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It is good news there are fewer homeless people on the streets this year. It is also pleasing that the number of families in bed and breakfast accommodation has been reduced. But it is very bad news that there are more homeless households in temporary housing than ever before – and this is still a forgotten story.

In 1980 the number was less than 5000. By 1990 it has risen to 45,270. In June 2003 it had hit 93,480. There are now 38,000 more households placed in temporary housing by councils than when Labour took office in 1997. If asylum seekers are included, the figure is higher still.

Too much temporary accommodation is unsatisfactory. Too many homeless families are overcrowded, sharing bathrooms and toilets. Children especially suffer from the emotional insecurity of not having a stable home.

Yet none of this is even raised as an issue in Labour's high-profile initiative to consult voters, the "Big Conversation". Well, this is a big issue. I believe that providing long-term settled homes for homeless families should be the top campaign priority for the sector.

So what should be done? We can reduce the numbers in temporary accommodation by constructing more new homes. However, we don't need to wait until these are built to release families from temporary accommodation. We can achieve much more by enabling social landlords to buy empty properties and let them to the homeless. This avoids placing too many vulnerable tenants on existing estates and creates more socially-mixed communities.

Ten years ago, this was the point of the Conservatives' "housing market" package. This should now be repeated but on a much larger scale, due to the rise in numbers stuck in temporary housing.

The only argument against this is that it would cost a lot of money.

One way of finding the cash would be to cut housing programmes or other public spending. The best way is to raise taxes. Unfortunately, Labour has ruled out any income tax rise during this parliament.

What about taxing the massive windfall gains from which existing homeowners have benefited? At present, capital gains on first homes are completely untaxed. Inheritance tax is only payable on estates valued at more than £255,000.

The capital value of owner-occupied homes has risen sixfold in real terms over the past 30 years. In recent times, it has increased by a staggering £200bn a year.

Of course, the proposal would be caricatured by the media and opposed by many existing owners. Yet there is no logic in taxing earned income more highly than unearned capital gains. Exempting housing from tax worsens the upward spiral of prices, making it harder for young people to buy for the first time.

This week chancellor Gordon Brown published the results of economist Kate Barker's study into the housing market and the reasons for inadequate supply. It presented an important opportunity to open up the debate on policy, taxation and spending. This is a prickly nettle the housing world must grasp. We cannot justify the case for making public spending on housing a higher priority if we fail to tax unearned windfall gains.

The housing divide is among the greatest inequalities in our society. Homelessness causes social exclusion, and denying young children a settled home is deeply damaging. Labour wants us to have a conversation: we should start talking.