I have no idea how the private rented sector is controlled in Caracas and I would wager a fistful of bolivars that Grant Shapps hasn't a clue either. That did not stop the Tory party chairman – or whoever spits out press releases in his name – reacting to Ed Miliband's proposed reforms before they'd even been announced by frothing that Labour was planning "Venezuelan-style rent controls".

On past form – you may recall the response when the Labour leader came up with his freeze on energy bills – the following will happen. We will have a few days of Tories echoing their party chairman by denouncing Mr Miliband as a crazed red who cribs his policies from Hugo Chávez, then a few days of panic at Number 10 when his pollsters inform David Cameron that the Labour promise is rather popular with their focus groups, and then the coalition will play me-too catch-up and try to scrabble together its own offer.

Whether or not the Labour plan is good enough – we will come to that in a moment – it looks like a canny bid for votes to offer more protection from exploitative landlords and increased security of tenure. There are about nine million people in private rented accommodation and, on average, their rent consumes nearly half of their disposable income. That is a meaty chunk of the electorate and one that has been neglected over the decades when the political classes obsessed about home-ownership to the exclusion of nearly everything else, including making sure that enough houses were being built. One survey suggests that there are 86 parliamentary seats where the number of private renters who are potential swing voters is larger than the current MP's majority.

The young are not the only group to whom Labour is trying to appeal, but it could have most traction with Generation Rent. It might even persuade more of them to vote rather than let the next general election be entirely dominated by the wants and demands of older age groups. A key to Barack Obama's election victories was mobilising what became known as "the coalition of the ascendant": groups of voters who had previously been reluctant to turn up at the polling booth. The young were a crucial component of that coalition. If Mr Miliband did not know this already, he now has David Axelrod, the Labour leader's recent hire from across the Atlantic, on hand to remind him.

For all the sound and fury around the subject, there is something like a cross-party consensus that Britain has a housing crisis and that we can date its genesis back to 1979 when Margaret Thatcher arrived in power with her Right to Buy policy. Selling council homes to their tenants was a brilliant piece of politics. It projected her world view in one easily grasped signature policy that was highly popular with its beneficiaries and re-engineered the DNA of the electorate by turning traditionally Labour supporters into Conservative voters.

During the 1987 election, I accompanied a Tory MP around what was, or had been, an estate of council housing in his marginal constituency in south London. Whenever he managed to lure someone out on to the doorstep, he would slap the brickwork and ask: "Do you own this now?" When the answer was positive, he almost always had found a convert to the Tories from Labour.

As a piece of politics, the great Thatcher sell-off was superbly effective. As a piece of policy, it turned out to be calamitous because the social housing stock was never replaced. That was compounded by New Labour's dire record. Luminaries of the Blair and Brown years will now confess that one of their worst mistakes was to ignore house-building. You could tell how seriously Tony Blair took the subject by the fact that he put John Prescott in charge of it. During its 13 years in power, Labour built fewer than 1,000 council homes a year, a worse record than Mrs T. Instead of ensuring that the supply of affordable homes kept pace with demand, New Labour presided over a long boom in property prices and let housing benefit take the strain.

The result is that Britain, a wealthy and resourceful country with 90% of its land still undeveloped, cannot perform that most basic of functions: it cannot properly house its people. Among the baleful consequences, there is misery for some and resentment among many; a widening of property inequality between the classes and the generations; and a massively high bill for housing benefit. Britain's economic potential is weakened by tying up too much wealth in unproductive brick and mortar purchased at inflated prices. The mobility of the workforce is badly impeded when people who want work can't get to the available jobs unless they are prepared to travel increasingly ridiculous distances. Disparities of wealth, the topic made newly fashionable by Thomas Piketty's bestselling book on the subject, have often been exemplified in Britain by property inequality. While millions of the "hard-working families" of cliched political discourse find the property ladder has been pulled up beyond reach, an anonymous eastern European buyer has just set a new record by forking over an eye-popping £140m for a penthouse in Knightsbridge.

Coalition ministers understand that something needs to be done, but their efforts to find solutions have been compromised by a reluctance to accept that this is a huge market failure along with the resistance to new building in the Tory shires. This side of the election, that won't be confronted more aggressively by a Conservative leadership terrified of leaking any more votes to Nigel and his little shop of Farageiste horrors. So they have fallen back on short-term wheezes, notably Help to Buy, a scheme that is a distraction from the central problem, at best, and, at worst, a gimmick that will make it worse. Whenever I break bread with Tories, I like to torture them by inquiring what a free-market, small-state party is doing handing over government subsidies for the purchase of private homes and in the process putting taxpayers' money at risk in the event that the buyers default. My victims usually respond by giggling defensively. The most loyal protest that it is stimulating new building. But the government's own figures suggest that most of the homes sold under the scheme would have been built anyway. Tory MPs indicate the main purpose of this policy when even they joke that it should be called "Help To Buy Votes". George Osborne let the tactic out of the bag a few months ago when he told the cabinet that a boom in house prices would do no harm to their re-election prospects.

Well, now the chancellor has got the boom he wanted, in London and parts of the south anyway. Prices in the capital are soaring at a double-digit rate. In a past incarnation, as housing minister, Grant Shapps once made the observation that house price bubbles were "crazy". Now his government is stoking a boom that satisfies the dream of owning a property for a few at the expense of making it even less realisable for the many. The Bank of England is having a fit of the vapours. The deputy governor for financial stability, Sir Jon Cunliffe, has rung the alarm bell in the last few days by warning that this is a risk to economic recovery. A housing bubble was, he said, "a movie that has been seen more than once in the UK". The director of one of those disaster movies was Nigel Lawson, who presided over the Tory boom and bust of the late 80s.

The former chancellor, who is something of a hero to Mr Osborne, has now added his voice to those concerned by calling for Help To Buy to be effectively wound up in the capital.

To get to the heart of the problem, you do not need to be a Nobel-winning economist. You simply require the ability to spot the bleeding obvious. There are too many people chasing too little housing. That is the fundamental cause of expensive rents and property at unaffordable prices.

The 1970s has a generally bad rep as a decade, but they got at least one thing a lot more right then. They did some building. About four-fifths of public spending on housing was devoted to constructing homes while just a fifth was paid out in benefits to assist people with their rent. Over the current four-year spending period, less than £5bn has been allocated to building homes and £95bn has been earmarked for housing benefit. Spending more than 20 times as much subsiding rents as we do building new homes. There is only one word for this: madness.

The most potent criticism of Labour's plan is that it tries to tackle some of the symptoms of this crisis rather than address the root cause. Mr Miliband says he has an answer for that, too, which is to get house-building up to 200,000 a year by 2020. This is still short of the level required to keep up with new household formation. And how and by whom and where these new houses will be built remains foggy: it is the subject of one of Labour's many interminable reviews. But there are plenty of creative ideas out there. And a goal for raising house-building at least attempts to address the fundamental source of the crisis. Even Mr Shapps, when he is being sensible, might secretly agree.