Steinitz Lays Out Three Steps to Lower Prices, in the Short Term

Finance Minister Yuval Steinitz yesterday announced three ways to lower housing prices and increase supply in the short term. He spoke at the press conference held by Prime Minister Benjamin Netanyahu. (See accompanying story. )

Steinitz said he would lower betterment tax on property bought before 2001, give incentives to developers to build quickly, and help local authorities fund public buildings. He said further steps could be expected soon.

Steinitz said the proposals would go to the cabinet for approval on Sunday. He said that while it may take a while to put up the new housing, media reports in the run-up to his announcement had already had an effect in reining in prices.

To increase the supply of available land, betterment tax will be cut from 45% to 20% on properties purchased over a decade ago, starting in 2011. The reduction will apply to sales of land for new housing and be applicable if such construction ends within 30 months.

Even though the Knesset will have to approve the tax change, Steinitz said it will be retroactive to the cabinet's approval next week.

To speed up construction, developers will receive a 15% discount from the Israel Lands Administration if they complete construction of 80% of the units in a tender within 30 months. This will give developers an incentive not to hold on to large inventories of empty land.

As for the third change, local authorities often hold up building permits due to disputes about who should fund the construction of public buildings such as schools, daycare centers and synagogues. In the proposed change, the ILA will include the costs of such facilities in the original tender. This means the state will receive less for the land, and in return developers will pay for the public buildings and the ILA will transfer these funds to the local authorities. Mayors will then be able to approve new neighborhoods they are now delaying.

In addition, Steinitz said it will be possible for local authorities to collect the cost of public buildings directly from the developers.

Steinitz said the government is also considering further steps on tax, rezoning and other areas that would affect the housing supply in the short term.

Netanyahu is also considering anther dramatic tax change: A full exemption on the profits from the sale of a second residence. Today, only the sale of a first residence is exempt from capital gains tax, and only once every four years. This is different than the exemption on the betterment tax for property announced yesterday. But there was no agreement on such an exemption and any decision has been postponed.