Israeli Finance Minister's Housing Reform Plan Comes Under Fire

Kahlon proposal to allow more building without formal planning approvals likely to fail, officials and industry sources say.

Finance Minister Moshe Kahlon outside the weekly cabinet meeting in Jerusalem, Nov. 22, 2015.
Emil Salman

Building industry and government officials warned an ambitious plan by Finance Minister Moshe Kahlon to increase residential construction by making it easier for local authorities and developers to get more building rights would likely backfire.

The warnings came as a special Knesset committee on urban renewal prepared the final version of a bill that would let local governments increase by 20% the area of land zoned for residential use without requiring builders to submit revised plans for formal approval. It would allow developers to increase the number of apartments in a project by 30%, while decreasing the size of each unit from the original plan.

The Knesset is slated to vote on the second and third readings of the measure, which would remain in effect for five years, today.

“The amended law will help to increase the stock of housing during 2016. It is a vital tool in the toolbox needed to solve the housing crisis,” said Knesset member Eli Cohen, the chairman of the special committee and a member of Kahlon’s Kulanu party.

But Petah Tikva Mayor Itzik Braverman warned that the amended law would create new housing without ensuring adequate infrastructure and services for the new residents. “You want just housing, but I’ll be left with the residents and I won’t be able to provide them with the needed services,” he said.

In fact, the new rules are a version of a law popularly known as the “Sheves amendment,” for then-Housing Ministry Director General Shimon Sheves. The law, which was passed in the 1990s, allowed developers to increase the number of apartments in a residential project — but not the total floor space — by 20% and more recently 30%, without having to refile the plans.

But the rule, which would have created much smaller apartments, wasn’t widely used by builders. That was because local governments discouraged them, said Eliav Benshimon of the Israel Builders Association trade group.

“Twenty years have passed since the Sheves amendment went into effect, the local authority heads approved additions under it in tiny numbers,” he said, saying local governments don’t want too much residential building because they collect relatively few taxes on it and have to spend money later on services.