A/67/286 rate subsidies or bonuses through savings accounts. 50 Mortgage interest tax relief existed, for example, in Ireland, the Netherlands, Germany, the United States, the United Kingdom, China, Slovakia, Hungary, the Russian Federation, Croatia and the Czech Republic. 51 France promotes a mixture of subsidies, including subsidized savings schemes for newly built and renovated properties and a means-tested interest-free loan granted to first-time buyers. 52 35. One of the most common housing subsidies in European countries (Germany and France) has been the contract-savings scheme. Savers who fulfil their contracts are eligible for mortgage loans at an interest rate that is below the market rate. Since the saving capacity of low-income groups is very limited, they are generally prevented from enjoying the advantages of this model. 53 The favourable tax treatment of households that are related to homeownership, in the form of tax relief or tax credit for the mortgage repayment, tax advantages related to capital gains for owner-occupiers and reduced property tax or imputed tax, are also used in developed countries, emerging markets and countries in transition and favour the better-off households that can afford a mortgage loan. 54 Mortgage interest-rate subsidies that reduce the interest paid by the borrower have been implemented in Denmark, the United States, Norway and Greece and in Mexico, Portugal, Croatia and Indonesia. 55 36. Demand subsidies linked to mortgage finance or savings usually do not target the poor and in effect benefit the better-off (middle- and even upper-middle-income households). Income tax deductions of interest payments or a broad-based interest rate subsidy for mortgage loans tend to be regressive, as they increase with the amount of the loan and benefit those who can afford larger loans more than those with smaller loans. In the Philippines, interest rate subsidies account for 90 per cent of the value of housing subsidies; however, 77 per cent of the country’s population cannot afford a formal-sector loan even at subsidized interest rates. 56 Part of these subsidies may also leak out to benefit others in the housing systems and raise the value of existing dwellings and land. 57 37. Although the rationale for the implementation of subsidized mortgage markets is supposedly to reduce State intervention in the housing sector, support for savings banks, interest-rate subsidies and tax allowances mobilize a large amount of public money. The Government is committed to long-term subsidy payments, which are hard to control during the contract period. For example, in Spain and Hungary, taxexemption schemes were recently cancelled owing to serious fiscal problems. The Special Rapporteur believes that a State’s sole reliance on mortgage subsidies may be considered incompatible with its obligation to employ the maximum available __________________ 50 51 52 53 54 55 56 57 12 Harold M. Katsura and Clare T. Romanik, Ensuring Access to Essential Services: Demand Side Housing Subsidies, Social Protection Discussion Paper Series No. 0232 (Washington, D.C., World Bank, December 2002), p. 6; replies of Canada and Australia to the questionnaire. UN-Habitat, Financing Urban Shelter, p. 63. Reply of France to the questionnaire. World Bank, Housing Finance Policy in Emerging Markets. Council of Europe, p. 38. Replies of Croatia, Indonesia, Mexico and Portugal to the questionnaire. UN-Habitat, The Role of Government in the Housing Market: The Experiences from Asia (Nairobi, 2008), pp. 39-40. J. Pollard, “Soutenir le marché: les nouveaux instruments de la politique du logement” in Sociologie du travail, vol. 52, No. 3 (July-September 2010), p. 333. 12-45918