At the annual conference for CEOs of local authorities, the mayors of Rehovot and Netanya, Rahamim Malul and Miriam Feirberg-Ikar, accused Israel's governments, past and present, of not doing enough to lower housing prices.
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The government prefers that housing prices remain high," said Mayor of Rehovot Rahamim Malul. "If every new minister of housing enters office and says housing prices will rise, what kind of message is that?"
Netanya Mayor Miriam Feirberg-Ikar added: "It's easy for the government to be generous at the expense of local authorities when it comes to betterment tax, as if schools and kindergartens can build themselves. If the huge purchase tax and other taxes are lowered, there might be a change in housing prices."
The mayors spoke at a panel on the booming housing market and urban renewal, held at the conference in Eilat. The event was attended by about 170 CEOs of local authorities, 3 government ministers, and 9 heads of local authorities.
Doron Milberg, Chairman of the CEO forum at the Federation of Local Authorities, CEO of the Rehovot Municipality, and Chairman of the conference, decided to hold a panel on the critical issue of high housing prices. According to him, "Real estate prices are continuing to rise at a mind-blowing pace, and many young couples' dream of buying an apartment is going up in smoke. It's painful to see young couples unable to buy an apartment in their native city."
Making billions
The panel (which I had the privilege of chairing) was attended, besides the mayors of Rehovot and Netanya, by Dimona Mayor Benny Biton, President of the Israel Builders Association Raul Srugo, and former chairman of the Real Estate Appraisers Association Ohad Danus.
"The government and the Finance Ministry prefer prices to be high, since they bring in billions of shekels in taxes," argues Rahamim Malul. "If the government does not take major steps to market lands on a massive scale, prices will continue to climb."
Feirberg-Ikar proposed some practical steps: "The government should see to it that entire buildings are built for the rental market at affordable prices and a high standard. The state should maintain the buildings itself, and after 5 or 10 years, when the apartment holders become better established financially, they can go on to buy their own apartments."
Benny Biton, who has signed a major roof agreement with the government to increase apartment supply in his city, offered some ideas of his own: "Housing prices are rising because there's not enough construction being done in the right places. The Buyer's Price Program should have been priced differentially between the center and the periphery. I suggested this step to the previous government, and I'm proposing it to this government as well: take everything that's called the Israel Lands Authority and put it into one basket. A kid in Modi'in or Tel Aviv doesn't need to make an NIS 800,000 profit on a Buyer's Price apartment. It's enough if he makes NIS 300,000. Give some to the kids in Dimona and in Kiryat Shmona. That way, we could control housing prices."
Long-term planning
Raul Srugo, President of the Israel Builders Association, called on government ministers to develop long-term plans for the housing market and think outside the box: "In the next 30 years Israel needs to build 3 million housing units. At the moment there's a shortage of 200,000 units. If we continue building only 50,000 units a year, like we have in recent years, that shortage will increase."
Srugo contends that Israeli governments have only ever considered the short term. "The Buyer's Price Program was not created to solve the housing crisis; at most it was supposed to assist buyers in obtaining affordable housing. When does a politician make a right decision? When he acts so that the benefit of what he does today is reaped by those who come after him."
According to Srugo, contractors see no profit from the rise in housing prices. "Rising apartment prices mean rising land prices and rising construction costs, and as a result, contractors make less," he argued. Srugo emphasized that the "keyword in real estate is certainty," and expressed support for extending the TAMA 38 program until an alternative is devised.
"The state should support local authorities so that in the future, a million housing units can be built in urban renewal projects in the city centers, mostly in Gush Dan," he said. "We should introduce mixed-use development, which is common throughout the world, and think outside the box. For example, allow contractors to build buildings in which the top stories will be designated for affordable housing, the middle stories for offices, and the bottom stories for schools and kindergartens."
Who says there's no certainty?
Ohad Danus concluded with a sobering message regarding housing prices in the coming years, yet with a number of recommendations: "There is certainty in the real estate market – housing prices will continue to rise and the central government will continue to disregard local government. The challenge of mayors today is to keep young couples from moving away. Though construction for housing brings in betterment taxes in the short run, it later results in a perpetual deficit and instability."
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In a turbulent discussion on real estate prices, the general opinion among the CEOs was that the central government should be more attentive to local government and delegate more planning and construction responsibilities. This will speed up processes, close the gap in housing starts, and slow the rise in prices.
Oded Forer, minister of agriculture and of the periphery, the Negev and the Galilee, said that a university was to be built in the Galilee, in Ma'alot-Tarshiha, in the midst of large interurban activity centers. He promised to provide immediate assistance to 5 mixed cities – Lod, Ramla, Akko, Nof HaGalil, and Ma'alot-Tarshiha.
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