If they say that it is not a political or racially motivated thing to construct this housing complex, then let the Jews build this complex, but allow the Palestinians to buy or rent these units at a controlled/fair market rate. If the goal is not to subvert the political borders, and just a matter of housing construction, then this solution should not be a problem. On the other hand, if the Jews only allow Jews to live there or otherwise discriminate in the housing complex, then how can it be viewed as anything other than a biased political move?
Palestinian stabs 3 police officers outside Damascus Gate, East Jerusalem (Haaretz)
from the article: Lieberman: U.S. demand to end East Jerusalem building is 'unreasonable'