It is the one point on which all people and parties agree: Britain’s housing problem is one of supply and demand. The solution is to build more homes. It doesn’t matter who owns them: once we have more supply, the normal market – where perfectly equal individuals reach great deals through mutual self-interest – will resume. This orthodoxy on house-building is so ingrained that if you query it you are regarded as a person who doesn’t understand supply and demand.

Last week the economist John Kay argued that, at the current rate of building – 100,000 homes in 2014 – even to replace existing stock will take 270 years, given that there are 27m dwellings in the country. But this is not accurate – there were actually 141,000 built last year, I guess he was rounding down for ease of arithmetic. It is not enlightening – like a TV chef filling a bus with sugar and yelling “Milwaukee consumes this much sugar every quarter”, the extension is supposed to give a sense of scale, but instead bestows senseless impotence. Ultimately, it is misleading; houses aren’t people, or crops: they don’t have to be replaced every year. Indeed, if you make them really well, you might expect them to last 270 years.

But the supply argument is not a simple mistake; it is deliberated and dearly held. Once you accept it, other things follow: supply is too low because planning is too stringent, because people are selfish and they would prefer to have a large garden than to help their fellow man. It follows also that supply wouldn’t be a problem if demand were lower, so now there are people to blame: immigrants, baby boomers with their great big houses, divorcees who have perverted the supply chain with their toxic personalities, people living alone, whose atomised existences are unsustainable in our tiny jewel of an island.

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Supply-and-demand turns this into a character weakness. We’re all a little bit too selfish and nimbyish; we’re inconsistent, wanting our house prices to rise but moaning when our kids can’t get on the property ladder; we want cheap labour but don’t want to accommodate the new arrivals who provide it; we’re just bad people who have created the market we deserve; those who’ve had no agency – the under-30s – should direct their ire towards those who have – their own parents and grandparents.

This depressing analysis is, fortunately, quite wrong. The problem of supply, for one thing, is not one of planning but developer incentives. Land value rises faster than the value of housing stock: expecting developers to crack on, to build and sell, is to expect them to get rid of an asset that would otherwise rise in value. This system would work fine if property development were a social enterprise. However, where the aim is maximising shareholder value, these incentives more or less guarantee that they will drag their feet: land with planning permission will remain undeveloped; when it is developed, the housing stock will be thrown up as cheaply as possible.

This is really easily solved, without having to undertake a mass reversal of the modern psyche. We could have a land value tax; the Labour proposal to compulsorily purchase land that was left idle would have worked. The Conservatives branded that “Stalinist”, while including in their own manifesto the proposal to appropriate social housing, then sell it. Politics never looks more pitiful or, frankly, animal crackers than in the housing debate – it’s almost a relief when they don’t discuss it.

But that isn’t the half of it. What we have seen over three decades is a rise in house prices far beyond what people can afford. This is thought of as a London problem, but that can apply only to things that do not infect the rest of the nation. Beards are a London problem – unaffordable housing costs have already spread to Reading, Cambridge, Oxford, Bristol, Brighton and beyond. GDP figures are mainly telling a story of housing costs in the south-east. Cities where housing is less expensive have no part in this economic growth but are expected to rejoice in it anyway. This could never have happened through simple shortage. “The housing market,” wrote Faisal Islam in the Default Line, “is driven principally by the availability of finance, mainly mortgage debt, but sometimes bonuses, inheritances, or hot money from abroad.” He is not, by the way, a Marxist; his career as a broadcaster relies on his impartiality.

Essentially, what looks like economic growth is simply the extension of credit to fuel a housing boom

To deal with those in reverse order: the money from abroad needn’t even necessarily be hot – 75% of inner London housing is never shown on the UK market, going straight to mainly Asian investors. Last week I shared a panel with a developer, Martyn Evans, and we were looking at a website’s illustration of a block of flats aimed at foreign investors. Apart from Canary Wharf showing up in the background – a scene of geographical impossibility – the funniest bits were the characters: a young man who looked like Prince William, on his phone; a kid with a bunch of balloons, running past in a blur.

This was actually the main point of difference between Evans and me. (It is amazing how many developers also think the system is completely broken.) He said investors look for exactly the same qualities as residents do. No (I insisted): residents want somewhere to live. Investors want somewhere where their investment will be safe. What could possibly be safer than a place where multiple balloons can be carried? Who last saw a child carrying a bunch of balloons?

It has become so normal for housing to be sold abroad that to complain about it sounds old-fashioned, almost racist. However, when anybody from anywhere can buy a flat in your city, sooner or later the people who live and work in it won’t be able to afford to. Rents will become difficult – last week the average monthly rent in London hit £1,500 for the first time. Soon after that, your population is in lifelong servitude to a landlord class, or it moves to Wales. The solution could not be easier: we could ban the ownership of housing by foreign non-residents, as they do in Norway and Australia.

Inequality has also played its part, as salaries in the financial sector have ratcheted up what sounds reasonable. Yet far more important has been the role of banks in extending credit.

This is how money is created – banks lend it to people, and it appears in the economy. Of this lending, 85% is on existing residential housing stock. Essentially, what looks like economic growth is simply the extension of credit to fuel a housing boom. Banks cannot lose: instead of being indebted to them for 20 years, it’s 30; or owing them three times our salary, it’s six; the very luckiest among us have wandered into a state of debt peonage to a high street bank, while the unlucky – who will never get on to the housing ladder – work to service the investments of the lucky. This is a bit more complicated and may involve an overhaul in the way we create money.

But when we look at how badly things are being done – the vanishingly small number of people served by the status quo, the huge numbers, entire generations, who will have to live differently because of what we’ve allowed – this can’t be allowed to stand. So sure, we can talk about supply and demand, and even create the political will to do something about supply. But the exciting bit will start when we allow ourselves to think bigger.