The Interrelation Between Subsidized Mortgage Lending and the Development of the Housing Construction Industry in Regional Economy

The paper examines the interrelation between the development of the housing construction industry and subsidized mortgage lending in regional economy. The construction sector has strategic importance at both national and regional levels, especially during economic crises. Regulation and support of the construction industry is one of the key tasks of economic policy. Such support is implemented using various tools, including stimulating demand in the housing market through subsidized mortgage programs. The authors identified several factors influencing the development of the housing construction industry in regional economies. In the quantitative part of the study, the authors conducted econometric modeling of factors affecting the development of the housing construction industry based on Russian regions’ data. The results showed varying relationships between the development of the construction sector and the effects of subsidized mortgage programs. On the one hand, subsidized mortgage lending can serve as an effective tool to support regional and national economies during recessions. On the other hand, the effectiveness of subsidized mortgage programs diminishes over time. Massive subsidized loans result in rising real estate prices outpacing inflation, negating the effect of lower interest rates on mortgages for certain population groups. This underscores the need to find alternative, more effective instruments of state support for the construction industry and fostering regional economic growth. #CSOC1120.