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The Shekel Before the Storm GA Magazine / Seeing ghosts By Jonathan Pulik Tags: Israel news, GA, jewish world Full coverage of the 2008 GA conference Michal Brunschwig, her husband Naphtali and their two young daughters have been renting the same modest three-bedroom apartment in Jerusalem's Katamon neighborhood for the past five years. Three times they have put down a deposit to buy their own apartment in the area - and three times foreign buyers outbid them just before they closed the deal. " Advertisement We don't stand a chance when an overseas buyer puts so much money on the table," says Brunschwig, a 30-year-old documentary filmmaker who moved to Israel from Switzerland 10 years ago. "Jerusalem is a city we want to stay in, but it seems the only thing that is being built is luxury apartments that we can't afford." The construction of luxury homes targeting foreign buyers has contributed to the dearth of affordable housing in Jerusalem - which, along with a stagnant employment market fanning the flight of young and educated professionals, may be threatening to drive out even the most tenacious of the middle class. But while frustrated residents like Brunschwig tend to blame foreign home ownership - and the municipality's failure to limit it - for turning some Jerusalem neighborhoods into ghost towns and pricing Israeli residents out of the capital, some homeowners who live abroad say their purchase contributes to the local economy and expresses their love of Israel. "Home ownership is one of the most positive expressions of our Zionism," says 66-year-old GA participant Lois Frank, the immediate past chairwoman of the Jewish Council for Public Affairs. Frank and her husband, who live in Atlanta, bought their Jerusalem apartment almost two years ago and have visited Israel five times a year since the purchase. "For 45 years, we've sent money to Israel in the form of philanthropy," says Frank. "Now we feel like we're following our money." For Ron and Danielle Ellis, the purchase of a home in Jerusalem was a first step toward their move from Boston to Israel in August. "By foreigners buying apartments in Jerusalem, they are putting money into the local economy," says Ron Ellis, the senior vice president and chief technology officer at Israeli biotechnology company NasVax. "Foreigners," he adds, "are not part of the problem." However, several studies have found that home purchases by foreign residents, primarily American and French Jews, have been driving up prices in the capital. That was the finding of a study by TheMarker last month, which reported that such purchases were the main force behind a whopping 72-percent rise in apartment prices in Jerusalem over the past two and a half years - even as the average monthly salary in the capital is less than three-quarters the national average. In central districts like Talbieh, real estate prices rose as high as 170 percent, according to a 2007 survey by government administration consultant Jehonatan Leurer, who also found that the majority of new housing developments in these areas were aimed at foreign buyers. Signs advertising the properties are overwhelmingly English-only. "Despite the economic slowdown, prices will not go down," says Corine Boukobza, manager of Optimum Real Estate on Jerusalem's trendy Emek Refaim Street. "When it comes to Jerusalem, people buy with their hearts, not with their heads. The high prices are not good for anyone. ... I'm afraid my own children won't be able to afford an apartment here." Boukobza says apartment prices in the central Jerusalem neighborhoods of Baka, Talbieh, Katamon, Rehavia and the German Colony, which are among the most popular for foreign buyers, have risen between 20 percent and 30 percent in the past year alone, in large part due to the sliding dollar. A modest three-bedroom apartment in one of these neighborhoods sells for at least $450,000 she says - more than twice the price of apartments in neighborhoods far from the city center. One consequence of extensive foreign home purchases concentrated in specific areas is the creation of "ghost town" neighborhoods, swathes of the city that are typically empty except during the Jewish holidays and summertime. Small businesses in these areas have closed for lack of customers, and break-ins are frequent. Closed shutters, lifeless streets The neighborhood where Michal Brunschwig lives is steadily becoming "street after street" of closed shutters, she says. "Many streets are lifeless most of the year." The paucity of affordable housing also makes it difficult for Israelis studying at the Hebrew University of Jerusalem or Bezalel Academy of Art and Design to live in the capital, a situation that has sparked student protests urging the municipality to reduce the housing crunch as a way of retaining a young and educated population in the city. Statistics from local water company Hagihon indicate that approximately 9,000 Jerusalem apartments sit unoccupied for most of the year, most of which are foreign-owned, Leurer found in his survey. Up to 35 percent of the apartments sold in the city's central neighborhoods in the past two years were to non-residents, who paid an average of NIS 1.8 million, compared