Scathing report puts blame for housing crisis on government

Scathing report puts blame for housing crisis on government

Study released by State Comptroller Yosef Shapira indicates red tape, political gridlock led to soaring prices in market

Haviv Rettig Gur is The Times of Israel's senior analyst.

Illustrative: Housing construction in Beit Shemesh in May 2012. (Nati Shohat/Flash90)
Illustrative: Housing construction in Beit Shemesh in May 2012. (Nati Shohat/Flash90)

A government report on the housing crisis released Wednesday places the blame for runaway housing costs squarely on government agencies and paints a stark picture of a stifling bureaucracy and political gridlock that led to the shortages that have driven the price rises.

Between 2008 and December 2013, the real cost for purchasing an apartment rose by a steep 55%, while the average monthly rent rose 30%, according to government figures. The issue of skyrocketing housing prices, amid unmet demand, has risen to the fore in recent years as Israelis have protested over the high cost of living.

The report, coming less than a month before Israelis go to the polls, may put wind at the back of opposition parties looking to unseat Prime Minister Benjamin Netanyahu by highlighting economic issues.

The report by State Comptroller Yosef Shapira focused on the snail’s pace of Israeli planning bodies for keeping demand in the housing market from being met. The Interior Ministry and Israel Lands Authority came in for special excoriation.

“It takes approximately 12 years to go from the submission of a [housing construction] plan to the planning committees [of the Israel Lands Authority] to the existence of a finished apartment,” the report noted.

Every step of the planning process is tortuous and inefficient, according to the comptroller.

State Comptroller Yosef Shapira, October 29, 2014 (photo credit: Flash90)
State Comptroller Yosef Shapira, October 29, 2014 (photo credit: Flash90)

“The Israel Lands Authority did not prepare annual and multi-year work plans that would enable planning for the required number of housing units. The plans submitted by the ILA to planning authorities in various districts did not match the demand.”

The result: “Over the years, planning committees approved tens of thousands of housing units fewer than the number demanded by the market. The planning inventory was eroded, and lost some 50,000 housing units” — a number that marks the gap between the demand and the number of housing units approved in the years under investigation.

And what plans are advanced “drag on for a long time — about five and a half years. In the center [of the country], more than seven years.” That’s the time it takes just to approve the plans, not to launch construction tenders or implement the building of the approved units.

According to a Taub Center report earlier this year, that years-long planning process takes just weeks or a handful of months in other developed countries.

But the ILA is not the only wrench in the system, according to the report, which pointed to missteps by the Interior Ministry.

The national housing master plan, known as TAMA 35, managed by the Interior Ministry’s Planning Administration, saw its update process “delayed for years,” the report said.

The ministry, which approves large-scale residential zoning, also failed to coordinate proposals for new projects with the government’s umbrella national housing plan, the report showed.

“The Interior Ministry does not know the size of the planning inventory [i.e., how many new apartments are being planned], and does not know how many housing units that were approved in the plans are actually available for construction,” according to the comptroller.

Different government agencies do not report to each other what they are doing, do not link construction plans to demand, and do not keep track in real time of Israel’s overall housing situation, the report said.

The result is that even “the government’s data on housing demand and housing prices is incomplete and of low quality.”

Much of the research on the housing sector takes place in the research department of the Bank of Israel, the report writes critically.

“The Bank of Israel, whose tasks are set by law, cannot be expected to serve as the central body acting in the housing field.”

This deficiency in information-gathering and sharing extends even into the planning units of the powerful Finance Ministry, the report found, especially when it came to “the effects of tax policy on the housing shortage.”

While the direct culprit for the steep jump in housing costs lies with these bureaucracies, the report devotes a significant portion of its 300 pages to the failure of the political echelon to correct these structural deficiencies.

“The Cabinet Secretariat,” which is appointed by the prime minister and tasked with coordinating among government agencies, “did not conduct any systematic follow-up on the implementation of cabinet decisions, many of which were not implemented or saw their implementation delayed.”

When the housing crisis began in 2008, the government, then led by Ehud Olmert, “did not have the means for dealing with the soaring housing costs and the deepening crisis.”

It was only in July 2010, “a full year after its establishment, that the 32nd Government, headed by Benjamin Netanyahu, identified the need to rein in the sharp increase in prices and determined that a policy should be instituted with the goal of lowering apartment prices,” the report notes.

But this newfound attention to the crisis did not translate into meaningful action.

As the report explained, “government ministries acted without a multi-year strategic plan, and without the setting of policy goals coordinated among the bodies involved in [developing] the necessary residential infrastructures. These activities were spread among different bodies, and lacked any appointed coordinating body.”

The report covers the housing market up to the end of 2013, and so leaves out more than half of the 20-month term of the last government.

In the hours before its formal publication, ministers who oversee some of the agencies criticized in the report insisted the situation has improved dramatically on their watch.

Former finance minister Yair Lapid, head of the Yesh Atid party, said the report proved that Netanyahu had failed to tackle the housing crisis until 2013, when a special cabinet committee was appointed to deal with the issue.

“The housing crisis in Israel is a direct result of Netanyahu and the Likud ignoring the issue. Years of procrastination, inaction and corruption caused house prices to increase outrageously,” he said in a statement.

The Likud Party called the report “very important” in a statement and said it would work to implement the recommendations in the next government.

“The Likud governments led by Prime Minister Benjamin Netanyahu have accomplished a lot with regards to housing prices, though there is still much more that needs to be done,” the statement read.

Minister of Housing and Construction Uri Ariel at a press conference in Jerusalem on January 11, 2015. (photo credit: Yonatan Sindel/Flash90)
Minister of Housing and Construction Uri Ariel at a press conference in Jerusalem on January 11, 2015. (photo credit: Yonatan Sindel/Flash90)

Housing Minister Uri Ariel urged in a statement that Shapira expedite the publication of an updated report that includes the term of the outgoing government.

“The comptroller’s report proves that Housing Minister Uri Ariel and the Jewish Home party correctly identified the failures [cited in the report] when they came into office, and knew how to act to correct the damage of past years,” a Jewish Home statement insisted.

During Ariel’s term, the statement said, housing starts rose to an unprecedented 50,000 units in 2014, up from some 30,000 per year in previous years.

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