First-time home buyers can receive a bigger mortgage if they move to settlements such as Itamar and Eilon Moreh than to the city of Ashkelon, according to the Construction and Housing Ministry Web site.
Banks use the ministry's formula to calculate how much money can be lent to a family, based on the number of children, the time the parents spent in the army, their immigration status and the region where the home is located.
This means, for example, that a family of five can receive a mortgage of NIS 244,020 in the Itamar settlement, located southeast of Nablus and some 28 km. over the 1949-1967 armistice line, but in Ashkelon the formula awards the family a mortgage of NIS 223,620.
The additional NIS 20,400 is one of the last vestiges of a system of grants and tax breaks eliminated under prime minister Ariel Sharon, through which the state encouraged people to choose homes in the settlements over those in the center of the country.
But while grants and tax breaks for settlements are no longer available, some settlements remain on the preferential status lists within different ministries. As a result their residents, along with those of any community on the preferential status list, are eligible for a special loan conditions.
Peace Now, in its June report on the 2009-2010 draft state budget, took issue with the practice. Hagit Ofran said a better loan deal for purchasing a home in the settlements was a type of incentive.
She noted that money was set aside in the Construction and Housing Ministry's budget to guarantee the loans.
"It helps people move to settlements," and in this way the government was hindering a two-state solution, Ofran said.
The ministry could not be reached for comment.
It was unclear if the practice of offering larger loans to residents of some settlements would be eliminated after a Knesset Finance Committee vote Sunday to approve the Areas of National Priority Bill, which would drastically broaden the criteria that determine which communities are entitled to the wide away of perks granted under "national priority" status, which until now had been based primarily on their location. Legislation setting forth this criteria will be included in the 2009-2010 economic arrangements bill.
The change has nothing to do with the fact that settlements are still on a number of lists, some of which, such as the one for the Industry, Trade and Labor Ministry, expire this year, but rather with the desire of legislators to change the definition of special-status communities.
It was unclear even to members of the committee and the committee spokesman whether settlements would be included in the list of preferred-status communities under the new criteria.
MK Uri Ariel (National Union) noted that the word "state" was removed from the bill, under the assumption that the list could in fact include settlements in Judea and Samaria.
But Pinchas Wallerstein, who heads the Council of Jewish Communities of Judea, Samaria and the Gaza Strip, said he believed most of the settlements would be written out of the preferential-status lists once they were completed.
Ultimately, the cabinet, not the Finance Committee, will generate the final list, based on the criteria approved as part of the 2009-2010 economic arrangements bill.
Sunday's Finance Committee vote expanded what had been the solely geographic criteria to include other parameters such as the security situation, the socioeconomic status of the community, the preferred distribution of Israel's population and the relative strength of the community in relation to neighboring communities.
In addition, clause six of the law allows for "additional considerations that relate to the population's needs in the area" - a clause that MK Shai Hermesh (Kadima) accuses of "leaving the law wide open to accommodate any community in Israel."
Rather than dividing the more than NIS 700 million budget for enhanced mortgages among the 240 communities on the list, Hermesh said, the new law would allow the government to compose a list including any communities that it wants.
With the Finance Ministry unwilling to raise the budget for the law, Hermesh said that many periphery communities that previously enjoyed national priority benefits would now have to make do with less.
"The government wants freedom of action to reward communities on an individual level," Hermesh said. "This is a law against national priority areas, not one that supports them."
Hermesh said that despite his reservations, he voted in favor of the bill, which is now expected to pass its plenum readings as part of the economic arrangements bill, because if he didn't, the High Court of Justice had threatened to do away with the entire status - a situation, he said, that would lead to the collapse of social services in many periphery towns.
Rebecca Anna Stoil contributed to this report.