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.