Kahlon unveils first stage of housing plan

On the supply side, the reform would both help convert existing stock and clear the way to new housing.

June 11, 2015 19:02
3 minute read.
west bank settlement

Palestinian laborers work on a construction site in a religious Jewish settlement in the West Bank. [File]. (photo credit: REUTERS)


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Finance Minister Moshe Kahlon on Thursday unveiled the first stage of his plan to bring down the cost of housing.

He intends to have the housing cabinet approve it on Sunday.

“Today, we are taking responsibility and presenting an unprecedented government reform, which is also prudent and balanced, and deals with both the supply and the demand sides,” Kahlon said.

Prime Minister Benjamin Netanyahu, who has been holding intensive meetings with Kahlon on the subject for the past week, said the reform was a first step in his commitment to lowering the price of housing, and called on the cabinet and Knesset to quickly approve the proposal.

“We are going to take care of three means of production: the land, the manpower and the capital. If we take care of all three of these things, we will be able to get results,” Netanyahu said.

On the supply side, the reform would both help convert existing stock and clear the way to new housing. It would make it easier to convert offices to residences and to split large apartments into several smaller ones under certain circumstances, while a new urban renewal authority would streamline the process for upgrading existing buildings.

The plan would also increase public land available for residential housing, enact regulatory changes to make life easier for construction, and increase the workforce in the construction industry by training Israelis and bringing in more foreign workers.

The reform would also adopt measures for increasing minority access to housing, supporting rural development and increasing “solutions” for the haredi population, as well as set up another 95,000 units to be built in large projects in key cities through fast-track umbrella agreements, a program begun under former finance minister Yair Lapid.

On the demand side, the reform would expand the subsidized mortgage program, and move to limit real estate transactions for investment purposes.

To deter investors, the reform will increase taxes on second homes by two or three percentage points (those currently in the 5-7% bracket will rise to 8% and those in the 8-10% bracket will rise to 10%). This move would be good for home-buyers, because it would mean more homes on the market, but it could push up the prices for renters who would have fewer options from which to choose.

Other steps in the reform proposal aim to make sure people aren’t keeping apartments in limbo for longer than necessary.

When people buy a new apartment, the 24-month window for tax breaks on selling their old one will drop to 12 months. Likewise, the tax exemption period for selling inherited apartments will be set at two years.

The plan drew mixed reactions.

The association of housing contractors was pleased at provisions to ease splitting up apartments. The Association of Country Builders offered general praise, but noted the adverse effects the plan would have for renters. Others fretted that plans that required legislative changes would freeze up the market until they went through, mimicking the debacle of Lapid’s zero-VAT housing plan. That proposal, in the works for nearly nine months, was never passed.

Eldad Tamir, CEO of the Tamir Fishman investment group, was particularly critical of the program.

“The program is very disappointing,” he said. The reform lacks specific goals and timetables, and was “more of the same” small steps the government had offered up in the past to little effect.

“At the end of the day, the entire program will sink or swim on the ability to flood the market with large amounts of land in the right places in a fast amount of time,” he said. “Every other section in the program is meaningless at best, and most likely will create more bureaucracy and pressures to increase price.”

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