Johann Hari: The dark secret behind the property boom

In Britain, the middle classes have a new narcotic of choice - property. Every swanky dinner party is dominated by incessant chatter about mortgages and garages and patio extensions. Every TV show seems to feature Sarah Beeny or Kirsty Allsop -or their army of imitators - lurking on a street corner with a bevy of estate agents, a clique of interior designers and a manic grin. If rising house prices could be snorted, suburban addiction levels would go through the roof and pass on the way through a lovely attic renovation with its own designer bathroom, of course.

But there is a dark secret behind Property Ladder. Britain's property boom has occurred for one reason and one reason only. For 25 years, the British government has sold off its stock of council housing for giveaway prices, and replaced them with nothing. The result, as Patrick South, policy director of Shelter, explains, is "a huge backlog of desperate families living in the few lousy scraps of housing that remain to councils - and a generation of children growing up in hidden squalor."

The spurting, surging property inflation of the Noughties is caused by the deliberate drying-up of decent council homes since the 1980s, causing demand to wildly outstrip supply. It is Margaret Thatcher's final gift to the middle class - and her final curse on the poor.

I decided to take a whistle-stop tour of the urban crush causing the boom by talking to people door-to-door on the Ocean Estate, a sprawling collection of tenements and grey tower blocks that juts into the east London skyline, a concrete slab of poverty between the glistening towers of the City of London and Canary Wharf.

Near the spot where in 2001 Tony Blair delivered a speech promising change, I met Sarah Hussein, a young mother living with her husband and four children in a poky two-bedroom flat. "The overcrowding is a nightmare," she said softly, inviting me into the living room as her children cycled round in circles on tiny bikes. "My sons share one room, and me and my husband have our two daughters sleeping in with us. I've started taking sleeping pills because it's impossible to crash out with three other people in the bed. It's bad enough now, but how can we carry on like this when the kids get older? The council told us we will have to wait seven years to be rehoused, but the girls will be women by then. Where will they sleep?"

Sarah led me up to the boys' bedroom - a line of two beds and a wardrobe, with no floor space - and I shivered. Casually she said, "Oh, that's the damp. It's in the walls. Mould keeps building up. I'm frightened the kids will get asthma."

Sarah is no exception. Shelter has discovered that 268,000 children in Britain are sharing a bedroom with their parents, many well into their teens. But in the next block along, Anna Phillips is an example of an even worse side-effect: her seven-year old son Tony doesn't have a bedroom at all, not even a shared one.

"There's just no space," she said as I tried not to stare at a mousetrap in the corner. "We turn the kitchen into his room at night. What else can I do? We've got two rooms, five kids and no chance of a bigger flat this side of Armageddon."

Some 98,000 children in this country - equivalent to one Tony in every classroom - are sleeping in kitchens, bedrooms and even bathrooms. They all want a decent council house - but there are none to be had.

The problem isn't the right-to-buy itself, a good idea to expand the number of people who enjoy the security of home ownership. It's that the Conservatives, and for too long, Labour, did not reinvest the money from the sales in building new houses, but chose to fritter it away on tax cuts and middle-class subsidies like Mortgage Interest Tax Relief.

Anna, like almost everyone else around here, explained that the worst thing is the damp. "No matter how much you wash them, the kids' clothes stink by the time they get to school because of it. Everything stinks. The kids get called names at school, and it breaks my heart."

The British Medical Association recently found that "multiple housing deprivation appears to pose a health risk that is of the same magnitude as smoking and, on average, greater than that posed by excessive alcohol consumption." That's why, in flats like this, 40,000 elderly people die "prematurely" every year, and an epidemic of childhood respiratory diseases is breaking out. Tony might as well be smoking 30 cigarettes a day, and the seven-year-old necking a bottle of vodka every night.

Liz Whyte, head teacher of Royston Primary School, sees the effects of this grinding, binding poverty walk through her gates every morning. "The mental health problems are so huge," she told me. "We have nine-year-olds self-harming. There's a lot of rocking, fingers in ears. There was one family where the child was absolutely delighted when he got a bed. He went around telling everyone. He didn't realise that everyone else had a bed."

For years, housing was a forgotten issue in British politics, as places like the Ocean Estate were left to turn black with mildew. Under a second-term Labour government, the building of social housing hit its lowest level since 1925. The number of families with no home at all, batted from B&Bs to temporary flats and back again, hit a record 150,000. It is only now that the Government seems finally to be waking up to the disastrous housing legacy left by the Conservatives. In the last manifesto, they promised decent homes by 2010, but as so often with New Labour, they are offering a maddening mixture of brilliantly high spending and mindlessly right-wing mechanisms of delivery.

They are offering cash for home improvements across the country. But council house residents can only access it if they vote to transfer their homes out of council control and into the private sector. This process wastes £450 per house in administration before any improvements can be made. If an area votes to stay with the council, it gets no extra cash, so how can the Government's decent housing target be delivered in just four years for those blocks?

The Public Accounts Committee has described this approach as "dogmatic" and "delivering questionable benefits for billions of pounds". Why not allow councils to invest directly in the houses themselves where the tenants want it?

Council housing was created after the First World War, when David Lloyd George promised "homes fit for heroes." Eighty years on, women like Sarah and Anna - struggling to give their kids a decent upbringing amid the damp and the cockroaches - are already heroes. So how long are they going to remain trapped in homes fit for nobody?

j.hari@independent.co.uk