Israel Approves Forming Company to Develop Rental Homes

Housing cabinet backs plan after stormy debate as officials scramble to rein in rising prices.

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After a stormy debate Sunday, the housing cabinet approved Finance Minister's Yair Lapid's plan to create a government company to develop rental apartments as it seeks to rein in skyrocketing housing costs.

The cabinet also voted in favor of a series of "umbrella agreements" with local authorities aimed at helping accelerate the construction of some 2,000 housing units around the country. This framework will enable the Housing and Construction Ministry and the Israel Lands Authority to fund critical infrastructure like roads and schools needed to develop new neighborhoods.

"We approved two major undertakings that will help with the high cost of housing," Lapid said after the cabinet meeting. "The government company that is being formed will advance home-rental projects, taking responsibility for each stage of construction, to the actual building to supervising contractors."

The votes on the two initiatives came hours after Housing Minister Uri Ariel agreed with Lapid on measures for removing obstacles to home construction with for a fund operated by the Housing Ministry for directing resources at large-scale projects.

The government is scrambling to come up with a way of moderating the rise in housing prices, if not lowering them. Earlier this months, the Central Bureau of Statistics reported that home prices rose an annualized 9.3% for the 12 months through July, accelerating from an 8.7% rise the 12 months through May. That is turn has spurred a rush on mortgages as consumers act to buy home equity before prices rise further and put a home entirely out of their reach.

Lapid announced just before the housing cabinet meeting that the new company was tentatively dubbed Dira L'Haskir (Apartment to Rent), but officials in the treasury budget division warned that the name might violate copyright belonging to the late poet and writer Lea Goldberg, who wrote a children's book of the same name.

The proposal still needs the approval of the full cabinet, which will receive the proposal sometime in the next several weeks. It is expected to meet another round of opposition there as well.

The crux of the debate was over a last-minute change to the proposal over what kind of land the new company would be charged with developing. The original proposal called for the company to be allocated land on the periphery of urban areas that have no authorized development plan.

Two hours before the housing cabinet was scheduled to meet, the proposal was changed under pressure from the Environmental Affairs and Justice Ministries to say that the new company would be allocated land designated and zoned for development. That kind of land is under the purview of the Housing Ministry and the ILA.

Ariel objected to the change and demanded to vote on the original proposal while Environmental Affairs Minister Amir Peretz demanded that ministers vote on the revised proposal. "It can't be that a government company can't get preference for sites inside the cities," Peretz said. “I don't understand why we are using the existing inventory of land. Why do we need to find new inventories?"

After a half-hour recess, the two sides agreed to put off the land allocation issue and agreed to vote on the parts of the proposal dealing with establishing the company, its budget and its operations, and to leave the sections in dispute for a meeting scheduled in two weeks.

Government sources said the new fund for accelerating home constructions was aimed at winning the Housing Ministry's backing for the new government company for rental housing, which will be headed by Uri Shani, to promote rental housing. The company will assume some of the powers currently held by the Israel Lands Authority.

Under the plan to speed construction, the two ministries will assemble a list of priority projects aimed at alleviating bottlenecks to new-home construction, such as the development of highway interchanges and sewage treatment plants. Dedicated budgets worth billions of shekels will be transferred to the Housing Ministry rather than to the ministries usually responsible for such projects, such as the transportation or health ministries.

"Selling land isn’t sufficient for expanding the housing supply," Ariel explained. "The sales need to be accompanied by actions that enable developers to build tens of thousands of additional housing units around the country and increase the number of housing starts. This is the most significant tool in the hands of the government for lowering housing costs."

Finance Minister Yair Lapid.Credit: Emil Salman

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