Plan to Double Tax on Israel's 'Ghost Homes' Falls Flat

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Upscale apartments in Jerusalem's Mamilla neighborhood, many owned by foreigners.Credit: Tomer Appelbaum

The plan to double municipal taxes on so-called “ghost apartments” and coax the owners into either renting or selling them has fallen flat so far, Knesset lawmakers were told on Tuesday.

The treasury estimates there are as many as 43,000 homes that stand empty much of the year mostly because they are owned by foreigners using them as vacation homes. The 2011 Trajtenberg Committee on social reform estimated the figure was 48,000.

But on Tuesday, officials from Jerusalem, Haifa and Tel Aviv, which have the biggest concentration of ghost houses, told lawmakers that they had succeeded in identifying no more than 3,000 homes liable for the double tax rate.

They said the problem is that the only way they are allowed to ascertain which apartments are empty is by checking water bills.

“The tools that the local authorities were given so far don’t enable us to stop the phenomenon [of ghost apartments]. I came to ask the Knesset to let us use electric and gas bills, which would enable us to find a great many more ghost apartments,” said Ofer Berkovitch, a Jerusalem deputy major, whose city has found 1,400 ghost homes.

“It can’t be that in the entire country we’ve found just 3,000 apartments at a time when there are an estimated 40,000 or more empty ones,” he said.

The 2013 law was passed as a temporary measure that would last three years, but the Knesset is expected to renew it before it expires. The goal is to help alleviate Israel’s housing shortage by forcing owners to rent or sell them.

But figures released by the treasury on Tuesday indicated that wasn’t working either. While the number of homes purchased by foreign residents plunged 36% to 1,566 in the first eight months of the year, the number of home sales was down even more — by 53% for a total of 740 sales. “Despite the big drop in foreign-resident purchases, the balance is still in favor of buying,” the treasury said.

The number of homes bought by overseas residents fell to its lowest level since 2003 when Israel was wracked by intifada violence and the U.S. economy was in recession. The treasury said foreign purchases accounted for just 2% of all residential real estate transaction, close to its 2002 level.

The biggest decline in foreign buying was in Jerusalem, where such purchases were down 41% to 450 units. In Netanya foreign purchases dropped 28% to 423, while in Tel Aviv they fell 36% to 297, the treasury said.

Despite the fact that in Jerusalem 1,400 absentee home owners were sent notices informing them that their municipal tax had doubled, the city failed to meet revenue expectations, said Moshe Levy, the head of tax collections in Jerusalem. The city had expected to collection 10 million shekels ($2.6 million) in extra taxes but has brought in only 4 million to date.

In Tel Aviv about 1,000 home owners have been sent notices and in Haifa, a few hundred.

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