Knesset Report Warned of 'Social Time Bomb' Three Years Ago

A lack of consistent government policy is pushing up home prices, which could spark widening social gaps, resentment and emigration. Thus declared a report by the Knesset research center - back in 2008.

A Knesset Research and Information Center report entitled "Israel's housing shortage" is available on the Knesset's website. It was written in March 2008, when Ehud Olmert and Kadima were in power and Ze'ev Boim was housing minister. "The government lacks a systemic, long-term perspective when it comes to housing and construction policy," the report states in a bold font right at the top.

"This is evident in many government decisions and moves that are inconsistent with the government's declared policy, and ultimately achieve the opposite of what is needed," it states, concluding, "This trend could result in social resentment, wider social disparities and even emigration."

housing protest - Tali Mayer - July 25 2011
Tali Mayer

The report ends with a practical suggestion: "These market flaws explain in large measure why the government needs to intervene in Israel's housing market. Accordingly, the government's construction and housing policy needs to be reevaluated, and must include a multiyear strategy to remove obstacles and ensure there is a supply of homes around the country, to be sold immediately when the need arises."

The Knesset Economic Affairs Committee met to discuss the situation in the wake of that report. Gilad Erdan, who is now environmental protection minister, was the committee's chairman at the time. As a member of Likud, then an opposition party, he used the document to bludgeon the Olmert government.

"Regrettably, the government is ignoring this social and demographic time bomb," he said as the meeting began. "In light of both the Research and Information Center document and the impression gleaned by committee members, the current government's policy will cause social resentment and encourage emigration. Unlike all other nations, including capitalist states, Israel currently has no effective plan to help people purchase homes, and rental aid has declined significantly as rents increase."

A decade earlier, the Knesset passed the Public Housing Law, sponsored by then-MK Ran Cohen (Meretz ), in order to help weak population groups buy homes. But since then, every government has blocked the law from being implemented. In that 2008 discussion, Cohen reiterated the center's warnings.

"The results are lethal because they will increase the disparities in Israeli society, heighten despair over people's chances of obtaining appropriate housing and living in this country, increase motivation to emigrate ... The government has to enable people to live a normal life in a normal apartment in this country," Cohen noted.

MK Dov Khenin (Hadash ) added: "This analysis obliges a general overhaul of the entire policy alongside specific reports about the different population groups. The picture we are being presented indicates that we must reverse the state's withdrawal from the housing market. If we do not, the social consequences will be far more serious."

Housing Minister Boim was not swayed. "To go from a housing shortage to emigration is a matter of interpretation, and I suggest we not speak in terms of interpretation but rather facts," he said. "How does this jibe with the fact that more than 70 percent of Israelis own apartments?"

Yet he also promised to improve things: "There are a few weighty issues here. We have shown the prime minister our plan and the finance minister responded that he is preparing a discussion on the topic. We will present our viewpoint."

Housing Ministry director general Dr. Haim Fialkov was a little more specific: "We have decided to consider a reform ... This is a model that has worked in several other countries. We currently are examining matters with the treasury and outside economists to see how it works. When we have results, we will bring the subject to the ministries to see if the ideas can be implemented. We hope this will create order in the system."

Another warning

Subsequently, in November 2009, the Knesset Research and Information Center drew up another report, "Housing price increases in Israel - consequences and solutions." This time, its warnings were issued on the watch of the new government of Benjamin Netanyahu and his finance minister, Yuval Steinitz.

The document states: "The behavior of the housing market, and particularly the reduction in the apartment supply combined with the cuts to the government's aid for weak population groups and young couples, indicate the government lacks a systemic, long-term perspective when it comes to housing and construction policy ... If supply keeps decreasing, this could augment the housing shortage in Israel ... [The] housing market is running counter to world trends."

And, it adds, "Many government institutions are involved in the housing market, and there appears to be insufficient coordination between them."

The bodies in question, the report notes, include the Housing, Finance and National Infrastructure Ministries, the Israel Lands Administration, the planning and building committees, the Interior Ministry Planning Directorate, the Israel Tax Authority, the Antitrust Authority, and bank and capital-market supervisors.

"For lack of a leader, government ministries sometimes pull in opposite directions," says the report. The result? "A continuing decline in the home supply, which is now pushing up prices sharply."

The solutions the Knesset center proposed resemble those that Netanyahu is now presenting: "greater coordination between the bodies involved in the housing market; reforms to reduce construction time and cost; and more aid for needy population groups."

In November 2010, the center addressed the issue for a third time; the housing crunch had only worsened by then. Under the title "Various models of attainable housing in the developed countries and in Israel," its report offers a gloomy description of how the government has handled the matter: "The government has reiterated its commitment to reducing obstacles in the housing market ... As will become evident, these declarations are not yet reflected in actual change. The effectiveness of the various plans must still be monitored."

Behind the scenes

The center in question is a research body that provides the Knesset and its committees with reliable, accurate, objective and independent information for their work. The center's reports offer MKs an alternative to the flood of information they receive from various bodies, companies and businessmen with their own interests.

The center is headed by director Dr. Shirley Avrami, budgetary control department head Ami Zadik and economists Tamir Agmon and Ron Tikva. It employs 30 researchers, most of them academics with graduate degrees in law, economics, social sciences and the humanities. Public authorities are legally bound to supply the center with information on demand.

The center's clients are the MKs, who are the ones who commission the reports. The public can read them online, but few people have the time or ability to wade through the sea of diagrams, statistics and information. (Some of the texts are available in English translation. )

"This is something we don't do very much - usually we do not issue warnings," Avrami said this week. "We saw a problem that was not being addressed, and we presented the consequences, stating, if the process continues like this, the consequences might be such and such.' I am deliberately using the word 'might' so as not to take a stand."

Asked if she didn't feel like telling the MKs "we told you so," Avrami replied: "That is not our task."

Zadik, who wrote the above-mentioned reports, added, "By the end of 2007, we saw a problem that would lead to other problems. We saw there were different bodies making different decisions when it came to housing; ministry policy makers who influence the housing sphere in contradictory ways; and an absence of a single systemic perspective, which would bring stable, moderate prices."