The Knesset Finance Committee on Monday continued trying to work out kinks in Finance Minister Yair Lapid’s main proposal for fixing the housing market, a bill that would cancel the 18 percent value-added tax on some firsttime home purchases.
Though the attorney-general has given the bill the go ahead, the Knesset Legal adviser has warned that the bill may not pass muster at the Supreme Court.
The bill offers the benefit to married, first-time home-buyers with at least one child, or who are over the age of 35.
The maximum price of the houses eligible for the VAT exemption is NIS 1.6 million for people who have served in the IDF or national service, but only NIS 950,000 to those who have not served. Critics say that discriminates largely against Arabs and ultra-Orthodox, who tend not to serve, even though the housing crisis cuts across the whole of Israel’s population. The cost of housing has roughly doubled in the past seven years.
Knesset Finance Committee chairman MK Nissan Slomiansky (Bayit Yehudi) has attempted to tweak the law to make it more palatable in recent meetings. On Monday, he suggested adding another differentiation between for former soldiers who had not served in combat units. While combat veterans could get the benefit for the entirety of the apartment price, non-combat soldiers and national service members would only get the benefit on up to NIS 1.4m. of the price, though they would still be eligible for the benefit on apartments up to NIS 1.6m.
On Sunday, he proposed that the benefit only be available on a temporary basis for five years, despite Lapid’s earlier insistence that the measure would be permanent.
The study did not spend much time focusing on reasons that supply has been limited, which the Bank of Israel has cited as a top reason for the problem, or address the VAT policy specifically, but instead focused on social implications of policies carried out by respective governments over the past decade that “consistently neglected” the housing sector.
The paper, to be presented at the Knesset’s Housing Day on Tuesday, blasted the government for the dwindling levels of public housing, subsidized mortgages and rental subsidies, while allowing the supply of new housing to lag behind demand. The problems are sharpest for the poor, the study’s author Gilat Benchetrit said.
Although a 1998 law to allow public housing tenants to purchase their apartments promised a replenishing of the supply, by 2011 there were 37,500 fewer units available, while only 1,000 were built.
“In the absence of a basic stock of public housing, it is simply impossible to provide decent housing solutions to low-income single-parent families, to people with disabilities or to the elderly, who for the most part represent the populations eligible for assistance,” Benchetrit said.
The number of people benefiting from subsidized mortgages also fell from 55,000 in 1996 to 2,200 in 2011, as requirement criteria were tightened and the terms became less attractive.
Rental subsidies, the study argued, remained the government’s strongest tool, but its budget has fallen 27% from 2003, to NIS 1.3 billion in 2011.
Meanwhile, just 47% of housing starts between 2008 and 2011 occurred on stateowned land, despite the fact that it accounts for 93% of the land area within the Green Line.
“Changes in land regulation could bring about much lower housing prices,” said Benchetrit.