Housing benefits for 18- to 21-year-olds are due to be cut next month. This is, of course, a policy that is both vicious and vacuous, and whose impacts will be felt in a rise in homelessness and the increased vulnerability of young people, especially those who are members of marginalised and at-risk groups. Even David Cameron’s government shied away from the idea.

Access to housing is probably the most vital issue in UK politics at the moment, despite all the parties being mindlessly distracted with the Brexit dog and pony show. Houses in the UK are the smallest in Europe, badly built and, despite successive governments claiming they want to make them “affordable,” absurdly expensive. Over the years policymakers have shifted towards treating houses as assets first, and only secondarily as places that people live in. Asset appreciation is probably the closest thing we have to “printing money” in our economy, and the short-term gains that can be realised for free have proved too attractive for governments to resist.

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However, the policy objectives of increasing house prices and enabling those on lower incomes to afford housing are diametrically opposed. You cannot on the one hand steadily increase the value of housing relative to the median wage, and on the other reduce the price.

The last Labour government tried to bypass the contradiction, subsidising high rents through the housing benefit system. This is a great idea if you believe, as Gordon Brown did, that your new post-history economic theories have placed the economy beyond boom and bust. You get to realise the free money from the propertied middle and upper classes, keep business interests happy by putting a lid on wage growth, and still keep those on lower incomes in houses, albeit houses that get increasingly smaller and shoddier. Those property owners can “free up the value in their home” by taking out mortgages and other secured loans, and this debt can fuel consumer spending.

Unfortunately, you can’t beat the Minsky cycle of financial instability. The New Labour strategy of pumping housing benefit into landlords’ pockets to sustain ridiculous wage/rent ratios gave the Tories the perfect headline figures for their punitive benefit cuts. “Look at this family getting thousands in benefits,” they said. The narrative has stuck, and Labour has been unable to counter the Tories because doing so would require Labour to admit that it was subsidising an unsustainable debt-fuelled consumer spending bubble.

This is why there is so much teeth-grinding on the Labour left about Blair and Brown’s third-way centrism. The defining myth in our political narrative positions the left as nice but irresponsible, and the right as bastards but competent. That New Labour fluffed it with rightwing policies doesn’t matter. They were “on the left” and so they confirmed the easy standard narrative that “the left can’t be trusted with money”.

The huge irony is that if they’d actually been doing the job that a Labour government should have been doing – ensuring economic growth was equitably distributed through decent wages and strong public investment rather than trying to play games with private finance – the Tory government would have fewer excuses to say “Look at the mess these spendthrift commies made, we need to fix it with austerity”. As good and decent as some of Labour’s achievements from 1997 were, they also laid the groundwork for the government that followed to completely asset-strip the state.

Chuka Umunna has skated tantalisingly close to admitting this in a column for the New Statesman, referring to New Labour’s economics as “a politics for the good times” that ignored “institutional reform” and left the gains “vulnerable to the vagaries of … a Conservative government”. However, the fundamental contradiction at the heart of this, between keeping house prices elevated and somehow making them affordable, remains unacknowledged: one of those “third rails” of politics that nobody dares touch.

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If the choice has to be made, the Tories and Lib Dems will inevitably pick asset prices over affordability. They’re quite happy with low wages and excessive returns to landowners, and government acting as a buffer against destitution just encourages dependence. Labour should be the ones to push for reform, but the party is still trapped in its internal crisis. The middle classes they are relying on to avoid being wiped out at the next general election are exposed to a lot of downside risk if house prices flatten or drop. A lot of people who did nothing wrong, except follow the sensible advice given to them at the time, stand to lose more than they gained in real terms, if not be left homeless and in negative equity, without careful management by the government to buffer them in the short term. Labour has a few good ideas, but the fundamentals remain a very hard sell.

Nevertheless, regardless of the party politics, we will have to grasp the nettle on this one. Centre-left fiddling, and pretending that we can both raise prices for home owners and lower prices for those who need a home, has left marginalised young people vulnerable to rightwing cuts. Labour needs to own it, address it, and do better.