Government dispute over loan subsidies. Criticism from all sides. This may not work out

“Unfortunately, I express concerns that the solutions proposed in the act, instead of contributing to improving the availability of apartments, may lead to an even greater crisis on the housing market. A further increase in real estate prices, which is a probable effect of the proposed regulations, will result in an even lower availability of apartments on the real estate market due to the need for consumers to obtain greater creditworthiness,” assesses the Ministry of Family, Labor and Social Policy.

The Ministry warns that the main beneficiaries of the proposed solutions will be developers “who have already benefited greatly from the existing solutions.”

Previously, numerous reservations regarding the subsidy program were raised by the ministries of finance, funds, climate, justice, as well as the National Bank of Poland.

Ministry of Development insists on “Start-up Loan”

The “Start Credit” loan subsidy program has returned quite unexpectedly. In the last dozen or so weeks, one could get the impression that the government decided to withdraw, in English, from a proposal that real estate experts considered erroneous and leading to an increase in housing prices. Already in the spring, the then Minister of Development Krzysztof Hetman indicated that work was underway in the ministry on the continuation of the “Safe 2% Credit,” but silence fell over the project. Until, as it turns out, a while later.

The draft of the government program “Kredyt na start” is to be submitted to parliament immediately after the summer holidays, Deputy Minister of Development and Technology Jacek Tomczak announced in the Senate on Wednesday. He added that the ministry wants the act to be passed this year and the program to enter into force on January 15, 2025.

– Many Poles are waiting for this solution. We assume that the bill will most likely appear in parliament right after the holidays. We would like the act to be adopted this year. We plan for these provisions to enter into force on January 15 – said Jacek Tomczak, answering questions from senators.

Subsidy programs do not help

We are not the first country to experiment with loan subsidy programs in the hope that this will make housing more affordable.

Loan subsidy programs lead to price increases, do not stimulate construction activity, and do not increase the percentage of families living in their own property – wrote “Puls Biznesu” a few weeks ago, citing the experience of countries that have decided to provide such support.

Subsidizing loans can take two forms: a subsidy to the down payment and a subsidy to the loan installment. In both cases, the economic effects are similar – they increase the demand for real estate – reports “PB”. It also cites examples from several countries where such solutions have been tested.

For example, the British “Help to Buy” program consisted of several components, one of which was the state’s auxiliary loans for the purchase of real estate. A household could obtain funding in the form of an interest-free loan, which reduced the requirements for the down payment and reduced the subsidies for the first years of loan repayment.

And what was the effect? ​​Prices in British cities rose, while construction activity did not change significantly. In contrast, on the border of England and Wales, where prices did not change significantly after the introduction of the program, construction activity increased.