Short-term Rentals: Good for the Israeli Economy?

'Everyone benefits from foreign homeowners renting out their properties.'

The protest against sky-high housing prices in Israel inevitably took aim in part at nonresidents. Foreigners own thousands of apartments in prime areas, dwellings that stand empty throughout most of the year.

Rich Jews living elsewhere bought themselves homes in the Holy Land and keep them available for their convenience, exacerbating the housing crunch in the best areas of Israel, claim the protesters. The result is even more upward pressure on home prices, they conclude.

Dalia and John Furstenberg - Ofer Vaknin - 17102011
Ofer Vaknin

Yet a market has been developing in which these apartments are rented out for short periods of time. Brokers who mediate these short-term rentals say it's a win-win situation - for the owners that get some income from their property that otherwise stands fallow and costs upkeep, and for tourists who may prefer independence to hotel life.

Israeli renters, however, are not appeased by the benefits to the foreign homeowners and tourists. What they see is a stifled housing market and rental prices that keep spiraling up.

"In the last year or two, more and more Jews living abroad decided to take advantage of property they own here," says Kfir Zohar, co-manager of the Anglo-Saxon Tel Aviv branch. He estimates the potential for short-term rental in Tel Aviv alone is 2,000 to 3,000 such foreign-owned apartments, whose nonresident owners spend, at most, a few weeks a year in occupancy. He also estimates that only about 15% of those apartments are rented out, while the rest stand unused most of the year.

The concept is gaining momentum: In the last two months, his agency closed 40 to 50 short-term rentals of foreign-owned apartments, Zohar says.

Jerusalem and the coastal cities of Netanya and Ashdod are also popular venues for nonresident homebuyers, and there, too, short-term rentals are on the rise.

Annual returns from short-term rentals are about 30% higher than long-term ones. At peak times, such as the Passover season, the rent can run double. Of course, at non-peak times the apartments may revert to standing empty.

Ten minutes from the sea or the diamond exchange

The potential clientele for short-term leases are business travelers and tourists. In addition, the apartments need to have features that meet the needs of transient dwellers. In Tel Aviv, for instance, the apartments should be no more than a 10-minute walk from the beach, and in Jerusalem, about the same distance from the city center. Business users would prefer apartments near the Tel Aviv business center or Ramat Gan Diamond Exchange. The apartments must be fully equipped and comfortable, too.

Yoni Shapira founded an Internet site, home4trip.com, which links tourists and homeowners. A three-room apartment in Tel Aviv, fully furnished and near the beach that can host up to four people, will run at $150 to $180 a night in a short-term rental, on average, he says. During peak summer season, in August, prices rise to $200 a night, he says.

"Exclusive" apartments with a swimming pool in the building and that sort of thing can command three times as much, he adds.

A visit to home4trip.com shows hundreds of apartments available for short-term rent in Tel Aviv, Jerusalem and other top cities. The ads cite the apartment's size, number of rooms, the furnishings and the price per night. A sign of the times is that the number of visits to the site has grown threefold in two years, Shapira says.

He came up with the idea of the site after living in Milan and meeting Italian Jews who owned apartments in Tel Aviv that they'd agree to rent out to people they knew. There were the apartments standing empty and there were the Tel Aviv hotels charging through the nose, Shapira explains. The rest is history.

He began three-and-a-half years ago with a site targeting Italian Jews. Today, the site serves Jewish communities all over the world and has about 200 apartments on its books, belonging to about the same number of owners. It's worked: The apartments are rented out for almost all the year, Shapira says. The Anglo-Saxon real estate agencies in Tel Aviv and Jerusalem have started to work with the site too, he adds.

The biggest challenge was getting the homeowners on board. Being well-to-do, generally, they didn't need the money. More persuasive was the thought that they were helping to encourage tourism to Israel, and thereby helping to strengthen the Israeli economy, Shapira says.

Renting out - the logical thing to do

Four years ago, Sue Armentry and her family, Jews living in London, bought an apartment on a quiet road near Dizengoff Street in Tel Aviv. At first, it was used just five weeks a year, by the family, but quickly found itself rented out to acquaintances in London's Jewish community needing a place to stay in Tel Aviv. Thereafter, Armentry turned to home4trip for getting the apartment professionally managed.

Armentry insists that whoever manages the apartment abides by her ground rules - no large families with many children; tenants must be meticulous in keeping the kitchen kosher; and a high standard of occupants who will maintain the apartment well.

"Each time the agency wants to rent the apartment to new clients, they phone us with a description for our approval," Armentry says. "So far, we haven't had any regrets. The apartment has been maintained nicely.

"I like the idea that the apartment doesn't sit empty and is being cared for," Armentry continues. "I'm also aware of the situation in many places in Israel where plenty of properties stand empty. I don't think that's good for Israel's economy."

Barbara Schulman, of New York, was sure she'd rent out her home on Ben Dosa Street, near Jaffa's clock tower, almost from the time she and her family received the keys to the apartment in April 2008. "I wanted to buy the property because it's in a special area," she recalls. "It seemed a bit rundown when we bought it, but we recognized its great potential. But I knew I wouldn't be able to enjoy long stays there - and just as I fell in love with the place, I thought others would too. So renting out the apartment seems logical, and it also helps pay for all my visits to Israel."

People in this business aren't particularly bothered by the fact that it's gaining appeal at a time when so many people are protesting against the lack of affordable rentals in Tel Aviv and Jerusalem.

"Everyone benefits from foreign homeowners renting out their properties," Shapira claims, adding nevertheless that they are being maligned and are seen as a threat.

"All kinds of suggestions are being floated in the media lately to keep them from buying, such as raising their taxes," he adds. "By renting out their apartments, though, they help the country take in more tourists who spend hundreds of dollars daily and contribute to the Israeli public's livelihood.

"Rather than focusing on the negative and trying to drive out nonresidents, people should think of ways to make the best of the situation," Shapira suggests. "Just like the Jerusalem Municipality does by approaching homeowners and telling them: 'We have a problem; come help us solve it.'"

Zohar rejects the claims that this market diminishes the supply of rental apartments and boosts prices: "The apartment belongs to someone who bought it for their use," he explains. "There are two possibilities - either renting it out for short periods or leaving it empty. I can't rent it out for the long term. I can't go and tell a student in August, 'I need you to move out for a month because the owner will be coming to visit Israel and needs the apartment.'"

"Sense of being at home"

For Dalia and John Furstenberg, a Jewish couple in their 60s from Melbourne, the main attraction in Tel Aviv isn't the beach, it's the apartment on Shlomo Hamelech Street rented by their daughter, who made aliyah several years ago. Before their visit, they found a three-room apartment two blocks away.

They've rented apartments in other cities around the world but this is their first in Tel Aviv. "In my work, I've traveled abroad frequently, so I'm used to the hotel experience," John explains. "But if you stay somewhere more than a week, I think an apartment is the best option."

The Furstenbergs rented a three-room, 80 square meter apartment - but not the city's typical rental fare. It's fully equipped and furnished, with two plasma TVs, an oven, refrigerator and washing machine - all brand new. The bedroom has parquet flooring, and the bathroom is spacious and inviting.

The apartment costs the couple $150 a night. They also need to pay a $75 cleaning fee when they leave and to foot the electricity bill. Compared with peak summer hotel rates, it's not a bad deal.

"It's very convenient," Dalia says. "We're within walking distance of everything, and have an entirely different rapport with the surroundings. We go to the supermarket, meet neighbors, friends come to visit. It gives us a sense of being at home. We feel that we're really experiencing Tel Aviv life, not shut off in an impersonal hotel."