THERE should be few more straightforward investments than housing. Everyone needs warmth and shelter, and a place to eat and sleep. As we turn a house into a home, it becomes an expression of our personalities, filled with memories.

In economic terms, a house is a capital good. It should have value because living in it makes people happy over many years. For most people, their home is their most valuable and long-lasting asset.

Finance for the purchase of these valuable assets comes from bank loans. Since houses occupy land, these lenders can secure their advances by acquiring the right to insist on the sale of a house if their borrowers fail to make repayments in full or on time.

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There is everything which is straightforward about housing, though. In the Industrial Revolution, cities expanded rapidly with people who became poorly paid workers. Whole families would live in a single room, sharing access to water, and with almost no sanitation. Infectious diseases were rife.

The mid-20th-century solution was to build houses quickly. The spacious Wheatley homes of the inter-war years gave way to the “deserts with windows” of huge corporation housing schemes. But for many years, the government ensured that there were about 300,000 new houses built in Britain per year.

In central Scotland, housing increasingly became a public service with assured tenancies. Careful regulation ensured that banks could not be mortgage lenders. Instead, specialist building societies provided the long-term finance needed for the housing markets.

As the post-war recovery turned into a boom, Harold Macmillan assured his anxious Conservative Party that “most of our people have never had it so good”.

Then the generation of politicians who had been shaped by wars and the Great Depression began to retire. That’s when Margaret Thatcher was able to articulate her rather old-fashioned appeal to individualism. The housing market was to have a large role in her experiment in building a property-owning democracy.

It was unsurprising that legislation to enable council house sales at massive discounts was popular among the tenants who could afford to buy their homes.

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But for the Thatcherites, by funnelling the sale proceeds back to the Treasury rather than into a council house building fund, they were able to achieve the subsidiary objective of weakening local government.

Then, dissolving the bulk of financial regulation, the government created a housing bubble. There was suddenly a “housing ladder” on to which young people scrambled, taking advantage of the availability of credit to buy a flat, then a small house, and finally a larger house, using the capital appreciation from successive sales to fund the next purchase.

That’s a trick which works well when house prices are rising. I began my career at the time when a sudden fall in house prices led to “negative equity” at the same time as interest rates were rising rapidly.

People found they were living in a house which was worth less than the loan they had taken out to buy it – at the same time as they became unable to meet the loan repayments.

There can be no better testimony to the short memories of many bankers than that after the housing crisis of 1989-90, British banks poured funds into the sub-prime asset markets in the US only 15 years later – finding out the hard way that loan securitisation was just another get-rich-quick fad balanced on top of a financial bubble.

Today’s problem is different. In many parts of the country, the bottom rungs of the housing ladder have been snapped off. Our predilection for owning our own houses, encouraged by successive governments, means that other ways of housing tenure have become much less common.

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The mix of housing stock often does not meet our needs. Relatively low rates of house building mean we are not addressing it that problem quickly enough. In cities, houses are often bought speculatively, sometimes by foreign owners, to be held as financial assets which can then be sold on.

In rural areas, where houses prices are much lower, wealthy city dwellers with high incomes can easily buy up houses which lie empty for much of the year, while key workers struggle to find somewhere to live.

Far from being a straightforward class of productive investment, the institutional structure of the housing market, including its links to financial markets, has meant that housing has repeatedly been the cause of economic and social fragility.

In this discussion, markets and institutions have been largely impersonal, influenced by governments and banks, and impervious to peoples’ needs.

After Scotland achieves its independence, reforming housing markets to ensure they are better able to ensure the wellbeing of communities, rather than the weight of money will be an important part of its Central Bank’s mandate.

Robbie Mochrie is from the Scottish Currency Group.