Second round of Israeli housing lottery to offer 5,500 discounted units

The second round of Israel’s new housing lottery project is set to kick off next week, as potential buyers scramble to wrap up registration for a chance to purchase one of 5,500 housing units at a discounted rate of 20 percent less than market value under the “Target Price” (Mehir Matara) system.

Target Price, like its 2015 predecessor “Buyer’s Price” (Mehir Lamishtaken), is intended for first-time homebuyers, young families, single-parent households, and other individuals deemed eligible for discounted housing. The program focuses on areas in Israel’s so-called “periphery” — the north and south of the country, which tend to have lower socioeconomic rankings according to the Central Bureau of Statistics.

Potential buyers must apply for eligibility through the Ministry of Housing and Construction, and purchase a certificate of eligibility, renewed annually, at a one-time cost of NIS 240 ($74). Households then register for the chance to “win” the opportunity to buy a discounted apartment.

To qualify, buyers need to be able to demonstrate that they do not already own a home, and to indicate where they have been living. The certificate of eligibility then allows entry to all lotteries set to take place in the next year. The government has promised to raffle off about 30,000 affordable dwellings, overall, in 2022.

The lottery system offers a discount of some 20% on the apartment purchase price, in addition to grants of up to NIS 40,000 ($12,460) in certain areas. The discounts can be worth hundreds of thousands of shekels and are designed to reduce the amount that would-be buyers need to fund a deposit and to borrow as a mortgage.

The second batch of 5,500 units will be built across 25 construction projects over the next few years. The largest numbers of apartments available are in Netanya, Sderot, Rosh HaAyin, Beit Shemesh, Ashkelon and Ramat Gan. But locations available include Eilat, Ashdod, Elad, Deir Hanna, Haifa, Jerusalem, Nazareth, Arad, and Mitzpe Ramon.

Registration for these units will open on July 3 and will end on July 17. The first batch raffled over 10,000 properties, and was massively oversubscribed with 119,207 households registering a million bids to compete for them as Israel’s housing crisis continues unabated.

There are currently about 130,000 households registered in the Housing Ministry’s database for the lottery scheme.

The government has made some small but significant changes to the program since the first lottery in March-April. In the future, those already living in an area will get priority for new lottery apartments available there.

In the center of the country, 35% of the housing units made available through the lottery go to existing local residents. Outside of the center, 40% of units will be allocated in this way. And in parts of the country deemed to be National Priority Areas like the Upper Galilee and Arava desert, 50% are already distributed to local buyers.

To be classified as a local buyer, in the north or south of the country, a would-be buyer must have lived in the area for at least 18 months before the lottery date. In the center, the requirement is three years of residency.

But even “local buyers” still need to register to participate in each lottery and have to prove their local status if they want to be eligible for the priority lottery.

To guarantee the discount to buyers — which is between NIS 200,000 to NIS 500,000 ($59,598 to $148,494) — Target Price projects will fix the value of a square meter at the price on December 30, 2020, before the current housing price surge.

The Israel Land Authority has promised that payments made by a buyer of an apartment on state land will not have interest added or be linked to any other inflation measure, apart from a link between the construction element of the cost and the construction index which tracks the price of relevant raw materials and has been rising steadily. These measures are designed to ensure that the cost of apartments does not rise significantly between their purchase and the final payment pre-occupancy, and that builders are incentivized to deliver apartments on time.

In further changes designed to strengthen the Target Price plan and to make housing available to those most in need, the Israel Land Authority has committed to marketing tenders for the plan in most locations around the country across the lifetime of the program. As part of these tenders, there is an aim that around 80% of apartments set to be built will be allocated to those who have yet to purchase a home.

Israeli governments have long promised to lower housing prices, which have climbed for over a decade. The sky-high costs have put homeownership out of the reach of many Israelis, weakening the middle class.

Recent figures have shown that housing prices rose by 16 percent over the past year, the highest figure in over a decade, with substantially steeper rises in some parts of the center of the country.

A joint announcement this month by the finance, interior and construction ministries promised 70,000 new housing starts for each of the next four years. This number is the same as the plans announced last fall, but prices have risen steadily.

The Housing Ministry-run Target Price program should be relatively shielded from the political turmoil over the coming months, as Israel appears headed for the fifth national elections in three and a half years.

In introducing the latest lottery round, outgoing Housing Minister Ze’ev Elkin said: “We continue to do everything to allow young couples to purchase an apartment at a significant discount. By the end of the year, about 30,000 apartments will be raffled off to those eligible. The ministry is working around the clock to increase this number.”