Hot property tax

Will doubling ‘arnona’ alleviate the affordable-housing crisis?

By MAX SCHINDLER
Hot property tax (photo credit: NETA BEN-EZRA)
Hot property tax
(photo credit: NETA BEN-EZRA)
An entire city block stands hollow, its Jerusalem stone architecture crumbling from disuse and abandonment.
The shuttered storefronts and cracked concrete balconies overshadow the commuters hustling and bustling outside the central bus station.
Across town, in a neighborhood where three or four-story family homes fetch asking prices of nearly $1 million, the problem reemerges. A walk down Ibn Gvirol Street in the tree-lined Rehavia area reveals a row of Bauhaus-designed homes falling apart from disuse.
Strewn across Jerusalem, abandoned buildings dot the landscape, creating eyesores and blighting neighborhoods. In the city center alone, a number of prominent buildings appear deserted – from the padlocked Solel Boneh building on King George Avenue to the deserted Etz Haim Yeshiva next to the Mahaneh Yehuda shuk, and the towering Eden Cinema on Agrippas Street.
According to Hitorerut B’yerushalayim (Jerusalem Awakening), a secular advocacy group represented on the city council, the city center-Rehavia neighborhoods host an estimated 60 abandoned houses and buildings. Across the capital, at least 1,000 unoccupied structures mar the cityscape.
In these high-demand areas, young and lower-income residents are often priced out of the neighborhood, says Merav Cohen, a city councilwoman for Hitorerut. The vacant and abandoned buildings reduce the number of available apartments on the market, exacerbating the problem of housing scarcity and driving up housing costs across the board.
“It’s a part of the affordable housing problem and a big loss for the city,” she says.
According to her fellow activist and husband, Yuval Admon, the problem is twofold, as abandoned buildings account for 2 percent of the housing stock in Jerusalem. This, in conjunction with ghost apartments – or residences owned by foreigners who do not reside there full time – exacerbates housing scarcity.
“A lot of [these empty houses] are in the center – Rehavia, Nahlaot – areas of high demand,” affirms Admon. “And a couple of thousand people could live in these apartments.”
AFTER LAST summer’s social-justice movement – when hundreds of Jerusalemites occupied deserted buildings – activists forced the issue back on the legislative agenda. In March, the cabinet approved the Trajtenberg Committee recommendations that would double the arnona property tax on abandoned properties, and last fall, the Jerusalem city council also voted to double the arnona on “ghost housing.”
It remains unclear how the municipality and national government would find out which properties are abandoned or vacant, identify the elusive owner and then enforce the doubled arnona. At the same time, some real-estate brokers and activists doubt that doubling the arnona is a panacea for the shortage in available housing stock.
“Raising the arnona won’t stop the flow of empty apartments,” says real-estate agent Shelly Levine of Tivuch Shelly, as “some owners have more than enough money to keep a place vacant.”
She also expresses skepticism that doubling the arnona will lead to revitalizing abandoned, as opposed to unoccupied, property.
Other brokers fault the government for curbing ghost housing without tackling more systemic problems.
“The doubled arnona will definitely decrease foreign interest in the city, which is very expensive anyway,” says broker Benita Raphaely of Optimum Real Estate, adding that the tax hike would not resolve the underlying issue of affordable housing.
“But if they want to stop foreign buyers in the capital, this is a way to do it,” she says.
The proposed changes stipulate that owners of abandoned or vacant properties are exempt for six months from paying arnona, with a three-month grace period.
After that, municipalities can charge double the tax rate.
The Knesset must approve the full report before the doubled arnona takes effect.
Admon is optimistic that the legislation will pass in the near future.
“It is pretty likely that the Knesset will try to pass the bill in 2012,” he says.
According to Cohen, the municipality has limited tools at its disposal to identify abandoned and unoccupied housing. For example, a local government may rely on water consumption metrics to identify a vacant residence, an often unreliable metric due to aging pipes and leaky faucets.
Cohen met with the city’s municipal director- general, Yossi Heiman, to investigate and compile data on the problem. Heiman researched the issue by coordinating with the tax division and seeing which residences did not submit property taxes. According to the unofficial audit, an estimated 1,500 houses were deemed abandoned.
“The [arnona] department could see in the past few years who hadn’t paid local property taxes, including in east Jerusalem,” Cohen says. “We realized that the government should change the law so only owners who are rebuilding won’t pay arnona.”
Two main obstacles stand in the way of rehabilitating and reusing abandoned property in Jerusalem: tax exemptions and municipal ordinances. On the municipal level, Cohen has pushed city officials and Mayor Nir Barkat to address the problem by enforcing preexisting ordinances and compiling official data.
“There’s a local law that forces people to maintain their yards, and usually the municipality doesn’t enforce that,” she says.
