Analysis |

Housing Prices Are Soaring. Why Most Israelis Don’t Care

Activists are setting up tents and trying to revive the energy of the 2011 ‘social justice’ protests in Israel. They have legitimate grievances, but nothing else in their favor

David Rosenberg
David Rosenberg
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Protest tent going up before news cameras in central Tel Aviv, June 2022
Protest tent going up before news cameras in central Tel Aviv, June 2022Credit: Hadas Parush
David Rosenberg
David Rosenberg

It’s one thing to have legitimate grievances. It’s another to have someone to listen, and act on your problems.

That’s the problem facing the protesters erecting tent encampments in cities across Israel demanding that the government do something about soaring home prices and rentals.

It seems like the summer of 2011 all over again, when tent cities emerged as the symbol of the mass “social justice” protests that gripped Israel back then. Some were triggered by the price of cottage cheese, some by soaring rents, some by other issues.

Encampments are a good way to attract the public’s attention and build a sense of comradery among activists. When the weather is nice, it can be a pleasant experience.

But the 2011 protests were largely a failure. They all but disappeared by the end of the summer, leaving behind a few gains for consumers, such as lower prices for cottage cheese and mobile communications. Some of the big holding corporations were broken up.

But the revolution in housing prices never happened. That may be because on the whole the last decade has been one of rising standards of living for Israelis. Inflation was nonexistent most of the time; some prices even dropped; and the poverty rate decreased. The 2011 protest failed to gain traction because, simply, Israel’s middle class was struggling a lot less than protest leaders believed.

Today’s activists are mimicking the encampments but are eschewing the nebulous calls for “social justice,” which may have been inspiring but lacked focus and led to ideological squabbling. The focus this time is on housing and only housing.

Here the protesters have a good case for being angry and not wanting to take it anymore. After a couple years of declines, home prices began rising again towards the end of 2018. In the year ending in March 2022, they were up 15.4 percent.

The rental market looks just as bad. The Central Bureau of Statistics says rents have gone up just 1.2 percent in the past year, but its figures are misleading because they include all monthly rents, including ones whose terms were fixed when the contract was signed.

Here the protesters have a good case for being angry and not wanting to take it anymore. After a couple years of declines, home prices began rising again towards the end of 2018. In the year ending in March 2022, they were up 15.4 percent.

The rental market looks just as bad. The Central Bureau of Statistics says rents have gone up just 1.2 percent in the past year, but its figures are misleading because they include all monthly rents, including ones whose terms were fixed when the contract was signed.

Madlan, a real estate market platform, says rentals rose 14 percent in the year through May. In some of the 28 cities Madlan measures, rent has risen almost 30% in that time.

The young and the single

The first of the protest organizers’ problems is getting enough Israelis to care. More than 69 percent  of Israelis own their own homes, which is certainly higher than in the United States, Britain and France. Among older families in Israel, ownership reaches 90 percent.

Only about 25 percent of adult Israelis rent their home – and the number is heavily skewed toward the young and single.

The young are easy to mobilize for tent protests, but have less power to change things.

To be frightfully cynical, the majority of Israelis have no problem with rising home prices – quite to the contrary, they have been seeing their home equity grow and grow over the years. The housing problem is real, but real only for the young, for whom buying a home is beyond their means. The alternative of renting is rapidly reaching that point as well.

Today, with mortgage rates rising, the costing of buying a home is becoming even steeper. Meanwhile, the government’s promise to expand the supply of apartments for long-term rental is going nowhere. The goal is to have 9 percent of all housing under construction dedicated to long-term rentals; in practice, in the first quarter of 2022, the rate was only 3.3 percent.

The situation looks pretty dismal. Yet, the protests are getting underway just as the situation may be starting to ease up.

Supply and demand for housing in Israel has long been out of balance, which is why prices have been rising for so many years. The coronavirus pandemic only made the problem even worse by slowing down the pace of construction.

Housing completions, a statistic generally ignored, were 15 percent lower in the first quarter of 2022 than three years earlier. That means that fewer new hones have entered the market. On the upside, though, housing starts began to grow in 2019, and in the first quarter were up 53 percent over three years ago.

At the current rate, housing starts are running at about 80,000 a year, still short of demand but getting closer. Meanwhile, demand will no doubt grow more tepid going forward as mortgage rates rise, easing pressure on prices being created by panicked buyers piling into the market.

None of this is likely to lead to an actual drop in Israeli home prices. The supply-demand situation isn’t going to come into balance, and the economy remains strong, with rising wages and record low unemployment. A recession would, of course, change the equation, but at a price that the protesters wouldn’t want to pay. So what if rents or housing prices are falling if you just lost your job?

The protest leaders say they will be producing a plan to solve the housing crisis ahead of a big rally planned for July 2. Their team, they say, even includes some economists to help rein in the idealists among them (although I doubt it includes any landlords or building contractors).

But having a plan doesn’t mean much if one doesn’t address the chronic problems afflicting Israel’s housing market, including a shortage of land, onerous regulations, and low-tech, high-cost construction methods). There has been no shortage of thoughtful plans. But the political will has never quite been there to make a difference.

Why? Real solutions require a time-span that exceeds that of democratically elected politicians, who need results now. The protesters will find themselves confronting the same dilemma. No one will be inspired to scream and shout and wave placards at rallies calling for a plan that involves complicated policy proposals that will have an effect on prices maybe a few years from now. Better to blame greedy landlords and demand rent controls.

In any case, a protest movement needs someone it can deliver its grievances to. As of next week, when the Knesset is slated to vote to dissolve itself, the housing protests will lack the second bit. The caretaker government that will be running Israel until the election and beyond (perhaps long beyond) will have no authority to take the kind of measures the protest leaders will be proposing. Indeed, the plan that the Bennett government had unveiled earlier this month for the housing market will probably never see the light of day – at least not any day in 2022.

Still, if the weather is nice, why not camp out on a traffic island in central Tel Aviv for a few weeks?

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