Homes That Only Israel's 'Landed Gentry' Can Buy

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Site of the former Sde Dov airport In Tel Aviv.
Site of the former Sde Dov airport In Tel Aviv. Credit: Tomer Appelbaum

On May 4, 1967, the workers’ daily Davar announced that it was a done deal: Then-director general of the Transportation Ministry, S. Bar-Ze’ev, had informed the Israel Airports Authority that the Dov Hoz airport (Sde Dov), just north of the Yarkon River, would be shutting down. According to the Davar correspondent, the final date was to be September 1, 1967. The airport would be evacuated and its operations transferred to Lod Airport, later to be renamed Ben-Gurion Airport.

The same Davar issue also included a story by Miriam G., regarding an ambitious commercial enterprise that would put an end to ironing shirts. The ATA textile company had just purchased the patent of a company in Manhattan that had invented, so it claimed, cotton shirts that did not require ironing. ATA would soon start producing and selling these shirts in Israel, said the story. Whereas the evacuation of Sde Dov was described as a done deal, Miriam G. expressed great doubt regarding the no-iron shirts venture. “Housewives are already accustomed to the fact that from time to time some manufacturer or other comes out with a declaration that salvation has finally arrived; finally, she will be free from the toughest ironing job, the ironing of cotton.” She was no feminist, Miriam G., but right she was. All of us, men and women, are still ironing our cotton shirts.

In contrast to the shirts enterprise, the evacuation of Sde Dov did come to be – albeit rather belatedly, in February 2020 instead of September 1967. But if you’d told a reporter from the workers’ daily at the end of the 1960s that on the ruins of Sde Dov there would one day be apartments priced not much lower than ones in Manhattan, Berlin or Paris, they’d have laughed at you.

When the Israel Land Authority recently opened the envelopes revealing the bids of developers vying to build the first 1,500 apartments on the evacuated land, another record was broken in Israel’s real estate market. Developers were willing to pay 4.5 billion shekels ($1.4 billion) for the land. Given the price they were willing to fork out, TheMarker correspondent Gili Melnitcki estimated that the starting price for an apartment in this project would be 4.5 million shekels ($1.4 million). Most of the cost is based, of course, not on cement, bricks and development costs, but on the price of land, the only component over which the government has total control.

Who are the people who can afford an apartment at these prices? They belong to the upper decile, obviously. The price of apartments in Tel Aviv and in most employment hubs in Israel has doubled over the last decade, whereas the adjusted average salary has risen by less than 15 percent. Mortgages and rent have become the most expensive and oppressive component of the household budget for millions of Israelis.

Expressions such as the “landed nobility” or “landed gentry,” which were used by authors, historians, journalists, politicians and reformers in Western countries for centuries, from the days of feudalism and up until the early 20th century, have become rarer in recent generations, but the plan Israel’s government is promoting will bring them back, writ large. The young generation growing up here is learning that there are two classes here: people who own land, apartments and houses, and those who work for them. The first year of the “government of change” may go down in history as the year of the sharpest spike in Israel’s housing prices, with great wealth passing rapidly from the lower eight deciles to the upper two, who hold most of the real estate bought for investment purposes.

This isn’t a result of “market forces” at play, of course. The inflation of housing prices is a result of government policy. Moshe Kahlon, Israel’s finance minister between 2015 and 2020, declared his clear commitment to lowering housing prices, but the results were very disappointing given the promises made. At the end of his term there was, however, a hiatus in the trend of price increases. Over the last year, in contrast, politicians have taken a new direction: Former Finance Minister Yisrael Katz stoked the surging prices by reducing taxation on real estate investments. The Bennett-Lapid-Lieberman government has taken things a step further. It is completely ignoring the housing crisis and is basing a growing portion of its forecast of tax revenues on insane real estate prices.

The new base of the 2021 model of the Labor Party, headed by Merav Michaeli, is less concerned by high housing prices; some members and supporters are even pleased with the situation. Called in the distant past the party of Israel’s workers, Labor petitioned the High Court of Justice three years ago in order to thwart the attempt to dampen investor demand. Labor explained the petition – aimed at foiling a plan to tax investors who own more than three apartments – as a procedural matter, but the bottom line was that it served the uppermost percentile.

