Cabinet oks 'price targeting' to lower housing costs

The plan will offer developers land at a 20% discount based on promises to sell it at the lowest possible price. Potential buyers will have to enter a lottery to get one of the discounted apartments.

December 21, 2014 16:49
1 minute read.
Uri Ariel



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The Cabinet on Sunday approved “price targeting,” Housing Minister Uri Ariel’s signature plan for lowering the cost of housing.

The program will offer developers land at a 20 percent discount based on promises to sell it at the lowest possible price. The tenders will mandate that the apartments sell for NIS 19,000 per square meter or less to ensure developers do not take the land and push them toward the luxury market.

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Potential buyers will have to enter a lottery to purchase one of the discounted apartments.

The plan was an early competitor to Yair Lapid’s “Zero VAT” proposal, which was dismissed as ineffective by economists. Lapid pushed that program as a central part of his political platform, and the two plans eventually were approved by the cabinet together.

Prime Minister Benjamin Netanyahu pushed Zero VAT off the agenda when he fired Lapid earlier this month and there were disagreements as to whether or not the price-targeting plan needed to be re-approved by the cabinet.

Of the two plans, however, only Zero VAT targeted firsttime homeowners, so the conditions of price targeting were updated following Zero VAT’s removal. In the lottery, three-quarters of the slots will be reserved for buyers who have never owned a home.

Alongside the Cabinet’s approval, the government will begin marketing discounted land, and expects to roll out some 4,000 units in Rosh Ha’ayin and Modi’in under the plan. An additional 12,000 units will follow in 2015.

Economists have generally approved of the methods behind the program, but note that it is unlikely to make a big dent in the housing market.

Adding 16,000 affordable apartments to a market that includes hundreds of thousands of units will not bring down the overall price, they argue, though it will benefit the lucky lottery winners who get the discounts.

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