A deeper political agenda behind Israel’s soaring housing market?
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Analysis

A deeper political agenda behind Israel’s soaring housing market?

Op-ed: Tackling rocketing house prices with new taxes and various harebrained schemes, the government seems to be ignoring the obvious solution: free up more land. Or has the goal all along been to encourage people to move to settlements?

David Horovitz

David Horovitz is the founding editor of The Times of Israel. He is the author of "Still Life with Bombers" (2004) and "A Little Too Close to God" (2000), and co-author of "Shalom Friend: The Life and Legacy of Yitzhak Rabin" (1996). He previously edited The Jerusalem Post (2004-2011) and The Jerusalem Report (1998-2004).

Prime Minister Benjamin Netanyahu looks out across the Negev during a special cabinet meeting at the Sde Boker academy to mark 40 years since the passing of Israel's first prime minister David Ben-Gurion, November 10, 2013. (Kobi Gideon/GPO/Flash90)
Prime Minister Benjamin Netanyahu looks out across the Negev during a special cabinet meeting at the Sde Boker academy to mark 40 years since the passing of Israel's first prime minister David Ben-Gurion, November 10, 2013. (Kobi Gideon/GPO/Flash90)

Israel’s housing market has become completely insane. Israelis simply cannot afford to buy their own homes, and rental prices are soaring to lunatic heights too. In some areas of Tel Aviv, prices of homes have doubled in the past two-three years alone. A reasonably well-lit, 60-square-meter (645 square-foot), two-bedroom apartment in a fairly central Jerusalem neighborhood will cost you half a million dollars, if you’re lucky. A little more in Tel Aviv. These are prices that, when contemplated from the vantage point of an Israeli family with two breadwinners bringing in an about average combined salary of 20,000 shekels a month (a little more than $5,000), dispatch home ownership into the realm of science fiction. A Globes survey found that it takes 191 average Israeli salaries to buy a five-room apartment, compared to an OECD average of 96. And that was in 2012.

Rather than tackle the problem at its root, by freeing up more land for construction, our various ministers have for years been engaged in a series of harebrained schemes ostensibly designed to cut prices but in fact reliably having the opposite effect.

They’ve introduced lotteries designed to give young families access to affordable housing. They’ve sought to require that builders, as a condition for receiving building rights in new projects, construct a set proportion of low-cost homes.

There’s a rage for something called Tama 38 — an arrangement whereby homeowners deliver the well-being of their apartment building into the hands of a building contractor who, in return for, say, the right to build penthouse apartments on the roof, is supposed to bolster the building’s capacity to withstand earthquakes, enlarge it and install an elevator. Given the avarice of too many builders and the routine inadequacy of supervision, this can be a recipe for corruption and chaos. The apartment buildings in question can be turned into construction sites for years. Sometimes it turns out fine. But other times, the increased costs of running the building once the work is done, and the increased value of the homes, can wind up pushing out the original residents. In the worst cases, residents are driven to despair by the interminable building work, and curse the day they ever consented to the intrusion.

Finance Minister Moshe Kahlon at the weekly cabinet meeting in the Prime Minister's Office in Jerusalem on July 31, 2016. (Ohad Zwigenberg/Pool/Flash90)
Finance Minister Moshe Kahlon at the weekly cabinet meeting in the Prime Minister’s Office in Jerusalem on July 31, 2016. (Ohad Zwigenberg/Pool/Flash90)

Finance Minister Moshe Kahlon has pushed through a series of new taxes on those who buy apartments for investment purposes — the inevitable consequence of which has been to push prices up still higher. Such taxes also encourage those Israelis with money to invest to do so overseas. Every time an Israeli buys a new home or refurbishes a home here, that brings work for architects and builders and electricians and plumbers… Not so if the Israeli investor instead puts his money into a new housing project in the US or Germany.

Capital chaos

As a Jerusalemite, let me also note some of the housing absurdities that afflict this holy city. Housing prices in Rehavia recently shot up a level because of the imposition of an “improvement tax” on apartment sales, under which owners are effectively being penalized today to the tune of hundreds of thousands of shekels for the possibility, some time in the unknowable future, that they might want to expand their homes. Even if they’ve never sought permission to do so. Other neighborhoods are about to be similarly punished.

The housing shortage in the capital is also exacerbated by the fact that a considerable number of properties, in prime neighborhoods, sit on land that is owned by the various churches, some of it on fairly short-term leases. Some of these leases are due to expire in the early 2030s. Nobody, but nobody, knows for sure what’s going to happen when they do. Nobody knows whether it will prove possible to extend the leases at affordable prices. In the interim, many properties on church-owned land in the city are increasingly hard to sell. What new buyer would take the risk of paying a fortune to buy a home that might involve considerably more expense in the near future? Consequence: even lower supply, and even higher housing prices.

