'Build smaller apartments, fines for empty homes'

Trajtenberg Committee due to submit recommendations; sources say it's not expected to recommend lowering VAT, will encourage construction.

Prof. Manuel Trajtenberg (photo credit: Mark Neiman / GPO)
Prof. Manuel Trajtenberg
(photo credit: Mark Neiman / GPO)
The Trajtenberg Committee for socioeconomic change is due to submit its final recommendations to Prime Minister Binyamin Netanyahu tomorrow. Sources inform Globes that its real estate recommendations will have six points: long-term rental housing; promote the construction of 165,000 apartments on available land; ease terms of developers in land tenders; encourage the construction of small apartments; levy fines for unoccupied apartments; and NIS 30 million for vacate and build projects.
The Trajtenberg Committee believes that corporations and investment institutions are the source of financing real estate projects. It advises amending the Law for the Encourage of Capital Investments to cover the construction of rental housing by subsidizing land and providing tax breaks. It advises amending the Planning and Building Law to zone residential land solely for rental apartments. It also advises regulations for long-term leases of 3-5 years, including terms for evicting deadbeats. It expects developers to make a return of 7% on these projects.
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The Trajtenberg committee advises concrete proposals for the construction of 165,000 apartments at 27 large available sites nationwide, including Tel Aviv's Large Lot and Glilot, and at vacated IDF bases.
The Trajtenberg committee advises easing land prices in Israel Land Authority tenders by cutting the minimum price from 50% of an assessor's estimate to 35%, provided that there is a minimum number of bids for the tender, and to extend payment by the winning bidder from the current 50 days to 180 days.
The committee recommends encouraging the construction of small apartments of up to 85 square meters, and to lower construction standards, mainly by reducing the parking requirements and terms for public spaces in a building.
The Trajtenberg committee recommends levying special taxes on land for which planning exists to allow a building permit, in order to get construction started and avoid speculation. A landowner with such a site who does not begin construction within three years from the deciding date will pay a "delay of construction fee" equal to 10% of the value of each apartment zoned for the site. The committee acknowledges that this is a draconian proposal, but believes that it send a clear signal to the market, and that it will replace the purchase tax. The committee also recommends imposing sanctions on the owners of the country's 47,000 empty apartments.
The Trajtenberg committee also recommends allocating NIS 30 million to urban clearing and construction projects. On the topic of subsidies for affordable housing which are currently given to haredim (ultra-orthodox) the committee recommends that the prime minister set criteria for which population sectors qualify.

In addition, the Trajtenberg committee will recommend a range of other measures including raising company tax by 1-2% in January 2012, raising capital gains tax, and a special income tax for high earners with an income of more than NIS 1.2 million annually. All salaries above NIS 39,000 per month would also pay higher income tax.
However, the Trajtenberg committee is not expected to recommend lowering VAT, or introducing an estates inheritance tax. The committee will recommend tax points for working fathers, more negative income tax for working mothers and free education for three-four year olds. The committee will also recommend opening the Israeli economy to more imports and reducing excise as well as breaking monopolies such as the Standards Institute and Nesher Cement Co. Ltd.