Have you ever found yourself doing the ironing at three o'clock in the morning, glass of Scotch at hand, stark naked and singing at the top of your voice? Not me, of course - but behaving oddly in the privacy of your own home is a birthright. That's one reason why so many people with dementia want to stay there for as long as they can, provided that they are not left lonely and at risk. But if staying at home becomes impossible, where is there to go?

Carers' testimonies in recent court cases and documentaries record a depressing litany of insults, incomprehension and disasters on hospital wards, and no respect for personal space. The last hospital ward for people with dementia that I visited was a cheaply converted maternity ward. Lost souls wandered around dim, mottled corridors between a grimly institutional lounge and a shared dormitory, with privacy provided by flimsy curtains. Not a cheering prospect.

The Russets, a recently opened nursing and residential home for people in all stages of dementia, couldn't be more of a contrast. Sitting in fathomless rural depths outside Bristol, it is light, airy and roomy. For all its ultra-modern lines and purpose-built features, its homely touches - including pastel colours, carefully chosen furniture, tea and coffee making equipment for everyone, and personalised bedrooms - make it feel welcoming and relaxing.

The design is "terrific", says one man who regularly visits his father at the home. "I normally look for things that could be improved, but I couldn't find anything significant."

The building, run by St Monica Trust, is based on an Australian care home model, with elements of best practice incorporated from Europe. The basic blueprint - a focus on the garden and interconnected houses - comes straight from The Village, in Inglewood, Perth. The open-plan, colourful kitchen design, with plenty of worktops, has been added from Europe.

Design partners

Rejane Le Grange, the determined and adventurous manager, has added some clever twists, such as a system to ensure laundry doesn't get mixed up, and a meeting space for residents and carers. She was involved all the way through the design and build. "Architects who say they use carers to help with design often mean they talk to them at the beginning of the process and to alter a few small details on the way, too," says Le Grange, who was care manager at The Village. The partnership between the Australian home and St Monica's took off after Zara Ross, head of care at St Monica's, and architect Neil Ross made a visit to Perth. "We were blown away," Ross says.

Anyone interested in design contributing to better lives for people with dementia should visit The Russets. It is home to 71 people, but has three "houses" separated into two units, each for around 15 people, which gives it a human scale that makes for friendships and interactions.

"It's brilliant - it's like being at home," says Sandy, whose mother lives there.

There are spacious, well-lit bedrooms, with thoughtful sight lines that mean people with dementia can find bathrooms or clothes on waking. In each unit, there is a lounge with a television and a lounge without - a shamefully rare blessing for the large numbers of care home residents who hate bombardment by non-stop TV.

The design of the kitchens allows residents to be routinely involved in preparing and cooking meals with staff, should they wish. That makes a huge difference to the quality of people's lives and should be standard. Older people in 95% of residential homes sit endlessly, waiting for something to happen, but helping with meals and other domestic tasks gives days and lives a familiar, meaningful focus.

My favourite example of inventive eccentricity in action is the portable Snoozelum machine. It looks like a 1950s robot from Flash Gordon and is designed to function somewhere between Pink Floyd's light show and hypnotically induced astral travelling. It is clearly a big hit with some residents, who have been matched carefully to its charms, which include warm, glowing and changing lights, part of an armoury of slowly changing sensory experiences.

That is indicative of the thought that has gone into the place. The Russets is unusually relaxed about the residents it takes in terms of abilities and "problems", but insists that everyone comes with a life history. This is linked to an assessment process that is not focused just on cognitive measurement, but also on motor and life skills - an unusually broad-ranging approach, allowing staff to design activities that really suit individuals. These range from drawing and painting to helping with meals or gardening, allowing residents to take pleasure in exercising their best-remembered skills.

The kitchens look out over the garden, where meals are eaten when the weather's good. Making the most of the garden is a crucial element of The Russets' design and ethos. As one pleased relative says: "I think it's great, and it allows space for a private chat with my father."

The houses have unlocked doors leading into the garden area enclosed between them, so there is a large, safe area for people to wander into, which the windows draw attention to. Anyone who has worked with people with dementia knows the joy that a garden brings, fair weather or foul. This one's a bit special, too. Paths lead to a central lodge with a chiming clock where a member of staff is on duty so that people wandering in will always find someone prepared to help them with something to do - such as painting, sewing or making a cup of tea. And the garden is large enough to have an Alice in Wonderland quality, full of nooks and crannies, with mazes of paths and a planned aviary. It invites exploration. Some of the residents doing best at The Russets are people with a history of feeling trapped in conventionally-designed homes elsewhere.

Even in a recession, it isn't easy to find staff to sit patiently in the centre of a maze or who are prepared to engage with residents in the way that The Russets philosophy demands. Some of the thinking is exotic: night staff wear slippers, pyjama-like bottoms and nightgowns, for example, which is intended to help orientate people with dementia. Any home prepared to be that unconventional demands real commitment from staff.

Le Grange had a cunning plan. "I have some key experienced people on the staff team, but I was more concerned to get people who were going to be right," she says. And how did she ensure that? "I set up competitive group interviews, but I took the people who helped others in the group - people who were patient, not aggressive. Completing the tasks was less important." It's a strategy that has worked. "I don't know how they do it, but they're a great bunch," says another relative of a resident.

Staff are constantly engaged with residents, visibly delighted to be working somewhere where people are happy, and glad to have access to the facilities, including onsite nurses, occupational and speech therapists and physiotherapists.

The Russets is an integral part of the Sandford retirement village, which is also owned by St Monica's Trust. It is an interesting project, incorporating a swimming pool and gym, a shop and a restaurant around the restored remains of an old railway station. It has allotments as well as gardens for people who want them, some well-designed architecture, and beautiful views. Sandford specifically links with the Russets, which will eventually provide outreach support. The idea is that it will be a specialised "extra care" village.

High costs

It is one of those rare places designed for older people that I'd be happy living in myself - though I'd have to find a way of paying for it. It costs around £840 per week to live at The Russets. While this is significantly more than many other homes in the area, there are a number of subsidised places, funded by the local council. If that sounds horribly expensive, try bearing in mind that it is very close to what it costs to keep people in those grim, ex-maternity hospital wards. Health service care may be free at the point of delivery, but it isn't cheap to provide.

So why can't we have Russets-style services everywhere, subsidised into affordability by councils and health services between them? I will be bitterly disappointed if some of the principles of design and the approaches to care at The Russets don't creep into the mainstream, because they offer practical ways of improving lives.

The government and commissioners may want to keep older people at home, but large care companies are still growing. There is still plenty of new building going on, to replace outdated care homes and hospital wards, too. The Russets' large garden may be too expensive for universal adoption, but building activities into the working day and the design of the house and gardens, by simple touches such as making kitchens visible and designed to be used by residents, and using windows and doors to focus attention on the gardens, helps to engage people with daily life so they don't sit around feeling depressed.

Real impact

This could have a real impact on the lives of a significant percentage of the people reading this article. For the fact is that more than one in four of us who reach 85 will succumb to dementia.

It would be good to find we had assessments that involved us in funky garden spaces, cooking, the right to iron in the nude when we want to - and maybe even Snoozelum machines for those of us who grew up with a fondness for the modestly psychedelic. We need more places that emphasise freedoms such as this - and we need them to be affordable too.

• Christopher Manthorp is director of older people's services for a housing association. He is writing in a personal capacity