“But in this case, they can make sure the property owner cleans and renovates around their house.”
TITLE-HOLDERS IN the city possess many incentives and few financial consequences for abandoning properties. In the country today, the owner of an abandoned home is exempt from taxation.
Without direct financial penalties, the proprietor has no pressing motive to rebuild, often allowing him to dawdle for years.
“If you don’t have to pay the arnona, or make part of the payment, you can earn money from land appreciation,” says Uri Aven-Haim, an architecture graduate student at Bezalel.
“Everyone knows that property and land are one of the best investments, and it’s a good pay-off even if you’re not using it.”
Disputed ownership among legal heirs also plays a role in hampering the redevelopment of abandoned property.
“When a building is inherited by a number of siblings, then it has multiple owners,” Admon explains. “Sometimes the family isn’t able to decide what to do with the building,” allowing the property to fall into disuse and disrepair.
In a separate scenario, the deed holder may want to increase the floor height and add to the house’s property value. “He says, ‘Okay, I’ll wait until the municipality approves my building,’” Admon says.
Historical preservation and municipal ordinances may also interfere with the rehabilitation of certain unused properties, and owners are unwilling to jump through various legal and financial hoops. “A lot of people just want to make more money out of the building, and they don’t have any incentive to rebuild,” he says.
Admon – who wrote his graduate thesis on the abandoned housing phenomena in Jerusalem – compares how other municipalities and cities respond to the issue. In Boston, the deed owner of an abandoned property is subject to back taxes and fees. If he continues to neglect the property, the city has legal tools at its disposal.
“If a building owner refuses to rebuild or renovate, even after having to pay fines and double taxes, in Boston today the municipality can actually take the building and compensate [the owner],” Admon said, advocating that Jerusalem adopt a similar mechanism of eminent domain.
IN RESPONSE to urban decay in the capital’s center, activists from Hitorerut have turned to social media to galvanize the public’s attention.
Aven-Haim took an academic interest in the structural design of abandoned buildings, and that curiosity metamorphosed into social action.
“As a student, I always liked finding new places with unique architecture,” he says, adding that in his strolls downtown, he recognized the scope of the problem.
Last November, he, Cohen and Admon organized a walking tour of abandoned downtown homes to raise public awareness.
The event stemmed from frustration that the problem was affecting civic morale.
“My feeling is that in the city center, it’s supposed to be alive and vital. Yet we felt that something was wrong, that there’s so much abandoned housing,” Aven-Haim says.
From empirical data indicating that the phenomenon was more widespread than commonly assumed, Aven-Haim compiled a list of abandoned houses in Jerusalem. But rather than engage in a cumbersome top-down effort, he decided to outsource the project to the community.
That’s when he came up with the idea of using Google Maps to document and describe each abandoned property in the city.
“We wanted people to view the houses and understand the problem,” he says, adding that he thought the public didn’t grasp the sheer number of abandoned properties. “The main issue is about the attitude – one that allows abandoned housing when there aren’t enough places for people to live.”
He created the Google Maps group “Abandoned Houses in Jerusalem,” where city residents can photograph and upload information on abandoned property in their neighborhood. The page offers information on over 100 abandoned buildings scattered across the capital.
IN CONTRAST to many similar-sized European cities, Jerusalem possesses a disproportionate level of abandoned housing in its downtown areas. In Western Europe, the central government prioritizes and invests in downtown infrastructure projects and housing density, as opposed to the Israeli-American planning model of sprawl and suburbanization.
The problem of abandoned housing in Israel is most acute in the capital, says Admon, as many former residents have relocated from downtown to more outlying areas.
“Jerusalem is one of the cities with the most abandoned [buildings] because of the age of the city and its neighborhoods, and also because of the mass demographic move to the suburbs in the past 20 to 30 years,” he says.
Similar to a number of American cities undergoing deindustrialization in the 1970s and ’80s, Jerusalem has seen a decline in the prosperity of its city center.
A 2011 study by the Jerusalem Institute of Israel Studies states that “Jerusalem has been on the wane for a generation,” and urges policymakers to invest and redevelop in the downtown area. “Jerusalem’s troubled state can be seen with particular clarity in the decay that has come to characterize the city center,” the report states.
Despite the lingering problem, the Hitorerut activists sound pleased with the recent developments, adding that the Trajtenberg recommendations are due to years of relentless advocacy.
Yet they maintain that much work lies ahead, including the refurbishment and redevelopment of some of the most blighted properties.
“When we came to city hall, nobody there was thinking of the problem,” Aven-Haim says.
Cohen concurs, noting that while the municipality has addressed the issue of ghost apartments, abandoned houses were not on the official agenda.
“The problem they didn’t talk about at all was abandoned houses,” she says. “Only because of the work we did, the municipality has finally paid attention.”