Special Report: Bombshell housing report falls on government 3 weeks before election

Netanyahu, Olmert, Atias, Ariel, Interior Ministry, ILA on hook; Lapid gets pass for now; Housing prices skyrocket 55% in 5 yrs, some housing units take 12 yrs to build because of red tape.

February 25, 2015 18:00
settlement construction

A laborer works on an apartment building under construction in Jerusalem. (photo credit: REUTERS)

State Comptroller Joseph Shapira’s report on the country’s housing crisis, issued on Wednesday, threw the political world into a whirlwind of opposing parties blaming one another in the run-up to the March 17 election.

In his characteristic understated style, which differs from his predecessor who took aim at specific politicians, Shapira’s report does not place the blame on any single individual’s shoulders.

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Instead, the report uses more amorphous phrases, such as “The government and its ministries have set national housing policy in a deficient manner.”

However, his focus on 2010 as the worst period of the housing crisis, his blasting of the government for acting only in reaction to events – such as the summer 2011 social justice protests – and for delaying the appointment of a point man to handle the crisis until June 2013, effectively place substantial blame on Prime Minister Benjamin Netanyahu.

Shapira does go out of his way to spread the blame, directly or indirectly assigning a share to former prime minister Ehud Olmert, Construction Minister Uri Ariel, former construction minister Ariel Attias, the Interior Ministry, the Israel Lands Authority and local planning authorities.

The report also makes reference to the Finance Ministry, the Development of the Negev and Galilee Ministry, the Justice Ministry, the Economy Ministry, tax authorities and the Bank of Israel.

Surprisingly, the report does not focus on Yesh Atid Party leader and former finance minister Yair Lapid (the criticism of the Finance Ministry mostly focuses on 2010, when Yuval Steinitz was minister) or on 10 decisions in 2014 by the housing cabinet.

A report still being drafted is meant to evaluate the housing cabinet’s decisions and Lapid’s signature plans, such as his proposal to exempt some mortgages from value- added tax.

Shapira went out of his way to rebut accusations that the timing of the report was influenced by politics, quoting former comptroller Eliezer Goldberg as saying that “oversight does not get silenced” even during election campaigns.

The report describes the housing crisis from 2008 to 2013 in stark numbers, stating that home prices skyrocketed around 55 percent during that period and rental prices jumped around 30%, while salaries rose only slightly.

Shapira said that the housing crisis “most significantly impacts society weaker sectors and the middle class,” representing 73% of the renters’ market in Israel.

Data from the report indicated that between 2008 and 2013, the average number of monthly salaries it would take to purchase a home jumped from 103 to 137, and the average proportion of a monthly salary needed for rent jumped from around 29% to around 38%.

The change was so pronounced that it made it difficult for people to make ends meet and could require them to cut costs in other critical areas in order to avoid losing their homes, Shapira said.

The report expressed concern that, despite the fact that “the state has great power” over the issue since “it manages most of the land” in the country and despite receiving significant attention, there have been few improvements.

The report’s main recommendations for change involve the government setting an affordable housing policy, increasing the efficiency of the approval process for new homes – which should also help decrease the need for short-term, Band-Aid-style policies – establishing a global policy to better balance housing supply and demand, improving government data on the issue, including establishing a joint central data center, and better attuning state actions to the status of available land and the target group for housing offerings.

There are four main sections to the report.

• Section one lays out the current housing situation, reviewing 2008-2013 trends. The section dates the crisis back to 2002, when the supply of new units began to fall behind demand.

• The report’s second section lays out state policies before 2008, noting that from 2005 to 2007, the state made a number of decisions to deal with housing, but put off implementing them. Shapira criticized the Olmert government for failing to recognize the severity of the crisis in 2008 and for failing to advance any special strategy to address the issue.

Between 2008 and 2010, the imbalance between high demand and insufficient housing supply grew even more, at a rate of 36% in real terms, said the report.

Shapira said that housing prices skyrocketed to unprecedented levels starting in 2008, but inexplicably Netanyahu’s government started to discuss the issue only in July 2010, more than a year after it took office.

Even after Netanyahu’s government finally started to declare that it would try to fight the housing crisis, the prices continued to jump higher in 2011 to 2012, though not quite at the same rapid rate.

Shapira said that following the summer 2011 social justice protests and the 2012 Trajtenberg Report, the state took some steps to address the problem. However, they were poorly planned, based on low quality data. They were also unrealistic in light of planning and infrastructure limitations, and joint intergovernmental work on the issue was deficient in translating the general goals into specific policies.

Many of the specially established committees that were supposed to cut through the normal red tape and grab the problem by the horns were not operating or were ineffective, without real support or anyone checking on progress.

Shapira noted that the director- general of the Prime Minister’s Office admitted in a December 2013 letter that the housing programs were unrealistic.

Also, the report slammed the Netanyahu governments for failing to appoint the construction minister as the point man for addressing the housing crisis until June 2013.

The report added that the Bank of Israel’s policies of keeping interest rates low to keep consumer prices stable and to support broad economic growth, did not help and sometimes indirectly aggravated the problem by creating more demand for housing and without providing an incentivize for corresponding growth in supply.

Real estate tax related steps designed to address the issue were performed deficiently and on a very delayed and ineffectual basis.

• The third section discusses failed efforts to expand the housing supply.

It slams the Interior Ministry for mismanagement of available land for building homes, including for lacking data on the land, such that no effort was made to prepare land for development.

The report criticized the Israel Lands Authority for not developing any broad multi-year strategic plan, for setting unrealistic shorter-term targets for developing land, and for failing to tailor its local planning efforts to local housing needs.

The report noted that only four out of 71 local municipal authorities have updated development plans.

There was heavy criticism for the red tape of local planning authorities, which held up approvals for housing units for unreasonable amounts of time, leaving 50,000 units in the pipeline that could have moved forward.

Some approvals were drawn out for between 5.5 and 7 years, with it sometimes taking 12 years from the time a development proposal was filed until people could move in.

• The fourth section states that there was no set legal or administrative framework to encourage affordable housing and specific targets.

Programs for new housing and long-term rent control units produced little, especially for the poorer population sectors that they were designed to help.

Here, the report blasts the Construction Ministry, the Interior Ministry, and the Israel Lands Authority for not properly defining what category of persons they were targeting for new, more affordable housing.

Only four out of 10 special public offerings of affordable housing in 2012 were successful, and out of 1,412 units offered, only 406 were seriously marketed and only 114 units were rented out.

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