Battling bureaucracy

The government’s proposed Fast Track plan may sound good on paper but is difficult to implement in practice.

By JOHN BENZAQUEN
Prime Minister Binyamin Netanyahu 311 (photo credit: Marc Israel Sellem/The Jerusalem Post)
Prime Minister Binyamin Netanyahu 311
(photo credit: Marc Israel Sellem/The Jerusalem Post)
The government of Israel is very concerned about the rise in real estate prices. If prices continue to increase, it may well be that by the next election, Prime Minister Binyamin Netanyahu may find himself at the head of the opposition.
Since this government took office, real estate prices have risen by more than 40 percent -- an unprecedented rise in the history of the state. During this time, the government has formulated all sorts of plans to stem the rise in prices, but to no avail. Most of these plans were fiscal, such as increasing the rate of interest on large mortgages, penalizing investors such as those buying a second property, or increasing the supply of land for building purposes.
A few weeks ago, Netanyahu unveiled a plan, which he says will allow for the building of an additional 55,000 dwellings during an 18-month period. It is popularly called the Fast Track plan because it is meant to circumvent bureaucratic bottlenecks in the planning stages.
The Fast Track plan is based on creating national building committees with special plenary powers that will permit them to disregard objections from the public, from green organizations, etc. They will have the power to avoid bureaucratic and administrative bottlenecks.
Will this plan succeed while all others have failed? Many are skeptical and believe that the plan is merely a way to overcome mounting political pressure, especially from Shas, a key coalition partner that has threatened to quit the coalition unless steps are taken to curb rising real estate prices.
Erez Cohen, up to a few weeks chairman of the Israel Land Appraisers Association, told Real Estate, “I have serious doubts about the success of this project. There is nothing new or revolutionary about it, and it has been tried before. In the 1990s, at the height of the immigration from the former Soviet Union when there was urgent need for new construction to meet the needs of the million or so new immigrants, the government set up national building committees with special powers. They were not a qualified success,” he says.
“By ignoring objections, they caused environmental harm, and they authorized only half the amount of building permits expected from them,” he continues. “But furthermore, it took a lot of time.
And I very much doubt that they can deliver what is expected of them in time.”
Eran Nitzan, the VP of the Contractors and Builders Association, is very supportive of the Fast Track plan, but he says it has to be adapted to the realities of the building industry.
“The idea is sound because the whole process of obtaining building permits is chaotic. It takes too much time to get a permit. Time is money, and it is reflected in the construction costs and in the ultimate price of real estate,” says Nitzan.
“But the Fast Track program has major flaws,” he explains. “The main flaw is that it only covers building plans in government-owned land – i.e., land owned by the Israel Land Authority (ILA). About 90% of land in Israel is owned by the ILA, but in urban areas the ILA owns about half.
If private land is not included in the program, it will be very difficult if not impossible to implement the plan.
The plan is based on authorizing large building projects on large tracts of land. If this regulation is not changed, we will have large tracts of publicly owned land with islands of privately owned plots,” he says.
Much of the plan is based on moving the army bases in the center of the country, such as the one in Tel Hashomer, Sirkin in Petah Tikva and Zrifim in Rishon Lezion, as well as the vacant lots of Taas (Military Industries) in Herzliya and Tel Aviv.
This is totally government-owned land, but some of it was confiscated from private owner. If and when the lots are no longer used for the purpose for which they were confiscated, they will revert back to their former owners.
But even if the plans to circumvent bureaucratic bottlenecks were to succeed, it would be very difficult to implement them.
Haim Feiglin, general manager of the Zemach Hamerman development and building company, agrees that there is an urgent need to overhaul the whole building planning process in this country.
“From experience, I can tell you that the process is outdated, it is frustrating and time consuming. It took us 22 years to get a permit to build 980 apartments on a 57.5 -acre plot in Ramat Gan.
But while I fully agree with the plan to simplify and de- bureaucratize the whole system, I very much doubt if it will succeed,” he says.
“The problem with the Fast Track, as with all other measures taken to curb the rise in prices, is that they are half measures, they are not holistic.
They are not implementable,” he elaborates. “To be able to construct an additional 55,000 dwellings on top of the annual 35,000 to 40,000 housing starts, other measures have to be taken. There is an acute shortage of skilled workers. The government must solve that problem by allowing foreign or Palestinian construction workers to work in Israel. There is also the problem of financing. Bank of Israel regulations allow banks to finance building projects up to only approximately 20% of their equity capital. This will have to change,” says Feiglin