myrrdin-inc.com/2022/01/04/subsidy-programs-and-the-legislative-process
Generally speaking, subsidy programs and finance are intended to support particular sectors of a nation’s economy that would otherwise be unable to thrive through market forces alone. These could include struggling industries or new developments that promote specific goals for economic and social development. The advocates of subsidies argue that they reduce the burden on businesses or individuals who may not be able the costs of their own development while also promoting overall efficiency of the economy. Contrary to this, they claim that government intervention in the economy can have unintended negative effects. They argue that it could increase costs for consumers, create inefficiency, and distorts markets by favoring certain companies and industries.
Subsidy schemes typically take the form of direct cash payments or tax incentives as well as other types of financial assistance. However, other types of subsidy programs include loan guarantees, low-interest loans, and capital subsidies. In evaluating the value these programs, it’s important to consider their impact on interest rates as well as the variables that drive them.
For example the grantee could help to reduce the interest rate of mortgages for a new homeowner, which can lower the monthly mortgage payment by a certain percentage points. This is a significant benefit that borrowers aren’t eligible to receive from private financial institutions.
Other important considerations when evaluating these kinds of programs are the criteria used to determine eligibility and the guidelines set around the application of credit subsidy funds. These can include minimum income requirements, maximum rents, purchase prices, and the minimum durations for housing projects to be eligible for subsidies.