Analysis

Only the Wealthy Can Afford an Apartment in Tel Aviv — but Is That Such a Terrible Thing?

As the housing market in Tel Aviv skyrockets, property values in more neglected areas also rise

Rothschild Boulevard in Tel Aviv.
Ricky Rachman

The price of everything goes up with demand, and real estate is no exception. Property prices in Tel Aviv have gone up because people want to live there, businesses want to open there and company owners believe it’s a great location. The result is that only rich people can afford to buy an apartment there. The heart of the city has the highest prices in Israel for homes, offices and commercial space.

Prices in the heart of Tel Aviv rose because of enormous public spending on projects such as the renewal of Rothschild Boulevard and the construction of plazas at either end. Skyscrapers went up with luxury apartments that attract wealthy buyers. Every old Tel Aviv neighborhood has gentrified. It’s the situation in every thriving city worldwide — the more attractive the area, the more in demand and expensive its real estate becomes.

>>Tel Aviv ranked the 9th most expensive city in the world - New York City is 13th

However, cities from Manhattan and San Francisco to London and Paris are not only for the rich. Their residents also include undocumented immigrants. The big city offers work opportunities and basic accommodations that they can afford.

The big, bustling city is also the home of those who are prepared to live in less than ideal conditions to enjoy the opportunity of just being in these places. They include the young and old who prefer constant company over privacy and quiet, families willing to squeeze into a small space to enjoy a wealth of public services.

Social activists say Tel Aviv’s luxury towers symbolize alienation. However, if they hadn’t built those towers, it would be impossible to improve the atmosphere all around town and to fund quality services for all residents. It takes a lot of money to fix Dizengoff Square, Rothschild Boulevard and the pedestrian mall, to operate the bicycle- and car-sharing systems, to tend to gardens and ecological pools, to install fashionable street furniture, to place comfortable chairs on the squares and beanbag chairs on the boulevards and to offer residents umbrellas and tanning beds for almost free on the beach.

Municipal taxes cannot cover these ventures because they fund the city’s everyday operations. The only funding source for developing public infrastructure is real estate tax revenue at the point of sale. The more expensive the property, the more the city can invest in the entire town.

This gentrification process was first identified a little more than 50 years ago in places where rich populations began moving into older areas that had suffered from neglect and were left with mainly poor residents. The result is a change of character in the trade and services that adapt themselves to the preferences of the new residents, improving the sense of safety on the streets and, of course, higher real estate prices.

The alternative: neglect

Gentrification often has a negative connotation, pushing poor people out of their homes. It is partly true. Many of them who are poor, usually longtime residents, enjoy the rise on the value of the properties they live in, sell them at a profit and buy a bigger home elsewhere, or another property for themselves or their children.

True, the new home pushes them from their familiar surroundings, and they have less access to services than they were used to. Longtime residents usually have the option of staying, but most prefer to sell and move. It also happens because they are less comfortable personally and culturally with the more expensive vicinity. But selling and moving is a necessary change, not a forced eviction.

One could of course decide not to fix roads and lampposts, not to add parks, not to tend to the buildings and let the city sink in neglect, as happened in central Tel Aviv until a few decades ago. The prices will fall for sure. There are examples of neglected neighborhoods with weak populations, but is that preferable?

Alternative, affordable housing should be created. In a good city, the alternative is created by having apartments above the street-level shops. Their location above a noisy area full of vibrant traffic, particularly buses, makes them much less attractive residences. Most people don’t want to live above a bus stop that has buses stopping every five minutes, a restaurant from which wafts the smell of frying oil or a pub that’s open late into the night. A good city like Tel Aviv also has such apartments, and they are sold and rented out for less than the ones in the quiet streets behind them.

While all owners of a commercial property or apartment in Tel Aviv have seen their value of their properties shoot up over the past 20 years, the more neglected the area was, the higher the potential was for gain. Owners in the wealthy northern neighborhoods saw their property values rise but at a lower rate than those in poorer areas like Jaffa, Florentin, Neveh Sha’anan and Shapira.