In urban renewal projects in New York, a developer can obtain approval from planning authorities to add 15 stories to a 5-story building. Can this model be adopted in Israel? Urban renewal in Israel, New York, and Portugal – how does it work?
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In weaker neighborhoods in Brooklyn and Queens, for example, urban renewal projects are abundant and in demand, mostly among investors seeking high returns. While in Manhattan's stronger neighborhoods, such as SoHo and the Lower East Side, rent prices dropped by about 30%, in weak areas such as Harlem, the Bronx, Staten Island, and Jamaica, the drop was more moderate – no more than 10%.
The real estate market in New York's suburbs is archetypical of the situation in Israel in general, and in Tel Aviv in particular. Like Israel, Manhattan suffers from a shortage of land plots for construction. The result is dozens of urban renewal projects, whether in buildings slated for demolition and reconstruction or intended for reinforcement and additions.
The main difference lies in the length of time it takes to approve municipal zoning plans, the flexibility and scope of construction rights, and the ability to execute projects at a rapid pace.
Recently, Tel Aviv's local planning and building committee approved a demolition-reconstruction (pinui-binui) project in the city's northern Maoz Aviv neighborhood, reducing the scope of building additions the developer can carry out in the building's public housing apartments. This type of decision not only prolongs the project's planning stage, but also lowers its profitability.
In Manhattan, it's the exact opposite. What lies behind the high rate of success of urban renewal projects? Planning authorities grant almost unlimited air rights (construction rights) above existing buildings. They encourage such projects and bring in all the relevant authorities to assist developers.
Harlem, for example, was once a gangland rife with poverty and crime, inhabited by minorities and characterized by dilapidated infrastructure and run-down houses. Artimus, a developer company, entered the neighborhood in the 1990s. It understood that providing an alternative to residents and renters or buyers from elsewhere in the city and the country required changing the physical environment and offering a better, more affordable product compared to Manhattan apartments. The apartments they built were indeed more spacious, well-designed, and cheaper than Manhattan properties.
The company promoted rental projects featuring permanently furnished apartments and amenities, such as lobbies, security guards, gyms, conference centers, rooftop socializing areas, and malls. Its projects contributed to the community's participation in the local job market. Artimus also collaborated with authorities, such as the city's sanitation department, the education system, and the police, seeking to improve law enforcement in the area to prevent violence and crime.
Adding 15 stories to an existing building
"Planning authorities in the US grant nearly unlimited building rights," explains Mark Ze'evi, founder and CEO of Bmby, who returned to Israel with his family after a long stay in New York. In recent years, Bmby invested heavily in developing its DREAMS system, which uses sophisticated technology to simulate completed real estate properties and building projects.
According to Ze'evi, the new system is an excellent tool for use by local and planning authorities when presenting a project's future appearance. It assists in attracting potential buyers while still in the planning stages and persuading all those involved to join the efforts to change the neighborhood's image and residential surroundings.
"In the past year, we've been using the DREAMS system in a number of mega-projects in Bat Yam, Kiryat Ono, Tel Aviv, and Haifa," says Ze'evi. "In the US, the system was used in dozens of urban renewal projects, including short-term rental complexes. It is part of the project's marketing and sales system and can be activated anywhere and at any time through the app."
Large-scale urban renewal projects include alterations to the urban territory, demolition of residential buildings, and construction of new buildings to replace the old. This is exactly where smart technology systems come in. The DREAMS app allows sales managers to simulate the planned urban environment, properties, and real estate projects using a system accessible from handheld devices, computers, and touch screens. The dream can thus be visualized. This aids the developer as well as the building's and neighborhood's current residents.
Ze'evi says that the projects being advanced in New York's weaker neighborhoods are planned at a level similar to the one in Manhattan and Midtown. New apartments will be offered for rent as affordable housing and for sale to middle- or high-class buyers, whose presence can change the neighborhood's image and increase its value.
Ze'evi explains further that despite the extraordinary building rights available in the US, standards for executing projects are very strict, and there are no exemptions. "The US is the opposite of Israel in this respect. Approval is granted quickly, but developers must obey the standards specified in the zoning plan. Penalties for violations are severe, and no developer wishing to succeed would take that risk."
"Such projects, which are characteristic of many New York neighborhoods, provide incentives to developers and thus succeed in raising the area's value," he explains. "You can see many neighborhoods that have changed their appearance, such as Harlem, the Bronx, and Jamaica in Queens. Advancing this kind of project requires the collaboration of all the municipal departments, authorities, and different bodies involved."
In Israel, says Ze'evi, the situation is different. "Developers have no financial incentive to renew buildings in weak cities. Ironically, the result is that property developers only execute projects like these in profitable areas such as Gush Dan, the Sharon, and the Judean foothills. Buildings that really need reinforcement, situated in peripheral cities, are neglected."
Worldwide renewal
Urban renewal projects on a scale totally different from what we see in Israel have been implemented in formerly Communist countries, monarchies, or even military dictatorships, such as China, the United Arab Emirates, and Pakistan.
Renewal projects are also executed in Europe, mostly in public housing. They are sometimes called "Retro-Fitting," focusing on renewing the structure and turning it into a green building that conserves energy and is suited to contemporary climate conditions. Like elsewhere, these projects are rapidly approved and implemented, even when executed in buildings marked for conservation or strict conservation.
"In Porto (a port city in Portugal) we're building nearly 1,000 housing units," says Shlomi Avni, CEO of the TAGA URBANI company, which opened a real estate branch operating in several European countries, including Spain, Portugal, Germany, the Netherlands, and England. "We're also building the city's first Hilton hotel and boutique hotels. Porto is a historical city, and some of its buildings are marked for conservation. Still, planning procedures take two years at the maximum until projects are approved.
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"The Israeli system is definitely more cumbersome and complex, and in buildings marked for conservation approval can take at least ten years. That has a major impact on the project's financial profitability and the developer's motivation."
"The situation in Manhattan is similar to the Israeli one, especially in Greater Gush Dan – a relatively small area with a limited number of land plots," explains Prof. Rachelle Alterman, a scholar of urban planning and law and a senior research fellow at the Samuel Neaman Institute for National Policy Research.
According to Alterman, "Urban renewal projects are also executed in large cities in Turkey, including Istanbul, in response to large-scale internal migration from rural areas to urban centers, and in Toronto in Canada. However, the situation in Israel cannot be compared with other places in the world, since here, ownership of most of buildings is shared by many residents. This slows down the decision-making process."
She notes that the kind of legislation found in Israel regarding residents' consent to development is rare worldwide. "The scope of urban renewal in Israel is large compared with other countries," she sums up, "but there's no doubt that the process of planning approval is one of the slowest in the world."
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