High Court Deal Could Undo Tax on Housing Investors

Flawed legislative process stalls measure aimed at bringing down home prices

Knesset legal adviser Eyal Yinon
Emil Salman

The tax levied on owners of three or more apartments may be heading back to the legislation process in the Knesset, after the High Court of Justice gave the government until Sunday to respond to a compromise proposed by Knesset legal adviser Eyal Yinon.

Knesset sources believe that this may be the end of the law, which they consider unlikely to be passed again.

The law, which is being contested in court, levies an extra tax of as much as 1,500 shekels ($415) a month on owners of three apartments, in a bid to make real estate a less attractive investment option and combat high home prices. The sum can be higher for owners of more than three apartments.

Part of the legal battle surrounding the law involves the legislative process. It was passed in a Knesset Finance Committee session that started at 11 p.m. A draft of the bill had been given to the Knesset committee’s legal adviser at 7 p.m., and to MKs at 9 p.m. The vote was ultimately held at 7 a.m. the following morning, without opposition MKs present.

Government representatives had admitted in previous High Court hearings that the legislative process was flawed.

The law was supposed to have taken effect this year, but its implementation has been delayed by the legal appeals.

Should the government accept Yinon’s proposal, then the Knesset Finance Committee will have to reconvene to discuss and vote on the bill, and it will then need to be brought before the Knesset plenum for another vote before it becomes law again.

Knesset sources say it’s unlikely whether the law will be passed again under these circumstances. Currently there is no majority in the Knesset in support of the bill – Prime Minister Benjamin Netanyahu’s Likud party is not interested in redoing the bill, and Finance Minister Moshe Kahlon is considered unlikely to put himself on the line over it.

The initial law was bundled up as part of the Economic Arrangements Bill.

Finance Ministry representative Shosh Shmueli, who was present at the hearing, stated following Yinon’s proposal that it would create havoc. One clause of the law called for giving owners of multiple apartments grants for selling, and people have already sold and applied for these grants, she said.

Yinon’s proposal would essentially cancel the bill, and that’s not an alternative, she said.

Court President Miriam Naor responded that Yinon’s proposal should be considered, as it had advantages, such as not needing to restart the legislative process from the beginning.

Previously, Yinon had proposed that the justices leave the law intact but give the Knesset a “non-validity warning.” The justices rejected this, stating that Knesset members knew they had behaved improperly.

The petitions against the law were filed by a list of opponents including opposition MKs and the NGO Hatzlaha.