Is Israel’s Housing Crisis Solvable?

The price of housing in Israel has been rising for decades. Three years ago rising prices brought out large segments of the population to protest by occupying tents set up in city centers – and they were absolutely justified. Every citizen has the right to a decent life, and that means living in a home, not on the street.

It is the government's duty to make that possible, to give citizens the opportunity to purchase a home at a reasonable price.

The continued rise in the price of housing is the result of a long term mistaken policy that began about a decade ago and, unfortunately, it is a policy that cannot be corrected overnight.  The root of the problem lies in one decision made during then-Prime Minister Ehud Olmert's term of office – to cease planning and marketing in central Israel, in the area referred to as the coastal plain, and plan housing mainly for the southern Negev and northern Galilee.  Olmert's well-meant move was an attempt to populate what is called the "periphery" of Israel.  At the same time, it would serve to deflect criticism from those who claimed that Judea and Samaria, parts of which border the coastal plain so that building there would actually help lower prices, were getting more than their share of construction. 

Olmert's plan, essentially, was to create a housing shortage in the center of the country so as to encourage young adults and families to move to the "periphery."  The best of intentions, however, cannot change reality by themselves and the plan was fatally flawed.

Lack of infrastructure for rapid transportation to the coastal plain coupled with a lack of employment in the "periphery" doomed the plan to failure.  As a result, few people moved to the north and south of the country. The absence of new planning made a lack of housing in central Israel inevitable, causing a dramatic price rise, while the lack of demand for housing in the "periphery" slowed down construction and marketing there.  Tel Aviv and its surrounding urban area became the leaders in skyrocketing housing prices, dragging the rest of the country along.

All told, the repercussions were a shortage of some 80-100,000 housing units. Add to this the large number of citizens who invested in apartments because interest rates in Israel, close to zero for the past several years, made keeping money in the bank unappealing. Massive purchases of apartments for investment at any price, including overseas purchasers who left them empty, further reduced the number of housing units available for young couples.

During the last government's term, the Housing Ministry analyzed the causes of the current situation, and as Housing Minister, I began to work on solving the problem. The housing market is not like other markets, it doesn't work the way, for example, the fruit or vegetable market does.  If there is a shortage of certain fruits or vegetables, it is easy enough to import needed produce.  In contrast, housing is more like a gigantic aircraft-carrier; it moves slowly, but does change direction eventually and then begins to pick up speed.

In the long run, the only solution that will lower prices is a glut of available housing. Marketing, marketing, and more marketing is the answer. Taking natural population growth into account, Israel must put approximately 45,000 housing units up for sale every year. For comparison's sake, in 2012 only 32,000 housing units were placed into the market. In 2013, however, that number rose to 37,000. In 2014, an unprecedented number of 50,551 housing units were offered for sale, the highest since the establishment of the state.

For the very first time, the enormous gap that had been created by the backfired "periphery" policy began to close.  Anyone who believes that a ten-year gap can be closed in a year or two is mistaken, but it is shrinking at a steady pace.

Housing plans for central Israel must be drawn up once again – a good many of them. There is an enormous shortage of apartments in the environs of Tel Aviv and within the city itself. In the last two years of the previous government, the planning for that area was tripled by taking advantage of the land to be vacated by the IDF's move south, as it evacuates bases in central Israel at Tel Hashomer, Sirkin and Tzrifin, IDF headquarters in Ramat Gan, the airfield at Sde Dov and more.  The fact that the housing for those areas has already passed the planning stage means that by 2017, over 60,000 housing units will be made available. This is a massive change for the housing situation in the coastal plain of central Israel and a significant closing of that ten-year gap. Meanwhile, a by-product of the IDF move is increased demand for housing in the Negev.

However, Israel must not stop there. It must develop and present plans for urban renewal and see that they are carried out in a way that makes sure to preserve the green areas that provide both oxygen and beauty at the outskirts of its cities.  It must save what little is left of the natural environment in the coastal plain.

Hundreds of old, dilapidated neighborhoods that do not meet the minimum standards for survival in the case of natural disasters or war are found all over the country. For the most part, these sites are filled with low-rise buildings that house few residents and are in an advanced state of disrepair. They could be razed and replaced with high-rise buildings. This alone has the potential to add 200,000 new units to the housing market.

Since bureaucratic delays are one of the banes of the building industry in Israel, much effort was expended during my term to streamline the once endless process of planning and acquiring construction permits. The new government has pledged to authorize the Urban Renewal Authority we created and intends to work countrywide to coordinate projects and move them forward at a faster pace.

Until such time as these processes begin to make their presence felt – massive marketing, more planning and coordinated urban renewal – the government must create a bridge plan that will enable prices to go down and effect change in real time.  In the previous government, the "target price" program was initiated, calling for the government to market over 15,000 housing units a year whose final price to the consumer is set by the ministry while the builder is given the land at a price so low that the state loses money on the deal.

Now that the new government is beginning its work, I am glad to see that Finance Minister MK Moshe Kahlon and Housing Minister MK Yoav Galant intend to continue our initiatives as well as advancing new ones.  They, too, will speed up planning and marketing, implementing bridging plans to help reduce prices right now, including the "target price" plan. As Minister of Agriculture in the present government and member of the Housing Cabinet, I pledge to work with them to reduce the price of housing in Israel.

MK Uri Ariel of the Jewish Home party, head of the Tekuma faction and Housing Minister (2013-2015), is Agriculture Minister in the current Knesset.


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