MDI continues the series of interesting government’s analysis, assessment and research activities. During this year, MDI will examine the incentive of the state subsidy system for municipal growth and planning. The work reviews the state subsidy system based on theory and empiria, looks at the features of a good state subsidy system and identifies the incentives for attractive different demographic groups. The study is based on empirical research and statistical methods on the factors affecting housing production, migration and population structure of different types of municipalities – including on one hand growing urban regions and on the other those small municipalities losing population. The work will provide an overview of international examples and good practices on state subsidy systems and related practices on the Nordic and Western European countries. In the summer, the simulation model provides a view of the alternative instruments of the state subsidy system and their impacts, and makes proposals on the possibilities for system development. An essential question in the report is whether the state subsidy system is the right instrument and way to encourage municipalities to increase housing production. The work is carried out in co-operation with The Urban Research TA ltd, which is the same partner as in the evaluation of housing policy to Finnish Parliament, which was completed in the autumn 2017. The study is a government’s analysis, assessment and research activities project and its main subscriber is the Ministry of Finance, also Prime Minister’s office and the Ministry of the Environment are represented at the steering group. Study will be completed during 2018.