The Housing Crisis Is Mainly Netanyahu's Fault

Olmert flubbed the housing challenge, but six years have passed since he left office, and Netanyahu had all the time in the world to fix everything that needed fixing.

Nehemia Shtrasler
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Israel's Prime Minister Benjamin Netanyahu at the prime minister's office in Jerusalem, February 16, 2015Credit: Reuters
Nehemia Shtrasler

The funny part of the report on the housing crisis is the part dealing with the recommendations. It is a generic section, which appears in every report written by the State Comptroller.

In this one the State Comptroller recommends to the public sector to undergo a metamorphosis: The government must improve the quality of its data and its ability to respond, develop economic models, set overall policy, decide on compulsory schedules, implement staff work, set standards for planning inventory, remove barriers, shorten procedures, make the manufacturing and licensing processes more efficient, and more and more and more.

Wait a moment, if all this is really done and the public service does undergo a metamorphosis, then instead of a bureaucratic, outmoded sector overburdened with political appointments, we will get Check Point and Facebook. That is why it is impossible: A leopard cannot change his spots.

To understand how we reached this crisis, it is enough to look at pages 40 and 41 of the report. There State Comptroller Joseph Shapira explains, with the help of a graph, that everything began, and ended, with the number of housing starts. The graph starts in the 1990s, with the beginning of the mass immigration from the former Soviet Union. In those days Ariel Sharon was Housing and Construction Minister, and he raised the number of housing starts to an average of 50,000 a year.

The big change came in 2001. That is when we see a sharp drop in the number of building starts, to a level of only 30,000 a year, with the share of that total represented by government initiatives falling to a low of 6,000 units a year. The rest are initiated by the private sector, which is amazing, since the government – via the Israel Lands Authority – owns 93 percent of the land and the private sector only 7 percent. And since the annual demand for housing is 40,000 units, there is a gap of some 100,000 missing units between 2001 and 2009 – and that is the surplus demand that has been driving up housing prices ever since.

In 2009, Netanyahu returned to power, and starting in 2010 the pace of construction rose to 40,000 building starts a year. But that is exactly the size of the annual demand – and so the huge gap of 100,000 units was never closed. In order to close it we need to build 70,000 homes a year – and that is what Netanyahu did not do.

It may be true that Ehud Olmert’s government did not recognize the housing problem either, and never held even a single strategy meeting on the issue. The Olmert government also made a mistake when it decided in August 2008 to stop initiating new construction plans in the center of the country, and to concentrate only on the periphery. Olmert’s team did not understand that it is impossible to force people to live in the periphery if they do not want to, and if there is no work there. But six years have passed since Olmert left office, and Netanyahu had all the time in the world to fix everything that needed fixing. That is why the brunt of the blame falls on him.

Another important figure that appears in the report tells that it takes an average of 12 years to get a planning and construction permit. That’s crazy. It is bureaucratic and administrative chaos. It takes 12 years for a district planning and building committee to approve a construction plan, for the Israel Lands Authority to publish a tender for the land, and for the contractor to receive the building permit from the local authority. So why is it a surprise we are in a crisis?

The housing cabinet headed by Yair Lapid is also mentioned in the report. Lapid said before the last elections that the “finance minister must be an economist,” but immediately after he was elected he changed his opinion and declared: “The finance minister does not need to be an economist.” Lapid was the one who told young couples in 2014: “Don’t buy homes, prices will fall.” Since then housing prices have risen by another 5%. This was a declaration no economist ever would have dared make, but a finance minister who is not an economist – he can. He is not limited by anything. Not even by the laws of economics.

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