Ron Huldai - Ofer Vaknin - October 2011
Ron Huldai Photo by Ofer Vaknin
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The Tel Aviv municipality intends to double the city tax rates on homes left uninhabited for more than a year, it said yesterday, while all homeowners countrywide can expect to pay 3.1% more on average starting next year.

The Tel Aviv local government hopes the move will encourage property owners to rent out their apartments and help relieve the city's housing shortage. City officials said the Knesset Finance Committee will discuss the resolution next week.

Municipalities cannot exceed the maximum limit set by law for building taxes (arnona ).

In August, as the "social justice" protest swelled, focusing on the high cost of living in Tel Aviv, Mayor Ron Huldai ordered councillors to think of ways to encourage homeowners to rent out apartments standing empty. The premise is that increasing the available housing supply would cause prices could drop.

Tel Aviv has an estimated 5,000 apartments that have been uninhabited for at least a year. While no comprehensive study has been conducted on why they're sitting empty, it's known that some of the homes belong to foreigners, while others are presumably the subject of ownership disputes. Yet others are simply in dilapidated condition or in bad neighborhoods, such as the area of the old central bus station.

Meanwhile, arnona will be rising by about 3.1% on average from January 1. The actual increase in each city will be determined by the formula used to calculate the city tax rates.

This increase does not include exceptions - meaning higher increases - that the interior and finance ministers may approve for specific localities. For instance, this year dozens of municipalities were allowed steeper rate hikes.

Since 2007 arnona rates have been based on a formula that is in turn based on two indexes with equal weight: the average wage index and the consumer price index. The 3.1% increase in 2012 is mainly due to the 4.8% increase in the index tracking the average wage.

The consumer price index rose by 2.93% from September 2010 to September 2011, observes Uri Deutch, a lawyer specializing in municipal tax from the law firm of Peleg, Cohen, Deutch and Moskovitz.

Deutch feels that since wages account for only about 30% of local authorities' expenses, giving them 50% of the weight in the tax-revision formula is excessive.