An Englishman’s home is meant to be his castle – it’s more like a rabbit hutch

It does not take much to get the British talking about house prices. If they are going up, we argue about whether it's a bubble or not, and whether it is a threat to the economy. If they are going down, we fret about whether people are falling into negative equity. Even if they are going nowhere, we worry about why the market is flat.

But although we discuss overheating house prices obsessively, an important point is often overlooked. It is not just that our houses are too expensive, they are also too small, and, even worse, they're getting smaller.

That is odd. Usually, products get both better and cheaper as we get richer. Housing, however, seems both to get more expensive and worse. In fact, bigger houses should be a clear objective for any government that wants to raise living standards. If that means opening up vast swathes of the countryside for development, so be it.

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We talk endlessly abut the number of houses we have, and how much they cost. But perhaps surprisingly, we talk very little about their quality. There are, of course, many ways that houses have got better over the past few decades. They have better heating, and slicker kitchens, and come packed with labour-saving devices. But one of the most important measures is surely size.

A bigger house isn't necessarily a better house condition and location count for plenty as well. Even so, all other things being equal, size counts for a lot. No one likes living in a cramped space there are no billionaires in studio apartments.

And yet there is a growing body of evidence that our houses are falling behind the rest of the world, and in some respects getting worse. An Englishman's home is meant to be his castle but increasingly it is his rabbit-hutch.

A survey last month by Building Research & Information found that half of all British houses failed to meet the minimum recommended living space requirement. A survey by LV Financial Services found that the average size of the British home had shrunk by two square metres, from 98 to 96 square metres (1,030 square feet) in the decade from 2003 to 2013.

Over time, that typical home is going to carry on getting smaller and smaller. The average new house built in the last five years measured only 76 square metres. As more and more of those smaller properties come on the market, the average size of the house will inevitably come down.

We might be used to the idea that Americans or Australians have big houses. Those are, after all, big countries with lots of cheap land. But we also come off badly compared to similar European countries.

According to research by Policy Exchange, we now have the smallest houses in Europe. Even the Greeks have more space to live in than we do. The average Irish house is 15% bigger, a Dutch one 53%, and a Danish one 80% more spacious. Those are huge margins, given that many of those countries are poorer than we are, and are just as densely populated.

Something strange is going on. Over time, most products get better. Our TVs are a lot bigger than they used to be. Our phones can do more than a desktop computer could do five years ago. In fact, in any industry you look at, prices tend to come down over time, or quality improves, or some mixture of the two.

You might expect the same trends to apply to housing, and in most countries they have. In the US, the average house has increased in size from 1,525 square feet in 1973 to 2,679 square feet now. People get richer as the economy grows, and they spend some of that extra money on somewhere nicer, and usually more spacious,to live.

At some point, of course, you run into diminishing returns. Great big houses become expensive to heat and maintain, and there are only so many rooms you need. There is some evidence that that point has been reached in America, but it seems very unlikely that we're at that stage in the UK.

In fact, it is not hard to work out what is happening. Britain suffers from a chronic shortage of new houses, most of all in the overcrowded southeast. Developers may be partly to blame for that, and so might the banks, but the biggest culprit is the government.

It refuses to make enough land available for new houses. The result is that in crowded city centres existing houses get divided up into smaller and smaller units, while out in the suburbs, as many new houses as possible get crammed onto whatever land is made available. The net result is that our houses keep on getting smaller when they should be getting bigger.

The government may think it is protecting the green belt, and in fairness, it is. But the UK also has a fast-rising population, and is starting to grow wealthier again. The government also has a duty to promote rising living standards, which include a better standard of housing, along with everything else you expect.

The conclusion? People may not like it, but Britain needs a huge increase in the amount of land freed up for development. That will mean more houses, which will moderate the pace at which they go up in price. But perhaps more importantly, it will mean better quality houses as well.