Terra Incognita: The failure to secure home ownership

This was supposed to be a country of hope for the world’s Jews. But when it comes to buying a home, the Jewish citizens have little hope of obtaining this essential lifestyle.

By SETH J. FRANTZMAN
Rothschild Tower TA 248 (photo credit: Courtesy)
Rothschild Tower TA 248
(photo credit: Courtesy)
Afascinating set of statistics were presented by Channel 2’s Oren Aharoni on October 13. The report was titled “In Israel people work the hardest to buy a house.”
According to the data, it takes just 30 months of work for the average Swede to buy a house. The American works 60 months, while the Israeli is burdened by 129 months.
The information is not based on how much a person might actually work and save or whether he can secure a mortgage to finance a house, it is just raw math calculated on a person working without spending any money and saving every penny toward the home. Consider the American numbers: 60 months multiplied by an average salary of $2,000 a month equals $120,000. That is the cost of a home in the type of market where the average salary is $2,000 (i.e. Arizona). So the numbers make sense.
What is happening here? Based on the math it seems that a person making NIS 5,000 a month can achieve his dream of buying a home for NIS 645,000 in 11 years. Of course he won’t ever achieve his dream because when one factors in all the expenses the person must pay out every month, including utility bills, rent and taxes, he is left with a tiny sum to save toward buying a home. Even with the possibility of obtaining a mortgage, which in reality is the only reason average people in any country can ever purchase a home, the Israeli is not only behind his peers in other countries but he faces an increasingly uphill battle to obtain propertied independence.
Why is this the fate of Israelis? This was supposed to be a country of hope for the world’s Jews, a place they could call their own and put down roots. But when it comes to home ownership, which is a large part of identifying with one’s landscape, the Jewish citizens have little hope of obtaining this essential lifestyle.
One must write “Jewish” here because all things are not the same when it comes to home ownership. The Arab community owns most of the fully private land (5 percent roughly) and home ownership is held in high esteem in Arab culture (one oftrepeated ditty is “have a son, build a house, plant a tree”). The Arab community suffers from perceived building restrictions and overcrowding, lack of planning, infrastructure and other issues, but owning one’s own property is not one of the factors mentioned by Arab rights groups as an issue of discrimination.
SO WHAT is it that has turned the Zionist dream of living in one’s own land on its head? One oft-repeated excuse for the lack of affordable housing and steep prices is that there is a lack of land. Obviously relatively wealthy countries with a high population density tend to have housing price problems. In the 1990s the business world was abuzz with stories of the “100-year Japanese mortgage” or what was called the “three generational loan.”
In the society of the “salaryman” (the Japanese term for the lifetime employee in a business suit) such exotic financial instruments, while not necessarily the norm, shine a light on what befell Japanese urban society due to rising real estate prices.
Home ownership was not only out of the grasp of the Japanese though. Under communism in Russia newlyweds told nightmare stories of waiting years to get the “right” to live in small dingy apartments.
But Israel isn’t Russia under the stagnation of the Brezhnev years, nor is it crazily hitech urban Japan. Even in the worst development towns or peripheral communities, home ownership remains a tough call.
In Beersheba the statistics tell us that one must work full time for 58 months and save every penny.
How is it possible that in the rural periphery, in the desert where there are millions of empty dunams, that people cannot afford to buy a simple apartment, let alone a house? The answer is partly salaries. Public salaries are abysmal. Police are paid a paltry starting wage of NIS 4,400 a month. Private salaries aren’t any better except in some industries in Tel Aviv, and there they still don’t compensate for the ridiculous price of real estate (216 months of work to purchase an apartment).
Some of those interviewed on Channel 2 pointed to a government solution. Dov Henin, the Hadash MK, complained about lack of government support for more housing. Another man voiced anger that the government sends people to army reserve duty but “gives them no hope” afterward.
Government can’t solve all our problems.
Artificially low prices for apartments or building more flats isn’t the only answer. Some hidden problems affecting the real estate market can be found elsewhere. One issue that doesn’t always exist in other countries is that the rural property market is very frozen. To put it simply, Arabs and Jews are not able to relocate. No Jew can move to an Arab neighborhood and in many cases can’t even gain admittance to Jewish rural communities, like kibbutzim and moshavim. Arabs also are generally unable to buy homes anywhere but within their own communities.
This creates, for better or worse, a frozen market, one artificially structured to allow only certain groups to live in certain places, the opposite of a free and open real estate market. Obsession with planning – the resulting eyesores can be seen in every development town and suburban or urban community – leads to building plans being approved that have nothing to do with the private demand for housing.
How else to explain the absolute scandal that is the Jerusalem housing market where the statistics tell us one must work 151 months, in one of the poorest cities in the country, to buy a property? Government regulation, the inability of ethnic groups to mingle, the domination of the rural environment by communes from another era and other factors have conspired to crush the dream of home ownership.
The writer is a PhD researcher at Hebrew university and a fellow at the Jerusalem Institute for Market Studies.