Building in the Wrong Places

A study shows that construction of new communities in rural areas costs 188% more than creating new housing in existing urban areas

Building a new settlement from scratch is expensive, for sure. But exactly how much it costs as compared with alternatives - such as expanding existing locales - has never been thoroughly studied by successive governments, until quite recently.

Not long ago the Environmental Protection Ministry decided to tackle this conundrum. It hired the Zenovar-Oved Gubi Planning Team consultancy to conduct a study on the economic aspects of building new towns as opposed to expanding existing ones. It turns out that Israel's citizens are paying a heavy price in both economic and environmental terms for their taste for new neighborhoods.

Mitzpeh Ilan, near Wadi Ara
Nitzan Shorer

The firm found that building new communities in rural areas, including the cost of construction and infrastructure, comes to NIS 1.4 million per housing unit, which is 29% more costly than expanding an existing rural locale - and a whopping 188% more than the cost of building new neighborhoods in existing urban areas. And that's before factoring in expenses the government isn't even thinking about, like ongoing maintenance.

If the "public costs" - meaning those due to be borne by the taxpayer, which get added to the national budget - are isolated, the difference is even greater: The cost of a single housing unit in a new rural settlement can be three times more expensive than in a new neighborhood of an existing town, the consultancy found.

While the Zenovar study did not look at the total impact of building a new community on the national budget, other researchers did: Environmental economist Noga Levtzion Nadan examined the state budgets for 2000 to 2004, and shows that the total allocated budget during those years for new construction in the rural sector was NIS 4.34 billion, compared with NIS 900 million allocated - in total during those years - for urban construction.

Back to Zenovar's team: According to its data, in 2008 the Housing and Construction Ministry spent the same amount on promoting new projects in the rural and urban sectors.

A greater part of the budget should be allocated to the sector with the greatest number of residents - meaning, existing cities and towns. But, in fact, per capita, the state is allocating more to families who agree to move to new locales.

When queried about this, the ministry did not respond.

Ten new towns

Until recent years, the government never seriously studied the cost of building new towns.

It simply promoted them as contributing to economic and social advancement of the "periphery," by attracting so-called strong populations, and as helping the "demographic balance" vis-a-vis the Arab population.

Government ministries have argued over the years that building new towns, mainly along the border, is crucial for security. These locales also provide a solution for groups that are consolidated in social terms; a classic example is the people evacuated from Gush Katif. Four new towns are being built for them alone, in Lakish and the dunes of Halutza.

Four years ago, following a state comptroller report and a decision concerning procedures for building new towns, handed down by the accountant general, the government did solicit a report estimating the cost of such towns which it had undertaken to build; there were at least 10 of them.

Yet, according to Zenovar-Oved Gubi, the estimates didn't include expenditures that had to be added to the national budget. No comparison was made between the cost of building a new town as opposed to expanding an existing one. There was no effort to quantify the impact on available open space.

"When no alternatives are presented, it is very hard to determine whether the investment in building a new town is justified," the consultancy firm writes.

Zenovar-Oved Gubi looked into 25 cases: 10 involved building new neighborhoods in larger locales (such as Ramle, Modi'in, Yavne and Beit She'an ); 10 involved construction of new neighborhoods in rural towns (including Matzuva, Ma'aleh Gilboa and the moshav Sde Avraham ); and five were totally new communities. Among the costs the firm factored in were the building of roads, water and sewerage infrastructure, and builders' expenses.

Great differences were found. The cost of building a housing unit in a new community was 29% greater than building a comparable unit in an existing rural town - a difference that expanded to 113% once various public costs were included.

When all expenses are taken into account, the cost of building a home in a new locale versus in an existing city is 300% higher.

On top of the infrastructure and construction costs, an entirely new community requires new allocations in the national budget for maintenance purposes.

There is also the cost of exploiting yet more open areas. No efficient way has been found to accurately calculate that cost, however.

The results of Zenovar-Oved Gubi's research have been presented by planning authorities to the Housing Ministry, during discussions of plans to build new towns. However, the company itself stresses that its research take the place of a thorough, professional economic cost-benefits study - it is a first step, no more.

In any case, notes the consultancy, it's time to stop basing declarations on the merits of building new towns and formulating policy on unchecked assumptions.