Housing starts were up 3.4 percent in 2013 despite a dramatic 19% drop in the Tel Aviv area, the Central Bureau of statistics revealed Monday.Though housing starts offer a glimpse into units that will be on the market down the line, the CBS also tracks the more immediate supply with completed dwellings, which rose 11.8% from 2012 to 2013. Jerusalem saw the greatest influx of new units, with a 42.3% increase, followed by Haifa at 22% and the Southern District at 17.3%. Tel Aviv only saw a 5% increase in completed dwellings.Housing and Construction Minister Uri Ariel welcomed the numbers, saying they were at a 16-year high, and that he expected the numbers to jump significantly in 2014. Final quarter numbers however, were down 13% from the same quarter the previous year. According to the report, 91,600 units remained in the building process, a 3% increase over the previous year.Although the modest increase in housing starts was welcome news, they fell short of the level needed to fill the supply shortage that has led (alongside low interest rates) to a massive increase in housing prices in recent years."So long as the basic problems of the shortage of land planned for housing, proper funding for infrastructure ahead of building residences and dealing with the tax issue are not taken care of, we will not be able to significantly grow housing starts," said Eliav Ben-Shimon, CEO of the Israel Builders Association. A shortage of construction workers was also a problem, he added.But Ariel may have some reason for optimism, still. A more localized breakdown of the figures showed a six-fold increase in starts in Rosh Ha'ayin, one of the cities where the government passed an Umbrella Agreement to fast-track housing growth. The plan hopes to increase housing supply in periphery to encourage people to move outside the country's center.According to a preview of the Bank of Israel's annual report that was released Monday, one reason for so much demand in Tel Aviv, and increasing inequality between the country's regions, was a tax change a decade ago."In 2003, as part of the economic recovery plan, the government reduced the scope of tax benefits enjoyed by many communities in the periphery. For communities in the North, the benefits were reduced, and for hundreds of communities in the Negev, they were cancelled , which has possibly eroded the ability of the periphery to retain strong population groups and attract them from the center," the report said.