Mary Ann Sieghart: Three cheers for falling house prices

Home-cum-business TheLimes, Wroxham, Norfolk Price: £675,000 Agent: Jackson-Stops & Staff Tel: 01603 612333 They say: Four-bedroom Georgian property with converted stables used as a three-bedroom B&B.

All I want is a room somewhere ..." Young people all over Britain are echoing Eliza Doolittle's lament. If it isn't bad enough that more than a million of them are unemployed, they're also finding it extortionate to rent and almost impossible to buy a home. So the Government's long-awaited housing strategy, to be unveiled today, had better be good.

Both parties in the Coalition are sensitive about creating a "lost generation" of young people who've worked hard through school and college and still can't find a job or a home at the end of it. Nick Clegg and Iain Duncan Smith are working closely on youth unemployment. And Clegg joins David Cameron today to launch the housing initiative.

It is based on the premise that there's a constraint both on the supply of homes and the demand for them. At least there's plenty of demand, but potential buyers can't afford the deposit needed to get a mortgage. The strategy aims both to increase the supply – by getting more homes built and bringing empty ones back into use – and to help buyers who can't lean on their parents to raise a deposit.

It starts at the bottom. Ministers have been aghast to discover the extent of fraud and abuse in council housing – costing the taxpayer between £5bn and £10bn a year, and using up homes that could be offered to people in need. Astonishingly, subletting a council property is not even a criminal offence. And people who already own a home are still allowed to apply for council housing. So they can pay a subsidised rent and rent out their own home at commercial rates, or live at home and let out their council property. Today's strategy will propose making subletting illegal and preventing home-owners from renting council houses.

It will also, for new tenants, offer shorter tenures. At the moment, you can be given a council house when you are young, hold on to it for the rest of your life, whatever your circumstances, and even hand it on to your children. The Government will recommend that tenants' needs are periodically reassessed and if they're earning more or need fewer bedrooms, they should either move or pay more to stay. Expect tabloid stories about council tenants with six-figure salaries: the bed-blockers of our day.

We've already heard about the bigger discounts council tenants will get if they want to buy their homes. But ministers are also planning to give some away for free. There are about 750,000 empty homes in England – whole streets of boarded-up houses in some northern cities. Rather than pull them down and redevelop, ministers want to hand over the keys to people who undertake to refurbish them. Social enterprises will be encouraged to train homeless people so that they can do up a place in which to live and make themselves more employable at the same time. The Government has earmarked more than £100m to bring empty homes into use. As well as a £400m Get Britain Building fund to drive housebuilders to develop their existing land banks, government departments have been asked to find public land that could be used for housebuilding. Just five departments have between them come up with enough land almost to meet the 100,000-home target. With land from other departments and from quangos such as Royal Mail and Network Rail, the Government hopes to end up with about 150,000 new homes.

Ministers also hope that innovative tax changes will encourage institutional investors, such as pension funds, to put money into the private rental market. At the moment, only 1 per cent of the UK's private residential stock is owned by institutions, compared with 10-15 per cent in most European countries. It would be good to create a reliable private rented sector, with responsible landlords, for the 14 per cent of us who genuinely want to rent.

But that still leaves 86 per cent who prefer to buy. And the hurdles are huge. According to the Resolution Foundation, the average low- to middle-income household putting aside 5 per cent of their disposable income each year would take 31 years to save a deposit in 2010, up from just eight years in 1983. In London, it would be 54 years.

The Government is desperate to see deposits come back down to 5 or 10 per cent, rather than the 20 per cent currently demanded by mortgage providers. Lenders, though, are reluctant to risk it. They want the reassurance of a government guarantee.

That's what's going to be announced today. Although this could get the housing market moving again faster than any other measure, it is also fraught with risk. After all, it was sub-prime mortgages that caused the financial crisis in the first place. At a time when job insecurity has never been higher, and defaults more likely, this is dangerous territory for the Government.

What would help most of all would be a sustained fall in house prices. Both buying and renting would become more affordable. And it would barely affect existing homeowners unless they have bought very recently and are in danger of negative equity.

For all others, it makes trading up cheaper and trading down less lucrative. But moving to a house of equivalent value is the same whatever your property is worth.

Ministers privately hope that increased supply will bring prices down. But they are terrified of coming out publicly for fear of what the Daily Mail would say.

In this, as in so many other areas though, the Mail has got it wrong. Most owner-occupiers these days have children or grandchildren. They worry about the young's chances of ever getting on the housing ladder. And they don't particularly fancy remortgaging their own house to pay for the next generation's deposits.

The one thing missing from today's housing strategy will be an outright acknowledgment that lower house prices would be a good thing. It's still too much of a political taboo. But ministers know that it's exactly what the younger generation need. So do prospective buyers and their parents. In the immortal words of Eliza: "Wouldn't it be loverly?"