A Jerusalem Municipality plan to build tens of thousands of new apartments in the city, including a couple thousand flats in various Jewish neighborhoods of east Jerusalem, has received final approval, the municipality said Sunday. The announcement came just as US Secretary of State Condoleezza Rice, during her latest peace mission in Israel, was again pressing Israel to cease all construction in east Jerusalem, saying the building was having a "negative effect" on peace talks. The building proposal, which won city approval earlier this year, has been authorized by the Interior Ministry's National Planning and Building Committee, Jerusalem Municipality spokesman Gidi Schmerling said. The proposed construction is part of a long-term city building plan which will see the construction of nearly 40,000 new apartments throughout the city over the next decade, including in the east Jerusalem neighborhoods of Gilo Ramot, Har Homa and Ramat Shlomo - areas that Israel built after the Six Day War; they are located within the city's expanded municipal lines, but were never recognized by the international community. The proposal will also see construction for Arabs in Arab neighborhoods of east Jerusalem, such as Issawiya and A-Tur. Israel differentiates between construction in east Jerusalem and building in the West Bank, but the international community does not, and views both as settlements. "Unfortunately, I do believe, and the United States believes, that the actions and the announcements that are taking place are indeed having a negative effect on the atmosphere for the negotiation - and that is not what we want," Rice said after meeting with Palestinian Authority President Mahmoud Abbas in Ramallah on her sixth trip to the region this year. Rice said Israeli construction would not predetermine the future borders of a Palestinian state. Prime Minister Ehud Olmert has said building in east Jerusalem is "not in the same status" as building in the West Bank. "It's clear to everyone that the Jewish neighborhoods of Jerusalem will remain part of Israel in any possible final status agreement," Olmert spokesman Mark Regev said. "Building inside those Jewish neighborhoods in no way contradicts our commitment to move forward in the peace process," he said. Jerusalem Mayor Uri Lupolianski said in a statement Sunday that Jerusalem is not a settlement, and that construction would continue throughout the city in an effort encourage young Israelis to live in the city. The city's building plan was approved just five month before the city's slated mayoral elections. Jerusalem opposition leader Nir Barkat, who is running against Lupolianski, has led a public campaign against the government's proposed the division of the city, and Lupolianski has been eager to show right-wing voters that he is no less hawkish on the issue than his opponent. The building plan also comes at a time of a severe housing crunch in Jerusalem. The dearth of space in the city to build, combined with the increasing number of holiday flats being bought by foreigners in luxury projects in central Jerusalem at prices Israelis cannot afford, and a freeze on a decades-old major construction plan for the area between Jerusalem and Ma'aleh Adumim due to American opposition, have all contributed to the crippling housing crunch in the city. "The committee emphasized the importance of finding areas to build residential housing in Jerusalem, both to answer the needs of the population, and in order to absorb new population," the Interior Ministry said in a press release. Many of the building projects listed as part of the city's decade-long master plan had already been approved by the government, or were in various stages of being authorized. Last week, Israel announced it would build 1,300 new housing units in Ramat Shlomo. The announcement brought to more than 3,000 the number of homes Israel has approved for construction in east Jerusalem and the West Bank since the renewal of peace talks late last year. Some 180,000 Jews live in various neighborhoods of east Jerusalem out of total population of nearly 500,000 Jews in the city; 250,000 Arabs live in east Jerusalem. According to a 2000 peace proposal put forward by former US president Bill Clinton and rejected by PA chairman Yasser Arafat, Jerusalem's Jewish neighborhoods would remain under Israeli control, while Arab sections would be part of a future Palestinian state. Privately, Palestinians concede that Israel will retain Jewish neighborhoods of east Jerusalem as part of a final peace agreement, but contend that the current building there severely hampers peace talks. Industry, Trade and Labor Minister Eli Yishai said Sunday it was the government's duty to build in Jerusalem and its surrounding areas. "The government is permitted to decide to build according to need, and exactly as the French government builds in Paris and the US government builds in Washington," he told Israel Radio. "If we place restrictions on construction around Jerusalem, we will eventually also need a special approval to build in Tel Aviv," Yishai said.