They're subsidized by building infrastructure. If the state builds a bridge that allows a homeowner in town A to commute to work to town B, this directly increases the land value in town A. The state paid for this bridge, not the homeowner. This is what the subsidy is - having access to state-provided infrastructure by virtue of location. Why should the homeowner have exclusive right to that increase in land value?
This is the gigantic pitfall of overly-individualistic property rights - that socially beneficial infrastructure development doesn't happen, because nobody has the power to siphon off enough of the value created to make it worth doing.
This is the gigantic pitfall of overly-individualistic property rights - that socially beneficial infrastructure development doesn't happen, because nobody has the power to siphon off enough of the value created to make it worth doing.