Why rent in Jerusalem is surging disproportionately – and unlikely to let up soon

If you’re looking to rent an apartment in Jerusalem, you’ll need to have a lot of money and patience.

While rental prices have risen an average of 4% nationwide over the past year, according to the Central Bureau of Statistics, real estate agents in Jerusalem say that rent has skyrocketed by as much as 25-30% in some neighborhoods of the capital.

“It’s very hard to find an apartment in Jerusalem now because there aren’t many available,” said Yitzchak Kowalsky, CEO of YKK Jerusalem Real Estate. “If you’re a young couple with a family and you want to rent a nice three-bedroom apartment in the Baka, Katamon, or German Colony neighborhoods, that used to cost between NIS 8,000 and 9,000 [$2,243 and $2,523]. Now, that same apartment costs between NIS 12,000 and 13,000 [$3,364 and $3,645].”

You can find apartments listed in the NIS 8,000 ($2,243) range online, “but those are usually a top-floor walk-up, or it isn’t renovated or doesn’t have parking,” Kowalsky added. “If you are looking for the whole package, with a balcony and an elevator, it’s at least NIS 12,000 [$3,364], and it will get rented as soon as it goes on the market.”

Eric Opland, real estate director at L. Levy Nadlan, agrees. “Demand is huge now,” he said. “When an apartment is available, it goes very quickly. If you are looking for a place, you have to start early.”

Much of the reason for the surge is an increase in immigration from American and French Jews in response to rising antisemitism, agents said. During the first 10 months of 2024, immigration from the United States rose 12% to 2,786 new arrivals, while immigration from France rose a whopping 79% to 1,846 people, according to Jewish Agency figures.

Judith Ben Avi, who runs a real estate agency specializing in Jerusalem rentals, said many of the new arrivals prefer to rent a place in Jerusalem for a few years before they commit to buying. “The problem is that they’ll pay anything, and that drives up prices for everyone,” she said.

Kowalsky had a somewhat different take on it. Many of the older immigrants moving to Jerusalem had already bought properties in the city as investments and rented them out. When they arrive, their tenants are forced to move, making fewer properties available.

Another significant contributor is the popularity of urban renewal projects in which apartment buildings are renovated or rebuilt at no cost to the owner, by allowing the contractor to build extra apartments to sell as an investment.

“A lot of Jerusalem residents have evacuated their homes while they are rebuilt under a Tama 38 or Pinui Binui plan,” Kowalsky said, referring to two such programs. “For each project, you get a large number of families that are looking to rent another place in their neighborhood for a few years until construction is completed. The market doesn’t have enough supply to allow for that. And the fact that a lot of construction is being delayed due to the shortage of workers available since October 7 makes it even worse.”

The hottest markets are the central historical neighborhoods like Talbieh and Rehavia, along with nearby Mamilla, Opland said. Immigrants with a bit less money to spend go to Givat Mordechai or Har Homa, Ben Avi added.

Due to the country’s ongoing security situation, most renters insist on selecting apartments with a safe room to protect them in the case of rocket attacks, Opland noted. “That’s the most important thing, even more than an open Sukkah balcony is for religious Jews,” he said.

The challenge for students

The upturn in rental prices can be tough on university students and young adults moving to the city. Jerusalem is a top destination for students who come to learn at Hebrew University, Israel’s top-rated university, as well as other institutions such as Bezalel Academy of Art and Design, the Sam Spiegel Film and Television School, and Hadassah College of Technology.

“Most of them are sharing apartments,” Ben Avi said. “You see three people splitting an old apartment near Azza Street for NIS 9,000 [$2,523], sharing the bills. Their prices have gone up too, although they receive big discounts on property taxes.”

The most desirable neighborhood in Jerusalem for students is the center, with nearly 40% of its students making it their home while they study, according to the Madlan real estate website.

Opland noted that with rental prices rising so quickly, owners have become more flexible about the length of rental contracts. “People used to insist on a commitment of a year or longer from the tenant,” he said. “But now they are open to shorter contracts since they know they’ll be able to rent their apartment out for even more after the tenant leaves.”