Imagine you're a salesman trying to sell a brand new car to a group in which only one in every four potential buyers even consider what you offer. Add to that a shortage of loans to buy the car, and an even shorter supply of attractive models. Even a car salesman would find that a tough sell.

For cars, read new houses. Only one in four consumers would choose a home built in the last 10 years. That means even if the shortage of mortgages can be solved and the undersupply of homes can be tackled, there may remain an acute shortage of potential buyers. Too few people want to buy one.

Our research at the Future Homes Commission, published today, shows the reasons why loud and clear. Not enough space in the rooms. Not enough storage. Not enough natural light. And not enough flexible spaces for communal and private living or changes in the household over time. In other words, they don't think new homes are built for the needs of modern families in the ways that Victorian and Edwardian houses were.

And in too many cases of new development consumers are absolutely right. Riba's Case for Space report showed the size of new homes in the UK is well below that of Ireland (15% bigger), Denmark (53% bigger) and Germany (80% bigger) – and shrinking.

Moreover, returning to the car analogy, designing cars for customers' dreams put General Motors on top of the utilitarian Ford Model T. GM designed cars that played on the fantasy of driving a vehicle that feeds your status, imagination and pleasure.

That sort of appeal to consumers' hearts as well as wallets is almost entirely missing from the mass housing market.

The lived experience of residents we met and researched backs this up. Lack of storage was top of the list of complaints.

Ipsos Mori filmed for us a young couple who had bought a new two-bedroom flat in a smart looking block in Liverpool. When they moved in, they found nowhere to put their vacuum cleaner and exercise frame except alongside the second bed, with guests having to climb over them to get into that bed. What will happen if they have a child? Or an older relative come to live with them? Kitchen storage was so meagre they had to keep non-perishables in the boot of their car. Purpose built? To what purpose? Maximising profit by minimising space.

You might ask why the couple didn't spot this beforehand? But the shocking lack of key information about new homes is another reason for buyers' reluctance. You will learn more about your breakfast cereal than a potential new house.

Worse still, any walk-in storage large enough to plonk a single bed in is likely to be called another bedroom to push the price up. That's what British estate agents and valuers do with new houses – count the bedrooms and ignore the storage and other important features such as energy efficiency even at a time of skyrocketing fuel prices. Talk about missing a trick: that's why cars advertise mpg (even though those figures are from perfect driving conditions).

We've known for decades from "tower block blues" that lack of space and light, good insulation for heat and sound, and agreeable surroundings are not just design and economic issues. They can cause serious emotional problems for crowded families, for school-age kids looking for a quiet space to study, or cultural needs like a prayer space for Muslims. We learned that families watch television with headphones because they felt guilty that their neighbours might hear it.

But that sort of bleak and cramped experience is not inevitable. Good design can solve a lot of those problems.

In Derwenthorpe, a new development on the outskirts of York, we saw well-designed houses that achieve attractive living spaces at a viable cost to buyers and to the builders. The build price was modest, but the quality of the construction, the layout of space and storage, the large windows and capacity to upgrade its energy efficiency along with amenities like good transport being built surrounding them meant they were being snapped up.

This is a win-win situation not only for buyers and builders, but also for neighbours whose resistance to new development on design grounds is a further block on expanding the housing market.

Design and the needs of consumers need to be at the heart of the housing debate. But this is not special pleading by Riba. The Future Homes Commission is independent and had no architects on it. We spoke to over 140 people – from estate agents and consumers to developers and councillors. Now is the time for the best of British architecture to be built, not in towers in the City to satisfy the edifice complex of the rich, but in residential areas that need the best, not the least, that we can do for ordinary people of all ages to live lives of quality.