Finance Minister Yair Lapid’s signature housing bill stalled in a stormy session of the Knesset Finance Committee on Wednesday, as MKs verbally sparred over the controversial legislation.
Known as the 0-VAT law, the bill would cancel the 18 percent value-added tax on first home purchases for some young couples. From the start, it has been criticized as an ineffective means of lowering the cost of housing. The increased strain on the state budget resulting from Operation Protective Edge have called it into further question for its price tag, estimated at between NIS 2 billion and NIS 3b. a year.
At the end of the Knesset’s summer session, the opposition was successful in blocking passage of the bill, which Lapid had promised would go into effect in September. Lapid, chairman of Yesh Atid, had hoped to have it approved this week, but the fierce acrimony in the committee – which led chairman Nissan Slomiansky (Bayit Yehudi) to eject MK Stav Shaffir (Labor) on Tuesday, and threaten to do so again on Wednesday – led the committee to postpone consideration of the measure until September. The setback blocked the already slim chance that the bill could pass into law during a special summer session.
The Yesh Atid faction vowed that it would “not allow political blackmail at the expense of tens of thousands of young couples, who are working, serving in the IDF, and pay taxes.”
Slomiansky, who twice called for breaks in the session to work things out privately with committee members, noted that many of their reservations would probably come up in the bill’s final reading in the Knesset as well.
In the discussion, MK Moshe Gafni (United Torah Judaism) cited Monday’s report by rating agency Standard & Poor’s that called out the law’s deficiencies.
Having an international group weigh in on committee discussions was “unprecedented,” he said.
“We think that the government measures to support affordability are likely to increase housing demand,” the report said. “For instance, cutting VAT for some buyers could fuel demand and, in the context of a supply shortage, might add price inflation pressure.”
The report also noted that the discount “could benefit contractors more than homebuyers.
Meanwhile, uncertainty about the implementation of these reforms is likely to continue to weigh on the market.”
The S&P report also predicted that housing prices would continue to rise, but at a lower rate than in the past, estimating an increase of 6.5% in 2014 and 4% in 2015.
Committee members from more left-leaning parties accused Slomiansky of cutting a deal with Lapid to support his initiative in exchange for further funding for West Bank settlements. The committee approved several cash transfers on Tuesday, including some designated for settlements.
“I recommend that Yesh Atid voters give their votes to Bayit Yehudi next time, and save all of us the pretense and headache,” Meretz MK Michal Rozin said.
Should the law overcome the obstacles and pass into law, it may yet face a challenge in the High Court of Justice. The Knesset’s legal adviser has noted that its provisions giving greater benefits to IDF veterans and national service alumni largely excludes Arab and ultra-Orthodox Jews, despite the fact that the housing crisis affects them equally. The court could rule it discriminatory.