It is summer: time for lazing around, letting your mind wander and, of course, devising a stupid solution to Britain’s plunging house prices.

It all looks bleak on the housing front. The latest figures from the Nationwide Building Society suggest prices in July are already 9 per cent lower than their October peak. With mortgage lenders unable to gain access to wholesale funding, cheap finance is a thing of the past and sensible buyers are pulling out of deals. So house prices have further to fall.

Home builders are screaming. Residential investment has all but stopped, threatening the economy with its first quarterly contraction since 1992. The industry says: “Something must be done”. “Now.”

The Council of Mortgage Lenders has suggested “a straightforward and attractively priced repo facility”, which would involve the Bank of England lending more money to banks in exchange for new vintages of mortgage-backed security. It would reopen the wholesale market for bank finance and allow mortgage providers to cut the cost of borrowing, the CML says. Demand for property would rise and the housing market would stabilise. “It can be implemented quickly, in an environment where speed is of the essence,” says Michael Coogan, CML director-general.

Politicians have their own plans. Last month, David Cameron slammed the government for its failure to adopt the Conservative party’s economic recovery plan with its ideas for a cut in stamp duty for nine in 10 first-time buyers. “Why is he dithering when thousands of people are being locked out of meeting their dream of owning their own homes?” Mr Cameron asked. After all, demand for property would rise and the housing market would stabilise. It looks as though Alistair Darling, the chancellor, agrees.

Not to be outdone, the Liberal Democrats have their own vision. Let government agencies buy up £20bn of unsold housing stock, Vince Cable suggested in the Institute for Fiscal Studies annual lecture. This would give a cash-flow injection to housebuilders and help the banking sector to cope with the credit crunch, the party’s Treasury spokesman insisted. “Since the benefits are obvious, why doesn’t it happen?”, he complained. Demand for property would rise, the housing market would stabilise and we would help the poor get into better accommodation.

But I can do better than all these. I can save the housing market, save the country from recession and not cost the government a penny. Instead of Fannie Mae and Freddie Mac, the US government-sponsored agencies that guarantee $5,200bn (£2,700bn) of mortgage debt, we should have our own British GSA: government-sponsored arson.

For the cost of a few matches (I will pay) and some monitoring to ensure the targeted households were insured and the residents were out, we could burn down a good chunk of our housing stock.

Just think of the benefits. Desire for accommodation from the newly homeless would stabilise house prices and shore up the buy-to-let sector. Hotels, the weakest part of the service sector, would benefit from the new demand for temporary accommodation. Unemployed construction workers would be saved from the dole by a rebuilding boom, funded by insurance claims and boosting residential investment, the weakest component of expenditure. The rise in prices and construction would help the banking sector to cope with the credit crunch.

The Association of British Insurers might not be pleased. But government could offer liquidity support through the Bank to get the companies through their cash-flow problems. Longer-term they would raise prices, which would have a minimal effect on inflation, given home insurance has a weight of only 0.2 per cent in the consumer price index. So, with no government expenditure, no tax breaks, some firelighters and the will to act speedily to prevent a housing meltdown, we can save the economy from recession and protect Britain from a housing downturn.

Needless to say, all of the above solutions are absurd. Pretending that, with a bit of support from the Bank, mortgage-backed securities will immediately rise again flies in the face of the facts. Mortgage lenders can already access ample liquidity for new lending at the Bank if they want to use hundreds of billions of mortgage assets they originated before the end of last year. We should not be surprised or disappointed that prudent banks are tightening credit conditions in a falling housing market.

Giving a stamp duty tax break for first-time buyers increases demand and so mostly raises the price of property for any hapless individuals encouraged to buy. To the extent that any first-time buyers gain from cheaper housing transactions, a large group will be the newly divorced. Brilliant. The Conservatives now offer tax breaks for marriage and divorce.

The nationalisation of housing stock has been tried before without success. Worse, the unsold stock, by definition, has to be in areas of least housing need. So the Liberal Democrats’ plan fails the homeless and tests of sensible use of taxpayers’ resources.

And what about government- sponsored arson? Well, it is not clever but it sure would boost growth.