Subsidized mortgage loans and housing affordability in Poland

Abstract

While a couple of decades ago homeownership used to be a privilege of the few, nowadays most households in developed countries are living in their own four walls. One of the reasons behind this shift are government policies aimed at promoting homeownership and making it more financially feasible. Among these policies, there is a wide range of instruments reducing the costs of mortgage loan interest. Recently, the promotion of homeownership has also become an important issue in some of the former socialist countries. An example of that is a policy of the Polish government called “Family’s own home”. The aim of this policy was to provide financial support for young households who are particularly vulnerable to the difficult housing situation in Poland. Due to huge price increases between 2006 and 2008, and in connection with a short supply of rental housing, many households have been unable to find an affordable dwelling in recent years. The “Family’s own home” policy, initiated in 2007, was the government’s response to this problem. The purpose of this paper is to investigate the outcomes of this policy, which was terminated at the end of 2012 because of a public finance crisis. Three research questions are addressed: (1) what was the relationship between government support and residential construction, housing prices, and mortgage loan interest rate, (2) what was the spatial distribution of government support, and (3) how was it related to the spatial distribution of housing prices, incomes, and housing affordability?