A/67/286 their repayments skyrocketing and in some cases saw the amount of their loans outstrip the value of their houses. 32. Following the sub-prime crisis, the supply of housing and household mobility have been significantly curtailed by a shortage of long-term credit for real estate development on the supply side (in both the rental and ownership sectors) as well as by increased rationing of mortgages on the demand side. In response to the crises, Governments have introduced regulations for responsible lending and financial institutions have tightened their mortgage conditions, again placing mortgage finance out of reach for low-income groups. Government responses to the crisis have concentrated on adjusting demand-side policies, tightening mortgage market conditions and adopting regulations in Norway, Sweden, Israel, Canada and the Netherlands; abolishing interest tax deductions in Poland, Spain and China; and introducing demand-side subsidies to assist mortgage lenders and prevent arrears in Spain and Chile. 46 The crisis has not led to a shift to supply-side non-market housing policies, and social housing investment remains low in most countries. Recovery measures based on austerity (i.e., cuts in public spending) led in some instances to additional curtailment of social housing programmes, as was the case of OEK (Workers’ Housing Organization) in Greece, 47 while huge public resources were allocated to “bail-outs” of financial institutions. This has resulted in increased homelessness, indebtedness of families and worsening housing conditions. B. Demand subsidies 33. A major component of the shift from supply-side to demand-side housing policies has been the promotion of demand subsidies as a means to enlarge the market for privately produced residential units, mobilizing public resources and directing them to potential buyers with the idea of “reducing Government intervention”. The rationale behind demand-subsidy programmes is that low-income households will be able to finance their housing through the free market, with their own savings, assisted by a down-payment subsidy or a subsidized loan provided by the State. The main types of household demand subsidies used are: (a) direct payments, either up front (to lower the amount of the loan, the closing costs, the down payment or the insurance premium, or in the form of a capital grant) or on a monthly basis; (b) subsidies tied to savings programmes; (c) interest-rate or interestpayment subsidies; (d) tax subsidies tied to mortgage payments or real estate taxation. 48 34. Most countries employ a combination of these demand subsidies. However, capital-grant subsidies have been popular mainly in Latin America and are relatively rare in developed economies. 49 In Europe, the United States, Canada and Australia demand subsidy programmes have largely taken the form of tax exemptions, interest __________________ 46 47 48 49 12-45918 IMF, pp. 115-116. Reply of Greece to the questionnaire. There is a critical distinction between subsidies that work through the financial system and those that do not, e.g. the construction and operation of rental housing or the payment of housing allowances to help renters meet their rent. This report focuses on demand subsidies aimed at increasing homeownership through the financial market. UN-Habitat, Guide to Preparing a Housing Finance Strategy (Nairobi, 2009), p. 45. Council of Europe, Housing Policy and Vulnerable Social Groups (Strasbourg, 2008), p. 31. 11