Gillian Tett: America likes living on the edge

Last weekend, as England basked in unusually hot weather, I went boating around Cornwall with some Swiss, British and American friends. As we skimmed across the water, looking at the beautiful coastline, my non-English friends pointed out something odd. If we had been looking at the shore of some of the most picturesque holiday spots in the US – Malibu, Long Island, Florida and so on – the coast would have been dotted with expensive houses, perched on the waterfront or soaring cliffs. Indeed, I have seen numerous such residences in recent years, open to the elements and public view.

Not so in England. On parts of the Cornish coast, there are majestic houses or ancient castles built for defence. But most of the dwellings on the shoreline huddle together in harbours and coves, not on cliffs. And that is not just true of the coast. If you gaze at the hills of Dorset, Devon and Somerset, say, you see numerous unspoilt ridges with beautiful views. “If that was Connecticut or Beverly Hills, you would have big houses up there – everyone wants a ranch and a vista,” one American friend observed. In England, however, those commanding heights mostly contain cows and barbed wire; the really beautiful houses tend to sit, half-hidden, in the folds of hills.

Why? History undoubtedly explains part of the difference. American houses are mostly “new” by English standards, meaning that they were built in the last century, or at a time when modern construction techniques made it possible to place houses on vulnerable spots – and when wealthy Americans felt able to reorganise land use, to their benefit.

But in places such as Cornwall and Devon the houses were often built several centuries ago, or in a period when people felt the need to shelter from the elements in low valleys or protected spots. And while building technologies have changed in recent years, these historical patterns have created rigid models of land use. Most notably, the plots of land which command great vistas – where rich Americans might instinctively build new houses – are often designated as national parks, public footpaths or protected farmland. And in England, it takes more than just wealth to change zoning laws.

I suspect there are more subtle cultural issues at work too. America is a land created by entrepreneurs and pioneers who believe(d) that determination and optimism could conquer all; where it is acceptable to stamp your will on the environment – or effectively say “nature, be damned”. Modern British culture, however, is less confident and entrepreneurial; its elites do not have the same wealth and belief (or downright arrogance) that they can bend the world to their will in search of a fabulous vista.

And that attitude is reflected – and reinforced – in the crucial issue of insurance. In Britain there is no government backstop for flood insurance. If you build a house in a vulnerable spot, you bear the cost yourself. As a result, when houses get hit by floods or coastal erosion, their value falls; last week in Devon, the newspapers were reporting that a building on the edge of a crumbling cliff had sold for a mere £35,000, less than one-tenth of its normal value.

However, America has a scheme known as the National Flood Insurance Program, which was created in 1968 “in response to a widespread belief that flood hazard was uninsurable by the private sector alone”, as a recent paper from Wharton business school explains. This does not cover every disaster (hurricane damage is not always covered) and many poor homeowners never use it. But the NFIP does insure $527bn worth of assets, or more than 5.5 million houses, and since 1978 it has paid out some $37bn of claims (excluding Hurricane Sandy). States like Florida subsidise hurricane insurance too.

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How long this state of affairs will continue is a moot point. Since the NFIP is already $17bn in debt there is rising political pressure for the subsidy to be cut. Indeed recent reforms to the programme are already forcing homeowners in vulnerable areas to pay higher insurance costs. Some environment activists – and fiscal hawks – want more dramatic reform; after all, the argument goes, it makes little sense for the government to keep encouraging people to live in dangerous areas when there is so much good land sitting inland, and when sea levels are projected to keep rising.

But don’t expect too much change to occur, too soon. Although a recent survey from Stanford University suggests that a majority of Americans want to cut the NFIP subsidy, the survey also showed widespread acceptance that Americans should be “free” to build where they see fit, as part of the American dream. And in practical terms, there is already an estimated $10,000bn worth of property sitting in coastal areas in America (of which $3,000bn is in New York and another $3,000bn in Florida.) and little tangible evidence of changing consumer choices. Since Hurricane Sandy in New York, the price of beachfront properties on Long Island has risen – not fallen. This might seem mad to someone like me (I was partly raised among the crumbling sandstone cliffs of Devon). But to my New York friends, those beautiful – empty – English cliffs seem just as odd. Either way, the next time you see the shore of Cornwall – or Connecticut – ponder the contrast; and doubly so given that the 2013 American hurricane season is now officially under way.

gillian.tett@ft.com