to the NIS 751,000 paid by locals, according to the survey. Jerusalem municipality spokesman Gidi Schmerling said in late October the city was planning to unveil an affordable housing project within the coming weeks. "The municipality has provided young people, students and high-tech workers with benefits and grants to stay in the city," he says. But a 2008 report by the Jerusalem Institute for Israel Studies research center, called "A Vision for Jerusalem: Plan for Revitalizing Jerusalem, the Capital of Israel," says this is not enough. The plan, which had previously been scheduled to be presented at the GA, found that a 2007 exodus of some 6,400 people from the city - mainly secular and modern Orthodox young working families and singles - was a continuation of a 30-year trend of migration away from the capital. To counteract the trend, the plan advocates stricter rules for building permits and higher property taxes on empty apartments, and calls for reducing the tax if homeowners rent their apartments to Jerusalem residents, which could help alleviate the housing shortage. "Immediate and intensive effort is required to halt and reverse the declining trends," write the authors of the plan, referring to the dearth of housing and employment opportunities. "Otherwise Jerusalem will continue to sink into poverty and its status as the capital of Israel and of the Jewish people will be threatened." The Jerusalem Institute had been planning to request funding for the plan from American donors when presenting it at the GA, but conference organizers canceled the presentation in light of "urgent" matters like the economic crisis, says UJC Israel spokeswoman Nomi Kessler-Feinstein. As of late last month, there were no firm plans to present the findings to an American audience. Economist Gur Ofer, who led the team that compiled the report, concedes that Vision for Jerusalem could be seen as harming the interests of foreign homeowners who don't want to rent out their apartments, but says the institute wants Diaspora Jewry as a whole, not just foreign homeowners, to consider providing funding. Not the only way to be involved Even if the construction of luxury apartment complexes does pump money into city municipality and builders' coffers in the short term, say Rachel Azaria and Ofer Berkovitch, who ran for city council this year on the ticket Wake Up in Jerusalem, if it remains unchecked it will ultimately hasten the flight of the very residents the city should most want to retain. Berkovitch, 25, says they want foreigners to be involved in Jerusalem life by visiting the city, opening businesses or improving the employment situation, but adds: "Buying an apartment here is not the only way to do that." Azaria and Berkovitch want a quarter of new housing construction to be what they call "affordable housing," which they say can be accomplished by requiring builders to allocate a proportion of new developments to affordable housing, as is done in London and other cities. "One of the main reasons for running for election is that all of our friends have left Jerusalem," says 31-year-old Azaria, an Orthodox mother of two who heads the list. "In five to 10 years, there will be no more productive citizens in Jerusalem to ensure its development." More than 60 percent of Jerusalem's population is ultra-Orthodox and Arab - the poorest, and fastest-growing, demographic groups in the city, among whom unemployment is rampant, according to the Jerusalem Institute. But while Michal Brunschwig and many other resident support municipal action aimed at limiting foreign home ownership, such as the higher property tax proposed by the Jerusalem Institute, home owners like Atlantan Lois Frank are concerned by the possibility. Frank hopes she and other apartment owners "will not be punished" for trying to contribute to Israel's wellbeing. "Our becoming property owners is positive for us and for the economy of Israel," she says. Other foreign homeowners say they empathize with Jerusalemites who cannot afford to buy or rent apartments in the city, but say the solution lies in constructing more affordable housing, not imposing a higher tax on foreigners who don't rent out their homes. GA participants and California residents Dana Edelstein, president of the Sacramento Jewish Federation, and her husband Alan, a lawyer and state politician, have owned a three-room apartment in Jerusalem's Rehavia neighborhood for the past five years and have invested considerable funds in renovating it. They do not rent their place out because it is occupied for most of the year, they say, either during their own visits to Israel or when relatives stay there. Though their primary home is in California, the Edelsteins can relate to the complaints of year-round residents: A luxury development next door to their apartment is unkempt because, they say, no one is there most of the time to take notice. "You'd really have to have blinders on," says Alan, "not to know this is an issue." Full coverage of the 2008 GA conference Bookmark to del.icio.us   The King is dead Archeologists find new evidence for King Herod's tomb site. Al-Hasbara Israel launches Arabic YouTube channel to bypass Arab media.

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