Politics often lags behind reality. But when the two get too badly out of sync, what’s produced is disaster. For proof, look at the catastrophe that is housing in London. We are in the final straight of the capital’s mayoral race. An odd, ugly and racist contest, it is also a remarkable one – perhaps the first housing election ever held in postwar Britain. Housing is the thing that Zac Goldsmith, Sadiq Khan and the rest of the candidates bang on about the most – rightly so, as it’s the biggest topic for voters. Yet the terms used by politicians are as inadequate as the policies they devise.

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Take one of the lines most commonly trotted out: that this is a crisis for London’s young, who can’t afford to get on the property ladder. One of Britain’s most respected thinktanks, the Resolution Foundation, has been digging through the government’s own figures and given me exclusive access to its analysis for the capital. Perhaps its single biggest finding is this: the proportion of Londoners who own a home with a mortgage has been sliding since the early 90s – and has now dipped below the number who rent privately. In John Major’s time, less than 20% of all Londoners rented privately, now that is in the mid-30s, and marching up to 40%.

In other words, the idea that Generation Rent is the one with the problem is for the birds: London is becoming a city of renters. Nor is that trend likely to reverse. The consultancy PricewaterhouseCoopers predicts that, in less than 10 years, 60% of the capital will be renting from a private landlord or a housing association.

Let that point sink in, because only then do you grasp how much it changes politics in London. Britain’s political economy remains shaped by Margaret Thatcher’s desire to create a property-owning democracy: one in which Britons held shares in the privatised utilities and building societies and owned their own homes. What these figures show you is how badly the Tory dream has crashed and burned. Not only do fewer Britons now own shares than they did in Thatcher’s time, but also in the capital owner-occupiers (both with mortgages and without) will soon be an outright minority. For the Iron Lady and her generals, the whole point of spreading asset ownership was to bind the middle classes by self-interest to the upper classes. Do that, and Britain would turn a permanent shade of blue. The project has clearly failed.

The maximum you want to spend on housing is a third of your wage. More than that and the danger signs start flashing

What’s happened instead, the Resolution Foundation’s analysts find, is that London’s households are spending more than they ever have to keep a roof over their heads. One of the truisms of personal finance is that the absolute maximum you want to spend on housing is a third of your wage. Much more than that and the danger signs start flashing. And in the mid-90s, only about 17% of Londoners were spending more than a third on housing; now that’s rocketed up to 31%. It almost goes without saying that low-to-middle income households – think of a family with kids making £40,000 a year – are stretching themselves way more than that.

If interest rates and property prices go up, these trends will only get worse. As it is, they make a nonsense of those other political cliches of the great property disaster. Sure, many Londoners are mired in a housing crisis: renting eyesores, spending so much of their pay on basics as to make saving a hopeless dream. But a few others are having a very profitable crisis. They’ve used record-low interest rates both to pay their own mortgages and to buy more properties to let out. The estate agency Cluttons predicts that rents in London will go up 16% over the next four years, underpinned, it says, by “an ever-expanding Generation Rent class”. As ever, the money men are way ahead of the politicians.

So you have a political class – both Tory and Labour – preaching home ownership, and a pundit class mainly focused on young people getting on the property ladder. Meanwhile, in the capital, the safest way now to buy a home is to own one already. And when it comes to renting, the national discussion is nearly zero. As the Resolution Foundation’s’s Lindsay Judge says, the rights of renters versus landlords are “policy-light and politician-free debates”. That won’t change much nationally. Not with a housing minister, Brandon Lewis, who is also a landlord. Not with a Conservative party that draws valuable funding from the property developers. Not with a parliament in which one in four MPs rents out property.

Khan may boast of his council-estate upbringing as a badge of London authenticity, but after over 30 years of right to buy, that actually makes him a comparative rarity. Much more representative is the Greens’ Siân Berry. A 41-year-old private tenant, she’s moved six times in 18 years. “The last time I moved, we had to put down eight weeks of rent and hundreds of pounds in various fees,” she told the Guardian this month. “It just gets worse and worse.”

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What is emerging in this vastly unequal city is a new and stark kind of class politics between owners and renters. To own property in London is to hold a golden ticket: an asset that earns more in two days than the average worker pulls in within a week. To rent, on the other hand, is to pay more every year just to live in an unliveable city. Towards the bottom of the market is to live in more crowded conditions and to be moved on by a landlord at the drop of a hat. And it is to know that – short of a miracle – your stay in the city is only temporary and insecure.

Yet the renters are yet to have a real political vehicle. At a housing conference in east London last Saturday, I was struck by how many attendees only grudgingly supported Labour. Khan and Goldsmith were both in the pockets of the property developers, ran the claim. Jeremy Corbyn needed to have a word with those Labour councils busy demolishing social housing. The disconnect between Westminster and local politics is as real in the capital as anywhere else in Britain. But at a time when David Cameron and co are assumed to be the only game in town, what’s most remarkable about the Tories is how they’ve failed to create anything like popular capitalism. Instead, what they’re defending is unpopular capitalism.

• This article was amended on 28 April 2016. An earlier version referred to “final strait” where “final straight” was meant.