“I would open Tinder in the evening in Jerusalem, and discover that the closest 30-something man lived 65 kilometers away, in Tel Aviv,” says Tamar, 30, who recently left the capital after living there for years. “I love the city, but it’s hard to live here as a single, post-college-age woman. There’s no real community life for us here and it doesn’t suit me to live with roommates forever, but in Jerusalem you don’t have much of a choice.”
Tamar is hardly alone. Every year some 5,500 young adults leave Jerusalem, according to a study conducted by the city in 2017 with a Bloomberg Philanthropies Innovation Team. A survey of 9,000 young adults found that the lack of an active young community in the city, the desire to live near friends and the lack of quality affordable housing were the three main reasons why young singles and families leave Jerusalem.
The Bloomberg study focused on professionals between the ages of 25 and 40 who are building their careers, living alone or with a partner and young children and who seek a suitable community or social group. They face a housing market that has seen rents steadily rising over the past decade, and 90% of the time they are in their apartments they use only 40% of the space, an indication that the housing market for young people is off-kilter. As a result, cities are seeking innovative housing solutions that will meet their particular needs. One such solution is co-living spaces, a mix of private and shared areas.
Jerusalem officials understand that the local housing market isn’t suited to the needs of the young demographic the city wants to attract. This week the city is holding a co-living conference and has built a small sample housing unit in Safra Square, near city hall. The Tel Aviv municipality’s strategic unit has set up working groups on the issue, and recently allocated a plot to build 120 co-living apartments in Jaffa’s Maccabi Jaffa project.
“In general, the housing market in Israel is geared toward families,” says Cheftzi Tirosh, co-living project manager in Bloomberg Philanthropies’ Jerusalem Innovation Team. “If you aren’t a couple with two children and a dog, then you probably either live with roommates or in a divided apartment.”
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She says her team understood that to prevent a situation in which after work hours the city is emptied of its young professionals, it’s not enough to create attractive jobs. A study by the team found that 65% Jerusalem’s public employees between the ages of 25 to 37 live in Tel Aviv.
Co-living, like co-working, is gaining traction all over the world. Co-living spaces can be found in London, New York, Barcelona, San Francisco and Chicago. These are apartment buildings that include shared spaces such as courtyard, gym, kitchen or furnished roof that all the residents use and whose costs they share.
The housing units are generally much smaller than studio apartments on the open market, sometimes as small as 12 square meters, and usually come furnished, including appliances. The developer serves as the management company, maintaining the shared spaces and even cleaning the apartments every two weeks.
The Jerusalem model being formulated is slated for one of the plots in the new city entrance area near the Jerusalem International Convention Center. The proposed mix is 50% apartments up to 25 square meters, for singles; 35% two-room apartments, for couples, of around 40 square meters and 15% three-room apartments of 54 square meters.
In Israel it’s hard to attract developers to projects of this type, since the yields are low. According to Daniela Paz, CEO and owner of Paz Economics and Engineering, which edited the economics chapter and conducted the feasibility studies for Jerusalem, for co-living initiatives to be worthwhile for developers there must be changes in the way land is zoned and priced.
“Right now, without ad hoc discounts on the land, the project isn’t worthwhile, which is why planning strategy needs to change,” she says. “There’s a demand to build small apartments or to set aside a certain percentage for rentals, but you can’t really have it both ways. Only if there are zoning changes and price adjustments in the [land] marketing can we encourage developers to take part in such projects. It’s illogical to provide only for students or nursing homes, but for such a major segment of the population there are no alternatives.”
The economic study shows that long-term leases, large commercial areas, reducing requirements for parking spaces, proximity to workplaces and accessibility to public transportation can help assure the feasibility of the project. That the target population will not require heavy investment in schools, particularly high schools, also shores up profitability. Municipal officials and developers who have expressed interest in such projects, especially in Tel Aviv, are seeking to advance amendments to legislation and regulations that will help them move forward.
Developers will also have to do somewhat of a mental switch, Paz notes.
“Today a developer has no interest in the life of the project over time,” she explains. “If the developer is also going to be the management company, developers will give more thought to the various systems and their efficiency. The developer will from the start be thinking about life after Form 4 [the occupancy certificate] and this will benefit residents. There will be quality of life and not divided apartments and landlords doing you a favor.”
Sources in the real estate market are also pinning hopes on residential real estate investment trusts (REITs), which the state has been encouraging over the past two years with a series of tax reductions and a convenient legal framework. These reductions, together with a decline in the number of apartments being bought for investment or by foreigners, and the high demand in the central region, point to opportunities for the expansion of a new market segment aimed at long-term rentals.
Cooperative models, in which some of the capital is provided by purchasing groups that will take part in the ownership and management of the building, are also being promoted by various groups in Israel.
Adapting to the Israeli market
The innovation team sought to ascertain the specific needs of the Israeli market. “Abroad there are models of smaller units with a shared kitchen on every floor; in Israel we understood that was out of the question,” says Tirosh.
The communal fabric is one of the clear needs that are guiding the strategic planners in both the Tel Aviv and Jerusalem municipalities. “We saw small, inexpensive apartments in New York, but the people lived in terrible isolation, like in some kind of high-tech hostel,” said Tirosh. “We want to stress social connections, which is why the mix is important to us.”
In Jerusalem focus groups were held to examine how interested more traditional Jews and Muslims would be in such an initiative. “We found a lot of interest among the population of East Jerusalem. That’s a community that’s riper for the idea,” Tirosh said.
The Tel Aviv municipality is emphasizing price supervision and the ability to create affordable housing that will keep varied populations in the city. Paz, however, argues that the economic research showed that rent control in even some of the apartments would require additional reductions in the price of the land. In Jerusalem the assumption is that the apartments will not be categorized as “affordable housing” but will be offered at market rates, or even higher.
“In Tel Aviv they understand that affordable housing projects can only exist with the help of a substantial subsidy, in taxes or land prices, but they are an opportunity for populations that are being pushed out of the city,” says Yoav Weinberg, head of statutory issues at Paz Economics and Engineering, who is advising the Tel Aviv municipality. “The Maccabi Jaffa compound is an example of an initiative that’s feasible because the city is a part owner of the land.”