Tackling the Housing Shortage

Dissolving the Israel Land Administration's monopoly on land could drive down home prices.

Haaretz.
Haaretz Editorial
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Housing construction in Israel is not keeping pace with demand, and ministers worry that the VAT exemption for first-time buyers will be counterproductive to lowering prices..
Housing construction in Israel is not keeping pace with demand, and ministers worry that the VAT exemption for first-time buyers will be counterproductive to lowering prices..Credit: AP
Haaretz.
Haaretz Editorial

The proposal by Finance Ministry budget director Amir Levy to establish a committee that would force the Jewish National Fund to share its huge land-sale profits with the government is a worthy one. The legal definition of the JNF as “a private company owned by the Jewish people” is not just obsolete and irrelevant. It also enables it to accumulate wealth while receiving benefits from the government under a 53-year-old bilateral agreement, while Israel’s citizens do not profit.

But Levy is dealing with only one aspect of the problem. The billion shekels the JNF gets from the state every year, which he would prefer to see as part of the state budget, will not resolve the housing shortage – one of the most acute problems plaguing the Israeli economy.

The Israel Land Authority and the JNF are responsible for the high cost of housing. During the first decade of the 2000s, until 2009, the ILA – under its old name, the Israel Lands Administration – marketed only 32,000 housing units a year, when the annual demand was between 40,000-45,000. This created the huge excess demand that has sent the price of land skyrocketing and, as result, also the price of housing.

In recent years, as the pressure on the ILA increased, it began releasing enough land annually for 44,000 units, but the previously accumulated excess demand was never resolved.

The slow release of lands stemmed from the narrow interests of the ILA, which is the most influential monopoly in Israel, holding 93 percent of the country’s land. It is refusing to market sufficient land due to various agricultural interests, and a paranoid fear of a foreign takeover of state land. What has resulted is high-priced land and overpriced apartments.

That’s why it isn’t enough to transfer JNF funds to the state treasury. The complete solution that Levy, the treasury and the Housing and Construction Ministry must aim for is the closure of the ILA and the sale of state lands to all-comers. As a result, land prices will drop, development and construction will pick up, and home prices will stop rising – and perhaps even come down.

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