Would a few houses on the edge of that village completely ruin the entire countryside?
Well, if "that village" is made up of attractive old Cotswold stone properties, a developer sticking a load of identikit red brick abominations on the edge isn't exactly an improvement...
How many, per year? Would "a few houses" every year lead to doubling the size of the village in ten?
Precisely
What would the downside of that be?
Well, for a start the developers will have managed to escape from any planning obligations to provide things like improved infrastructure, community facilities etc in order to cope with the addition residents...
Is this the same Thathcher that famously stopped councils from building new council houses, and to who we have to thank for the sustained drop in housebuilding that we've seen for the last 40 years?
Although I don't necessarily agree with the political motivations, the right to buy is one of the best things to come out of the Thatcher government. However, not letting councils build more houses was literally the most stupid decision (but aligned with the political values of the government).
Anyway, we won't be able to fix the housing crisis until the system is no longer rigged in favour of the large housebuilders who can build poor-quality, unattractive identikit rubbish with impunity, as local councils are effectively powerless to stop them due to mandatory government targets.
The other aspect is costs. It's often said that the price of a house is split roughly equally between land, building costs and profit. However, the average cost of top-quality arable land is about £10,000 per acre (according to Farmers' Weekly). You can build many houses on an acre of land. Therefore, there is some blatant profiteering going on by landowners. Now I accept that Farmer Giles would like to benefit a bit from selling his land for housing, but even at triple that price the land cost is relatively tiny compared to the house price.
If the prevailing market price for 4 bedroom houses in an area is £500,000, should we be surprised that new builds are sold for this much, or that land is being sold with this cost in mind (ie: "I'll sell you the land for £300,000 per acre, because although it's far in excess of its real value you can easily afford it if you're selling houses for that much")? If someone (for example, Farmer Giles starts building his own houses) starts selling 4 bedroom houses for £300,000 in the same area, then eventually the market price will be forced down. So that's one option.
It's kind of like the cost of infrastructure on a national level (roads, railways etc). If the government loudly trumpets that £x is being spent on scheme Y, the price from the bidders for the contract will be Y even if their cost is half that, because they know they can get away with it. And once you're in this position you can never go back because they'll just say "but this is how much it's cost in the past, so it'll cost you this much now".
Near where I live, a large area of land is just starting to have houses built on it. The land was bought by a developer something like 40 years ago (my dad remembers it as a child); since then, it's been sold on several times, each developer making a profit, until finally the market price has been deemed high enough the make enough profit. Local authorities need the power to stop this from happening, but never will due to the lobbying power of the big housebuilders.
And don't get me started on the destruction of the strategic road network by development and "growth at all costs"...