The Owners of Tel Aviv’s Luxury Towers Go to War on Airbnb

Developers are opting for bylaws ensuring that apartment owners can’t rent out their space and irk their neighbors

Luxury apartments in the Arlozorov 17 tower
Studio Aiko

It’s the specter haunting many developers of the Tel Aviv luxury towers that have sprung up in recent years: the possibility that some apartment owners will seek to rent out their homes on Airbnb and harry their neighbors. Some developers are doing something about it.

Dolly Elrom, marketing chief for Dan Nadlan, talks about “a luxury apartment tower in the most desirable part of Tel Aviv, and when we started marketing we saw what was happening in other luxury developments, so we decided to act to prevent short-term rentals.

“We realized fairly quickly that many were being sold without restrictions. The owners rent them out, especially in areas by the beach,” said Elrom, whose company is the developer of the luxury tower at 17 Arlozorov St. in Tel Aviv, whose residents are about to move in.

“So all summer, from June to November, the towers are full of tourists who come for a few days, walk around strewing sand in the lobby, use the pool and take towels, disturbing the other residents. The solution we found is to insert a clause prohibiting owners from renting out their apartments short-term.”

The tower at 17 Arlozorov St. between Dizengoff Street and Hilton Beach was designed by the architect Moshe Tzur and includes most of the elements of luxury-apartment living in Tel Aviv – an Olympic-size swimming pool, a stunning lobby and a gym.

One apartment sold for 40 million shekels ($10.8 million). But despite that huge sum, the buyers don’t have right to do whatever they like with the apartment.

“About 60% of the Israelis who bought apartments in the tower plan to live there. These are people who are downsizing, people who have left large houses to live in an apartment in Tel Aviv,” Elrom said.

“For some clients this is a vacation apartment, and there are about 10 units that were probably bought as investments. It may be that these are apartments to live in, not for investment, so if this clause deters people because they planned to rent out the apartment as an Airbnb, we have no problem deterring them.”

According to statistics from AirDNA, which analyses the short-term rental business, fewer than 1,000 people are managing about 4,500 apartments out of 8,800 apartments offered on Airbnb in Tel Aviv, an industry in every sense of the word. In a good tourist season, owners can triple the income they would have reaped from a regular rental.

For example, a three-bedroom apartment for rent in Tel Aviv at 7,000 shekels a month can go for 800 shekels to 1,500 shekels a night during the tourist season. And in the luxury market, this price can surge to between 2,500 shekels and 3,000 shekels a night.

But the Airbnb rental debate isn’t limited to the luxury market. One question is whether an apartment rented as a short-term accommodation can still be considered a residential apartment.

According to a recent ruling by the Justice Ministry’s supervisor of land registration for the Tel Aviv area, in some residential buildings, apartments may not be rented on a short-term basis.

The case in question is an apartment in a building on Hebron Street in central Tel Aviv, not far from the beach. The building’s bylaws state that the apartments are to be used as residences only. The supervisor ruled that, beginning on January 1, no apartments may be rented short-term there.

“Airbnb is certainly a problem. It generates lots of friction between the residents and short-term visitors, and in luxury towers this is a consideration in the project’s marketing strategy,” said Amir Rosenblum, chief executive of Idan (S.N.I.) Building Management and Holding, and a consultant in the management, operation and maintenance of luxury buildings.

Some developers see Airbnb as an obstacle, so they have apartment buyers sign a commitment saying they won’t rent out the space on a short-term basis. Rosenblum calls this “a strategy to ensure peace and quiet and a luxury experience for their clients.”

On the other hand, Rosenblum says, some developers shy away from a no-short-term-rental clause because “in this market there are plenty of purchases based in part on the possibility of profits in months when the apartment is empty. Such a clause could put off such buyers.”

Rosenblum says he’s seeing cases where buyers of luxury apartments are banding together to update their building’s bylaws. “That is, even if the developer didn’t insert a clause like this, the residents see that they have the power and want to act,” he said.

Rosenblum says short-term rentals will remain a hot topic in Israel for years.