural