Its a mix of religion and Israeli culture. Israel has always been a divided society different groups don't like each other orthodox & secular jews don't like each other secular & orthodox jews don't like the arabs. the arabs operate policies like these by trying to avoid selling or renting to jews in arab majority cities like Jaffa. All sides are just as guilty as each other of creating the division that exists in Israeli society and probably always will exist. Certainly jews and arabs will never get on and each side dreams of a country free of the other its not racism its the divided society where different groups don't like each other.
Roadside bomb kills five border officers in western Iraq (AP)
from the article: Safed rabbis urge Jews to refrain from renting apartments to Arabs