And Interior Minister Ayelet Shaked, in her role as Ayelet Shaked, already announced last month that there would be no decline in housing prices. It was clear that the developers who wrote the Land Authority a check for 4.5 billon shekels the other week believe her.

If we wrapped up this brief analysis of government policy regarding housing prices at this point, we’d be overlooking something: the fate of the 4.5-billion-shekel check, given by the developers who will build the first cluster of apartments at Sde Dov. This money will go into government coffers this year, and will no doubt serve to finance worthy social causes.

Indeed, the government did not waste a moment. In fact, even before the check was deposited, the Bennett-Lapid-Lieberman-Michaeli-Horowitz government rushed to find a purpose for the billions it got from evacuating the old airport. A day before the envelopes were opened, the government decided to approve illegal increases to defense establishment pensions. These are not paltry sums. The NGOs Financial Justice and Pure Profit, which revealed this highway robbery and petitioned the High Court of Justice in order to block the move, discovered that the illegal increase to salaries and pensions totals 1.3 billion shekels this year, and becomes 1.5 billion shekels a year in the very near future. In other words, the impressive check the Land Authority just received will go straight into the pockets of army pensioners, and that’s before the first tenants even move into the apartments built on the ruins of Sde Dov.

Since the majority for passing this cruel and scandalous decision was assured in advance, coalition leaders allowed some left-wing ministers to vote against it, so that they could tell the media later that they had opposed it. Real opposition, if it exists, will be evident if the decision fails to pass in a Knesset vote in the coming months. In the meantime, the inflated salaries and pensions with their illegal raises continue to flow into the pockets of these millionaire pensioners every month. The Supreme Court continues to grant the Defense Ministry repeated extensions that enable this abomination, instead of doing the right thing, which is what we believed the court to be there for: enforcing the law.

And thus, we close the circle: Data published by the Treasury’s chief economist Shira Greenberg last month reveal an amazing phenomenon. The biggest buyers of investment apartments in Israel this year were not developers or people in high-tech, a sector experiencing an unprecedented surge this year. It turns out that there is another group whose real estate acquisitions are much larger than their proportion of the population. These are senior public sector officials, including members of the defense establishment.

Thus, we get a picture of what is happening or will happen from the following:

* In the coming 30 years, money will flow from taxpayers to Israel Defense Forces pensioners, most of them having sat in offices or engaged in “civilian” professions. When we embarked 20 years ago on a campaign that warned against this time bomb, we were talking about 70 billion shekels. Today, the figure is 370 billion shekels ($116 billion), with the military still using strong-arm tactics in matters of pension, salaries and conditions for its senior members and associates.

* The surging housing market index over the last decade.

* The graph the Treasury and Tax Authority do not wish to produce, let alone share with the public, which illustrates the wealth disparities between real estate owners and people without any real estate.

* The graph describing inter-generational transfer of wealth. Are wealth disparities in Israel preserved over decades due to the inter-generational transfer of assets, mainly houses and apartments? In other words, who are the real estate aristocrats in Israel, and is their economic and political clout on the rise?

But we don’t have to wait until the Finance Ministry, the Tax Authority and the chief economist provide us with better figures on the impact of housing prices on inequality. We can already say that the present “government of change” is truly a unity government – at least when it comes to housing policy. The widely politically divergent team of Naftali Bennett, Nitzan Horowitz, Merav Michaeli and Ayelet Shaked will provide Israel’s real estate aristocracy with exactly the same services that were provided by Benjamin Netanyahu, that neo-liberal and cruel capitalist. In the eyes of all our politicians – right, center or left – housing and a roof over one’s head are not products the government is meant to worry about. At best, these are “services” provided by the “market”; at worst, they are a source of income that helps finance the increasing amounts that go to powerful interest groups with links to political leaders.

There are quite a few such groups in Israel’s economy, but only one of them has no fewer than six full-time lobbyists in this government, former generals who enjoy both a minister’s salary and a military pension that has been illegally increased. At their helm is Defense Minister and former Chief of Staff Benny Gantz, who enjoys an enhanced pension and salary totalling more than 100,000 shekels ($31,000) a month. One can only reminisce about those amusing days in which he, his associates and satiated donors, the richest people in this country, were sold to us in the media as members of the “change bloc” – namely, people who could, and wanted to, bring about the social and economic change this country is waiting for.

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