Municipal Tax Hike on 'Ghost Apartments' in Israel Stalled at Interior Ministry

The tax penalty would apply to 47,000 apartments around the country that stand vacant for most of the year.

Ranit Nahum-Halevy
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Ranit Nahum-Halevy

One of the suggestions to come out of the Trajtenberg committee, the public panel that looked into ways to lower the cost of living, related to higher taxation on apartments that stand empty most of the year. The committee thought this would add to the supply of available housing and help drive down prices, but the recommendations have been stalled.

The target of the Trajtenberg proposal was apartments that are unoccupied most of the time because their owners don't live in them and don't rent them out. Some of these properties are owned by Diaspora Jews who are eager to have a place of their own in Israel, but who spend most of the year abroad. According to figures presented to the Trajtenberg panel, there are currently about 47,000 apartments around the country that are unoccupied most of the time, including 4,746 in Tel Aviv, 3,445 in Haifa and 3,429 in Jerusalem.

On a related subject, recently the Knesset Finance Committee rejected a government bill that would have required owners of completely unoccupied housing to pay municipal taxes (arnona ) on the properties. Currently such housing is exempt from municipal taxation. Instead, the Knesset committee adopted an approach that would exempt the properties from the tax for three years and then impose taxes at the lowest rate allowable.

When it comes to apartments that are vacant most of the year, so-called "ghost apartments," Interior Minister Eli Yishai has the authority on his own to impose municipal taxes, as they are governed by regulation and a change does not require Knesset legislation. But Interior Ministry sources say it's difficult to enact such a change in the absence of a clear definition of what a "ghost apartment" is. The matter has been examined by the ministry's legal department staff, sources say, and as soon as this snag is resolved, regulations will be prepared for the minister's signature. The current thinking, however, is that the matter will not be resolved before the January 22 Knesset elections.

The Interior Ministry responded that it is "currently examining appropriate ways of implementing cabinet decisions regarding ghost apartments and is developing an amendment to the relevant legal regulations."

In contrast to the slow pace at which the issue has been dealt with on the national level, the Jerusalem and Tel Aviv municipalities have laid the groundwork for taxation of ghost apartments. In Jerusalem, the municipal government has assembled a team to collect data on empty housing units in the city.

"It's another recommendation from the Trajtenberg committee that has faded away," said Jerusalem city council member Meirav Cohen. "In Jerusalem, there are thousands of empty properties, creating a major environmental nuisance and contributing to the rise in housing prices in the city. To curb this phenomenon, we proposed raising the tax rates on [such] property owners in the hope that it would cause them to put the properties to use, or at least increase revenues to the city by millions of shekels. We managed to get through the Trajtenberg committee's team of experts. We managed to get a cabinet decision passed. We managed to pass a Jerusalem city council resolution, but unfortunately the interior minister is holding up the entire process."

A luxury apartment building in Tel Aviv. Overseas buyers are snapping up apartments to escape paying taxes on undeclared funds. Credit: Viewpoint