Tel Aviv’s Plans for Affordable Housing Too Good to Be Real

Urban renewal program will not add as many homes in strategic areas as had been anticipated and prices are expected to keep rising, according to Dana Chermesh Reshef, an urban data scientist

Tel Aviv apartment building Ahad Ha'am corner of Nahmani Streets
Moti Milrod

Tel Aviv is dreaming of a bright new future for the city’s center, where thousands of new apartments will be built to increase the supply of homes and bring down prices. But an independent examination of North Tel Aviv tell another story of housing remaining in short supply and prices staying high.

When the city approved a master urban renewal plan at the start of the year for the area between Bograshov Street and the Yarkon River west of Ibn Gvirol Street, planners spoke in theory of adding 16,000 homes. That would be a major addition to the current stock of 36,000 units in the area, which planners call Area 3.

Tel Aviv residents could use some relief from high housing prices. The average price of a home in Israel in the last quarter of 2017 was 1.44 million shekels ($390,000 at current exchange rates) while in Tel Aviv it was nearly double that, 2.7 million shekels. Homes in Area 3 are probably on average higher than that.

“The [national] government is making Tel Aviv a city for rich people, and I’m getting the blame for it,” Mayor Ron Huldai griped at a real estate conference in April, blaming the state for reducing public housing in the city.

The extra units in Area 3 would come by allowing landlords to use the Tama 38 building program, which lets builders add extra floors to buildings to help cover the cost of upgrading the existing structure and generate a profit as well.

Realistically, planners admitted, there are challenges to the implementation of Tama 30, from the problem of ownership disputes over properties, tenants refusing to sign on to Tama 38 undertakings and/or because some upgrades that would never be financially feasible, and other reasons. Still, they put the probable number of extra apartments in Area 3 at 8,000.

But now Dana Chermesh Reshef, an urban data scientist and architect specializing in the role of big-data analytics in urban renewal, says the city has grossly underestimated how much new housing it can squeeze out of the area. She has used such tools to examine more carefully than planners the potential for employing Tama 38 and comes up with a number much smaller than theirs.

Chermesh, who is now pursuing a graduate degree in urban planning at New York University after working six years at the urban renewal specialist Bar Orian Architects, estimated that only 520 buildings are likely to be candidates for upgrading based financial viability, which amounts to such 3,300 apartments. And that’s the number based on financial viability – taking into account other obstacles, Chermesh puts the real number at just 400 buildings.

Dana Chermesh Reshef, an urban data scientist and architect.
L.R.

The result is that the impact of the program unveiled by Tel Aviv on housing supply will be much smaller – an addition of no more than 9% to the housing stock in the area, which represents the heart of Tel Aviv.

Chermesh analyzed the building potential by measuring the financial feasibility of Tama 38 upgrades. She deemed any project that can’t earn an 18% return as not viable simply because the developer needs a cushion against rising costs of construction inputs and the risk of getting a lower price than planned.

The special problem in Area 3 is that about 60% of its buildings are designated for preservation, most of them having been built in in the 1930s in the Bauhaus or International Style. These “White City” buildings were collectively declared a World Heritage Site by UNESCO in 2003.

The result is that building rights on them are highly restricted; for instance they can’t exceed a height of 5.65 stories versus 6.65 stories for other buildings and 7.5 floors for non-preserved buildings on commercial streets. To prevent overbuilding, other restrictions limit the overall size of upgraded structure.

Chermesh said the White City issue is unique to the area and that the plan for the adjacent Area 4 will allow for more building.

“They [city planners] prefer to advance projects in Area 4 next door – the New North east of Ibn Gvirol up to Namir Boulevard,” she said. “Area 4 in Tel Aviv doesn’t include the White City in its borders, and so the urban renewal plan offers more building rights than in Area 3.”

For its part, the municipality defends its estimate of 8,000, saying Chermesh failed to consider the option of some buildings being razed altogether and replaced. .

“In the estimate for additional housing units, it was assumed that about 760 buildings would be demolished and rebuilt while the rest would comes from additions to existing buildings. The plan has the potential to build about 8,000 housing units,” a spokesman explained.