Government gives urban renewal provisions another year

The National Planning and Building council has agreed to extend the national urban initiative, TAMA 38 (National Outline Plan), by another year to allow developers and builders to finish up existing real estate projects under the program by 2023.

The popular framework, first conceived in 2005 to quake-proof older buildings in vulnerable areas, was due to expire at the end of November this year.

The building council made the decision to extend the program earlier this month, confirming the program will run until October 2023 and existing tax breaks will be maintained until then.

The framework was originally intended to help strengthen existing structures through earthquake proofing and the addition of reinforced security rooms in towns and cities along the Syrian-African rift such as Kiryat Shmona, Tiberias, and Beit She’an.

In practice, the plan has largely been used to extend existing apartment blocks in the parts of the country in which housing demand is greater and land prices higher, namely central Israel.

TAMA 38 offered a package of incentives to developers, speeding up approval processes and giving them the right to add on apartments and even additional floors to existing buildings. Developers profited from the sale of the extra apartments, while existing owners (of whom a majority in each building was needed to approve the renovation project) received a stronger and upgraded building, with elevators added, for example, and usually also an enlargement of their apartment. In some cases, weaker structures were taken down altogether and replaced with new ones.

By making the approval and development process easier, TAMA 38 was also supposed to help accelerate residential construction in cities to meet galloping population growth rates and demands for accommodation.

But in reality, lower property values in the primary target areas have made such projects economically unattractive for developers. Instead, the streamlined approval process and the opportunities to construct new city center apartments offered by TAMA 38 were taken up enthusiastically by developers in central Israel. They recognized that these incentives offered a way to increase the numbers and quality of available apartments in built-up areas of Tel Aviv and nearby towns, where land and property prices are much higher.

The regulations have been exploited most consistently and extensively in North Tel Aviv, Givatayim, Ramat Gan, and Rishon Lezion.

The Israel Builders Association, a national organization that brings together companies and workers in the construction and infrastructure sectors, claims that around 20% of current, newly started construction projects in Israel use the TAMA 38 framework. There have therefore been concerns that urban renewal will come to a halt without a plan that is similarly attractive for developers and tenants, and which can add to housing availability in densely populated areas.

The decision to end TAMA 38 was reached in 2019, following extensive discussion in The National Planning and Building Council, whose members were convinced that the regulations did not achieve their goals.

The program is eventually set to be replaced by Amendment 136 to the Building and Planning law. This change is intended to rebalance urban renewal projects by giving municipalities more say in the discussion with developers about upgrades to existing buildings, and therefore to better enable projects to be part of a coherent plan for a given area.

But the changes will also slow down the approval process, decrease some of the power current residents have in the program at present, and reduce some of the current tax breaks.

The government has yet to make clear what, if any, additional quake-proofing programs will take its place.