It used to be said that a man's price is just a few pounds short of his mortgage. Though in Westminster that should now be his second mortgage, and women MPs, like Hazel Blears, have been just as bad as the men. It's widely accepted now that our political system will require radical change to restore public confidence. But there's something else that is needing reform: the housing market. Our national obsession with property corrupted parliament by turning many of our politicians into property speculators.

We have seen how MPs have been fiddling and flipping their second homes to gain, in some cases, hundreds of thousands of pounds from properties wholly or largely funded by the state. Some even bought second homes for their ducks. As a result, up to half of all MPs are expected to be retired, deselected or be voted out by outraged constituents. It's like a Stalinist purge. MPs are desperately waiting the four o'clock call from the Daily Telegraph.

They should erect a monument to Kirsty Allsop outside the Commons as a grim reminder of what happens when people become addicted to the drug of property. And a copy should go to the city of London too, because housing madness helped to destroy the banking system. Bankers who believed property prices could only ever go up created an inverted pyramid of debt on the slender basis of dodgy mortgages in American and British inner cities. The losses and write downs from the mortgage-related securities fiasco has so far reached some $4trillion world wide, according to the IMF. In Britain around £1trillion has disappeared from the asset base of the middle classes, who had been maintaining their living standards for years by borrowing against the nominal value of their homes.

The housing boom begat the debt bubble, which begat the construction boom. The mania for property diverted investment from productive activity into real estate on a colossal scale. From Riga to Dublin, European cities are surrounded by thousands of acres of unfinished developments, many of which face being demolished because there's no money to complete them.

The housing boom has inflicted the devastation of a small war on the national finances of European countries from Spain to the Baltic. Vast sums of public money are being wasted by central banks buying toxic mortgage bonds from insolvent banks.

Amid this devastation, ruined political careers in Westminster might seem the least of our problems, but the scandal of MPs' second homes is important because it was both a symptom and a cause of the crisis. Politicians became infected with housing madness under New Labour and started plundering the public finances to buy and develop second and sometimes third and fourth homes. So it's hardly surprising that MPs didn't ask searching questions about the housing bubble - they were benefiting from it.

And so were their constituents. Between 1997 and 2001, house prices nearly doubled. They nearly doubled again by 2005. It was as if the government had given every homeowner an average of £100,000. No wonder they voted Labour. We were all corrupted by the housing boom, to some extent. People talked endlessly about how their houses were earning more than they did, never asking where all this free money was coming from.

Well the truth is that it was being stolen from the next generation. Houses don't produce wealth, they merely transfer it from the young to the old - from the coming generation of families who have to burden themselves with colossal debts if they want to get a roof over their heads, to the baby boomers who are about to retire and live on the cash they make when they downsize. MPs were the most egregious example of this, but in a sense we were all invested in the housing scam. Well, it's time to call a halt. Our property obsession has been an economic and political disaster.

Now, governments and central bankers talk as if the real estate bubble was nothing to do with them. But in reality house price inflation has been actively encouraged by easy money, low interest rates and regulatory negligence. From mortgage interest tax relief to tax breaks to buy-to-let investors, successive governments have fuelled the housing mania. They subsidised the sale of council houses and then prevented local authorities from using the proceeds to build new social housing, thus creating an artificial shortage.

Housing is the only asset class which is free from capital gains tax, and both Labour and Conservatives intend to exempt up to £1m worth of property per family from inheritance tax. For 30 years, governments made property speculation a no brainer - and even now, in the wake of the crash, the thrust of government policy is to try and reflate house prices.

I spoke to a friend last week who said that his £1500 a month mortgage has now fallen to £600. He feels a bit embarrassed by this, since there are a lot of people who seem rather more deserving of a £900 a month bung. Our addiction to property must be curbed if we are to avoid yet another disastrous bubble. Property must be taxed like any other investment, like shares or savings - there is no rational justification for its exemption.

The mortgage industry must be properly regulated by the Financial Services Authority, with limits put on loan to value ratios to prevent young people taking on unsustainable loans of five or six times salary. 125% "suicide" loans and self-certification "liar loans" should be outlawed along with sub prime.

There should be a minimum deposit of 20% on residential loans as is the case in countries like Canada and Germany which have not experienced property crashes. Buy to let investors should no longer be able to set mortgage interest against tax, a measure which discriminates against ordinary home buyers.

Mortgage loans should be made "non recourse" as in America, so that when a house is repossessed, the mortgagee doesn't bear liability for any losses at auction. That would soon stop predatory lending, above all, governments must ensure that enough houses are built to meet population pressures caused by immigration and family break ups.

It is the most basic function of government to ensure proper residential housing is built. Perhaps now that we have a new generation of MPs coming along who will actually have to buy and equip their houses like the rest of us, they will finally see sense.