View of Jerusalem's Rehavia neighborhood on January 10, 2015, after a snowy day. (Hadas Parush/Flash90)
View of Jerusalem’s Rehavia neighborhood on January 10, 2015, after a snowy day. (Hadas Parush/Flash90)

And then we come to the city’s unwinnable fight against overseas owners of apartments here. You might think it an act of Zionist solidarity for a non-citizen of Israel to want to buy a home in Jerusalem — to own a stake in the capital of the revived sovereign Jewish state, and perhaps to come and stay in the holy city, putting aside their usual routine, during the major annual Jewish festivals, as our ancestors did in ancient times. Well, if that is indeed what you think, the Jerusalem municipality begs to disagree with you. Far from an Israel-loving patriot, it considers you to be a damaging intruder. It has for years been trying to persuade foreign owners of what it calls ghost apartments to at least rent them out. To whom, you ask? To students. As though the owner of a multi-million dollar home in a prestigious Jerusalem neighborhood is going to turn it over to a group of youngsters, who are expected to keep it in pristine condition, oh and also to move out for a few weeks two or three times a year when the owners want to come for Pessah, the high holidays and/or Succot.

The city has also now hit on the idea of checking people’s water and electricity bills to make life harder for non-resident owners. If your bills are too low, you see, indicating that you’re not living in your home enough, you’re charged a higher rate of municipal taxes — yes, a higher rate of taxes for the municipal services you barely use.

A three-word solution

Thing is, there is a solution to the national housing crisis. Really quite a simple one. Three words: Build more homes.

That’s truly all it takes. Cut through the bureaucracy and liberate land for building — and not solely, not even primarily, in the dense, green-space-starved, high-demand central Tel Aviv and Jerusalem areas. No, build as well, build especially, to the north and to the south. For a start, do what David Ben-Gurion always wanted Israel to do: Populate the Negev, 55% of sovereign Israeli territory. Beersheba, driven by a trailblazing university, is in the process of transformation. The army, gradually moving much of its training and logistics activities to the south, is accelerating the trend. There is considerable construction in the Negev. But there is immensely more potential. Further improve the transportation infrastructure, allocate land, and build.

David Ben Gurion works on a farm settlement shortly before his 1955 recall as minister of defense. (Screenshot of newsreel footage from YouTube)
David Ben Gurion works on a farm settlement shortly before his 1955 recall as minister of defense. (Screenshot of newsreel footage from YouTube)

The implementation of what Ben-Gurion always recognized as this strategic imperative would have dramatic and fundamental benefits for Israel. It would take the pressure off housing prices in the center, gradually restoring some sanity to the market there. It would enable more Israelis to own their homes, deepening their personal sense of stability and more firmly rooting them in this country. It would bring more infrastructure and industry to what is absurdly known as the periphery — those parts of Israel that are more than a cycling trip away from the center. It would help offset concerns, especially in the Negev, that the Jewish state is losing demographic control of parts of its own country.

If all of this seems like common sense, you may ask, why is it not being done? Why was it not done years ago? Incompetence. Shortsightedness. The particular interests of certain sectors. Corruption. All of these surely play their part.

One effect of the endlessly rising housing prices, and the otherwise incomprehensibly convoluted and snail-paced process of allocating land for new construction, however, is that more and more Israelis, over more and more years, have moved across the Green Line, to Jewish neighborhoods built since 1967 in the expanded Jerusalem and to West Bank settlements. Why sentence yourself to a life of financial hardship struggling to meet your mortgage payments on a broom closet in Jerusalem or Tel Aviv, when for the same price or less, and possibly with additional financial incentives, you can buy a decent apartment, maybe even a house, in, say, Ariel, Tekoa or Ma’ale Adumim?

Prime Minister Benjamin Netanyahu, Minister of Transportation Yisrael Katz ( R), Mayor of Jerusalem Nir Barkat (L) and Jerusalem Deputy Mayor and chairman of the Jerusalem Planning and Building Committee Kobi Kahlon (2L) at an inauguration ceremony of a new interchange on the Begin expressway named after Benzion Netanyahu, the PM's late father, west of the Beit Hanina Arab neighborhood of Jerusalem, on May 5, 2013. (Kobi Gideon/GPO/Flash 90)
Prime Minister Benjamin Netanyahu, Minister of Transportation Yisrael Katz ( R), Mayor of Jerusalem Nir Barkat (L) and Jerusalem Deputy Mayor and chairman of the Jerusalem Planning and Building Committee Kobi Kahlon (2L) at an inauguration ceremony of a new interchange on the Begin expressway named after Benzion Netanyahu, the PM’s late father, west of the Beit Hanina Arab neighborhood of Jerusalem, on May 5, 2013. (Kobi Gideon/GPO/Flash 90)

Jerusalem’s Begin Expressway, which has been extending over the years, has made traversing sections of the capital a simpler, faster prospect. Nowadays, you can drive south from Tel Aviv, join Road 443 past Modiin — with handy access to adjacent settlements — link directly to Begin, and continue all through Jerusalem to the southern, post-1967 neighborhood of Gilo. Only an interchange separates Begin from the tunnel road leading south out of the capital to the Etzion Bloc of settlements and Hebron in the West Bank. That interchange is now being worked on.

As with housing policy, so with transportation: Our national planners moan about high housing prices, and introduce counterproductive taxes, but insistently restrict the allocation of land for building inside Israel, while they improve access to affordable housing over the Green Line. One might be forgiven for thinking that the whole housing crisis is part of a deeper political plan. What’s more Zionist than owning a home in Israel, in Tel Aviv, in Jerusalem, in the Galilee, in the Negev? Could it be that the government has effectively for years been answering: Owning a home at a settlement in the West Bank?

And what’s wrong with that, you might ask? Nothing, if your goal is boosting the population over the Green Line to the detriment of the population within sovereign Israel.

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