Upcoming changes to urban renewal plan have developers racing to finish building
TAMA 38, national program to quake-proof older buildings that became popular in central Israel due to higher prices, set to end
Israeli developers are racing to finalize approval for real estate projects that take advantage of urban renewal provisions that are set to expire in October this year.
The temporary but long-standing provisions have been in place since 2005, as part of a national urban initiative called TAMA 38 (National Outline Plan).
The program was introduced to encourage earthquake-proofing older residential buildings, initially in towns and cities along the Syrian-African rift such as Kiryat Shmona, Tiberias, and Beit She’an.
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 in accelerating residential construction in cities to meet galloping population growth rates and the demands for accommodation.
In reality, since its introduction, 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 they offered a way to increase the numbers and quality of available apartments in built-up areas of Tel Aviv and areas nearby, 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.
But TAMA 38 rules made no provision for support services. So while they allowed for higher density building and more residents in key areas, there were no guarantees of the transportation, education, and other infrastructure needed to support more people. There was also no requirement for the redevelopment to include affordable housing, and municipalities say that they are powerless to insist it should do so. As a result, TAMA 38 projects have pushed up both purchase and rental prices in city center areas, pushing out lower-income households that previously benefited from the lower prices of the older housing available.
According to Madlan analysis, Tel Aviv and its surrounding municipalities have the highest number of ongoing urban renewal projects in the country participating in TAMA 38, which is set to expire in October. As one example researched by The Times of Israel’s sister site Zman Israel, on Yehoshua Bin Nun street in North Tel Aviv, 102 apartments have been demolished and replaced with 183 newly built luxury properties, retailing at between NIS 5 million and 18 million ($1.51-$5.45 million), delivering a profit to the developers of approximately NIS 155 million ($46.94 million).
Tel Aviv company Acro Real Estate, a property developer founded in 2006 that specializes in residential and commercial projects, received a valuation of NIS 4 billion ($1.21 billion) when it went public on the Tel Aviv Stock Exchange last month. Its market success is seen as based on its effectiveness at leveraging TAMA 38 provisions in Tel Aviv suburban areas such as the upscale neighborhood of Ramat Aviv.
This fall, TAMA 38 will 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.
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 new regulations, proponents hope, may help shift the focus from just upgrading residential buildings to considering the conversion of office buildings into residential properties and addressing gaps around upgrading public infrastructure.
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. Although more attractive from the perspective of municipal planning, they may well be less popular with both homeowners and developers. For the moment, it remains unclear whether the new regulations will be attractive enough to commercial developers.
The new framework may also do no more to protect the interests of lower-income households.
TAMA 38 has offered a way to use private money to upgrade areas that are more rundown. But the provisions have not delivered the wholesale redevelopment across the country that municipalities were looking for. Dalit Zilber, the director-general of the Israel Planning Administration, a unit in the Interior Ministry charged with regulating land use, said has said that the program has “lost direction” and had called to end it.
But with the end of TAMA 38 in sight, the government has yet to make clear what, if any, additional quake-proofing programs will take its place.
