Housing cabinet approves plans for bringing down cost of housing in Israel

Construction and Housing Minister Ariel aims to bring down costs by imposing new guidelines for construction companies.

June 23, 2014 17:23
2 minute read.
Apartment building [illustrative]

Apartment building 311. (photo credit: Ronen Zvulun / Reuters)


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The Housing Cabinet on Monday approved two new plans for bringing down the inflated cost of housing, one to lower the target price of new homes and another to expand transportation infrastructure.

The target-price scheme, promoted by Housing Minister Uri Ariel, aims to bring down costs by imposing new guidelines for construction companies.

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Those bidding on new land from the Israel Lands Authority through 2019 would commit to selling 80 percent of the new units built at a 20% discount from the average price of the complex, as determined by the government appraiser.

Special conditions will apply in those areas in which the government has signed “umbrella agreements” to fast-track large-scale building projects and fund necessary infrastructure.

The transportation segment of Monday’s plan would devote NIS 4 billion through 2020 to fund 45 projects that would connect new housing projects to Israel’s transportation network.

The plan aims to time the building of new infrastructure to ensure that 50,000 new apartments will be ready for market as they are built in that time frame.

The cabinet also approved a NIS 30 million shekel plan submitted by Environment and Energy Minister Amir Peretz to encourage green building.

Ariel, who offered the target price plan as an alternative to Finance Minister Yair Lapid’s policy of exempting some first-time home-buyers from paying the associated 18% value added tax, was absent from the meeting over another housing issue.

The Finance Ministry, he said, had refused to transfer NIS 1 billion in funds for housing assistance programs.

Lapid’s VAT policy, widely criticized by economic experts as ineffectual, advanced through the government this week toward a September 1 implementation deadline.

A government report on the war against poverty released Monday found that the poor devote a larger- than-average share of their income to housing costs, with the poorest 10% of the population devoting 40% of their consumption on housing. In the center of the country, paying rent costs the poor 61% of their income, a figure that rises to 74% when water, electricity and property taxes are taken into account.

“The state of Israel does not sufficiently fulfill its duty to provide its poor citizens adequate housing at a reasonable cost,” the report concluded.

Its recommended policy changes would cost the government NIS 2.52b. a year, and included expanding the eligibility rules for public housing and rental assistance, as well as assistance programs for home purchase, including partial ownership, and aid for those who have trouble repaying mortgages.

Among the changes, the committee recommended spending an additional NIS 950m. on rental assistance, which would aid an estimated 96,000 households.

The number of public housing units have dropped from a peak of 108,000 in 1998 to 70,000 today, while eligibility conditions for mortgage assistance and public housing, it said, had not been updated in 45 years.

The committee recommended setting 5% of housing aside for public housing, a percentage it says is relatively low among OECD countries. That would require the government to add 700-1,000 new public housing units a year for the next 15 years, at a cost of NIS 450 million a year. It also recommended boosting funds for maintaining existing public housing by NIS 53 million.

In response to the report, Ariel promised that there would be solutions on public housing “in the coming months.”

The cost of housing in Israel has increased over 95% since 2007.

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