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HomeNewsThink Tank Reveals: Britons Pay More for Smaller Homes Than Americans

Think Tank Reveals: Britons Pay More for Smaller Homes Than Americans


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Britons are feeling the pinch of higher housing costs compared to their American counterparts, according to a comprehensive report by the Social Market Foundation (SMF). This disparity in housing consumption, along with other factors, is contributing to lower living standards in the UK when compared to the United States.


The SMF’s study reveals that despite adjusting for cost-of-living differences, consumption in the US is significantly greater, approximately 30%, than in the UK. A significant portion of this discrepancy can be attributed to higher spending on healthcare and transportation in the US. Interestingly, the report raises the question of whether this higher consumption in these sectors in the US leads to better outcomes.


However, the situation takes a different turn when examining housing expenses. The SMF points out that the glaring difference in housing consumption is a direct reflection of the dysfunction within the UK housing market. While individuals in the UK allocate approximately 21% of their consumption spending towards housing, Americans allocate just 17%, despite the fact that American homes are, on average, 60% larger than their UK counterparts.


The report emphasizes that a substantial boost in real housing consumption can be achieved by increasing both the size and quality of the housing stock. It does acknowledge that this investment in housing may come at the cost of reduced investments in other areas in the short- to medium-term, but the potential for building a better future is seen as a crucial trade-off.


Interestingly, this phenomenon of smaller homes is not unique to the UK. Countries such as France, Germany, and Japan also have smaller houses compared to the US, but in these cases, the difference in spending on housing is driven by cultural preferences and lifestyle choices.


The SMF’s report highlights that the gap in consumption between the US and the UK has remained relatively consistent over time, with only a slight increase of about five percentage points since 2019, despite more than a century of this gap hovering around 30%. It cautions against excessive pessimism about the UK’s relative economic decline and points out that the gap with the US has been persistent.


The report concludes with a clear call to action. It suggests that without a significant increase in productivity, the UK will continue to face challenges in maintaining living standards comparable to its peer countries. The key to bridging this gap lies in increased investment, not only in housing but also in areas such as business, residential, and public sector investment.


In essence, the SMF’s report highlights the urgency for the UK to address the housing issue as part of a broader effort to boost its economic performance and improve the well-being of its citizens. This necessitates making difficult choices in the short-term to lay the foundation for a brighter future.

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