They also introduced the Town and Country Planning Act of 1947, which made it illegal to build any kind of housing or modify existing housing without asking permission from the government. We would not need council housing nowadays if the private sector were simply allowed to fill the market demand. We are no longer in the days when children played in the rubble of cities flattened by the Luftwaffe.
Blaming Thatcher is too kind to the current government. They're the ones who keep listening to nimbys. Thatcher's mistake is that she didn't go far enough; axing the 1947 Act and its descendants should have been part of the supply-side reforms.
The fondness for council housing is an example of a peculiar psychological coping mechanism of Britons, stemming from imperial decline. We pretend a necessary evil was something positively desirable all along. The Americans are right, it is actually embarrassing to have 42% of your population in state-owned housing, I'm sorry to say.