Israel's Housing Cabinet Clears Measure to Speed Construction

Target Price program will offer discounts to builders who pass them on to home buyers.

Nimrod Bousso
Nimrod Bousso
There's an increasing presence of illicit money in Israel's real estate industry.
There's an increasing presence of illicit money in Israel's real estate industry.Credit: Nimrod Glickman
Nimrod Bousso
Nimrod Bousso

The housing cabinet approved on Monday a package of measures by Finance Minister Moshe Kahlon to rapidly increase the supply of housing, the most important of them a plan to tender much more government-owned land at discounted prices to builders.

Under the plan, part of an existing Target Price (Machir L’mishtaken) program, land will be tendered in a kind of reverse auction where builders that bid the lowest selling price to the buyers of the homes constructed on the land win.

Unlike an earlier version of the program, the discounts offered contractors will range from as little as 10% to as much as 60%, depending on how strong demand for the land is in the area. The treasury said the aim was to end distortions in the market when the government discounted prices by 50% across the board, effectively awarding bigger subsidies on land in high-demand areas.

The final buyers of the home will be limited to people who are buying their first properties or who haven’t owned a home for at least 10 years, the target market for Kahlon’s ambitious plans to stem the sharp increase in home prices over the last decade.

The discounts, according to treasury estimates, will cost the state some 1.7 billion shekels ($450 million) in revenue annually. But that is exactly the idea, said Emily Silverman, who is on the geography faculty of The Hebrew University geography and was active in the 2011 social-justice protests.

The plan attacks a key element in what the building industry says contributes to high home prices, namely a near-monopoly in land by the government that tenders the land slowly and at high prices.

“At last we’re seeing a real framework by the government that actually hurts income the government makes from land,” she said.

The housing cabinet also approved measures to improve efficiency and productivity of the construction industry by adopting more advanced technology. It also cleared a plan for faster construction-planning approval at four Arab towns slated to get 30,000 homes and other measures to alleviate the housing crisis in the Arab sector. Another plan approved was to speed up the process of re-zoning agricultural land.

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