Britain has a chronic housing crisis; but it's a supply-side problem, not a demand one. House prices are too high, with most properties costing at least five times the average salary. Over the past two decades, house prices have more than doubled in real terms while incomes have not.
With prices so high and incomes falling fast, it's no surprise that banks and building societies will only lend to buyers who have at least a fifth of the price in ready cash. The banks are correctly terrified that borrowers will not be able to finance future repayments when interest rates rise again, or that house prices do fall.
After all, it was mispricing risk in the Naughty Nineties that got the banks into trouble before, and they don't want to drink from that punchbowl again. One in eight of households already has mortgages in forbearance, and another 2 per cent rise in base rates could push many more into the danger zone.
That's why George Osborne's Help to Buy mortgage subsidy scheme is sheer lunacy as it confuses the supply-side problem with a demand-side problem. Is the Treasury now in the business of being a player in the sub-prime lending industry? While Mr Osborne's plan may be rooted in the best of intentions, the unintended consequences could be to drive up prices in an already sclerotic and rigid market.
Yet there's an alternative, and that's to build more houses now, and more affordable ones; private as well as new council housing. Why not? It was a Conservative government that led the way with council-house building in the 1950s so why shouldn't the coalition do so again?
If you build more houses, prices will come down. More homes should also bring down the cost of rents that are also punitive. It's not a new problem: the UK has had a housing shortage for decades but since the financial crash, the number of homes being built has fallen off a cliff – in 2010 the number of new homes was about 23 per 10,000 inhabitants. Only 100,000 or so new homes are being built a year – about half the level required to meet projected demand. Land for housing is crying out to be developed. UK house developers have at least a million plots waiting to get built on while there are so many brownfield sites that are empty, waiting for permission to be converted into residential use.
But there's a problem here. The developers are as frightened as the banks of exposing themselves to over-priced properties so long as they believe prices might fall and local councils are still living in la-la land over planning permission. That's why building state-financed housing for renting, an idea being pushed by Dr Tim Morgan of Tullett Prebon, is such a sensible solution. It would provide affordable housing and give the Chancellor with the single biggest lever he has to boost the economy; and it's a home-grown solution that requires no imports.
It's one of life's mysteries why the Chancellor hasn't pushed for more housing development, which would at a stroke help the young on to the housing ladder and boost jobs from plumbing to retailing. He's even got his own lethal weapon in Eric Pickles, the local communities minister, who has already done so much to shake up planning laws by forcing all those nimby local councils to come up with new numbers in the National Policy Planning Framework.
Mr Pickles has given councils until 1 April to come up with the numbers and if they don't, he should carry out his threat to strip them of planning powers. If there is a problem over building new homes, it's not that they encroach on green belt, but that so many of them, to borrow a phrase, are "pig ugly". That's the real crime.