A bill to regulate the rental housing market for the first time and establish tenants’ legal rights was submitted to the Knesset by MKs Hilik Bar (Labor), Stav Shaffir (Labor) and Orly Levy-Abekasis (Yisrael Beytenu) on Thursday.

The proposed legislation would limit hikes in rent for long-term tenants, who would be able to request a three-year lease under which the landlord could only raise prices once annually, with up to a two percent increase each time.

The purpose of this provision is to make long-term leases the norm, MK Hilik Bar told The Times of Israel.

Bar said he hopes the bill will ensure that families can settle down, and not be forced to uproot their children every year due to sudden increases in rent that prove to be unaffordable. He also maintained that securing long-term leases will benefit landlords as well as tenants.

“The law offers incentives for long-term leasors,” he said.

However, landlords will still retain the right to reject the request and seek short-term tenants.

While tenants who receive the long-term lease agreement would benefit most from the proposal, Bar claimed the bill would also protect short-term renters by keeping all rent increases at a fixed annual rate.

The bill would also prescribe the specifications that make an apartment suitable for rental, protecting renters from uninhabitable living conditions. The terms include having running water, ventilation, and access to electricity.

In addition, the law would require landlords to pay real estate broker’s fees, and would force owners to handle any necessary repairs. The proposal would also formulate universal eviction and breach of contract laws.

“As a renter who knows what it’s like to pay rent monthly and beg the landlord to pay for a plumber after the house is flooded after the first rain, I view the regulation of the rental market as a paramount goal,” Shaffir said. “There are two million renters in Israel and no one is protecting their rights and it’s time to put an end to this madness.”

Labor party member Stav Shaffir seen at a Finance committee meeting in the Knesset. December 16, 2013 (photo credit: Flash90)

Labor party member Stav Shaffir seen at a Finance committee meeting in the Knesset. December 16, 2013 (photo credit: Flash90)

Shaffir — the youngest Knesset member — was a leader of the 2011 social justice protests, during which thousands of Israelis took to the streets to protest the housing bubble.

MK Bar described the bill as particularly relevant now, as many Israelis cannot afford to buy an apartment. Purchasing an apartment amounts to some 12 years of employment and an average of 150 paychecks, he said, such that the rental market becomes the only option for many. Unfortunately, he continued, the market for renters is a “wild jungle.”

“Our law essentially seeks to bring order to chaos and regulate this large market,” he said.

In its annual report, the International Monetary Fund warned on Wednesday that high demand and low supply has driven up apartment prices to 25% above their real value.

“Against the backdrop of low interest rates and supply shortages, house price increases have been rampant,” the IMF said, and noted that housing prices have jumped 80% since 2007.

The IMF warned conditions mean that there is a 20% chance that the property bubble will burst, causing a decrease in private consumption and hurting economic growth. However, correcting the housing prices too quickly could also drive the economy into recession while a slow correction would diminish economic prospects for a prolonged period, the IMF cautioned.

Stuart Winer contributed to this report.