A major dispute has erupted in the Israeli government over continuing the long-standing “Discounted Housing” (Dira B’Hanacha) program, which provides affordable homes to young couples and reservists. Finance Minister Bezalel Smotrich demands that 50% of subsidized units be allocated to reservists, threatening to block the program’s renewal unless his condition is met. Housing Minister Yitzhak Goldknopf opposes this change, warning that halting the initiative could harm Israel’s real estate market, which shows signs of recovery. The decision has been delayed by two weeks as tensions remain high.
The Discounted Housing program, Dira B’Hanacha, has operated for over a decade, providing discounted apartments through public lotteries. To date, approximately 130,000 households have benefited from it. Its legal authorization expired at the end of 2024, necessitating government action to renew it. However, the push to extend the program’s mandate has encountered fierce resistance from the Finance Ministry, led by Smotrich.
Reservists vs. Broader Public Access
Housing Minister Yitzhak Goldknopf, who also chairs the Israel Land Council, convened the council this week to approve the program’s extension. Despite a strong majority in favor, Goldknopf was forced to postpone the vote for two weeks after Smotrich refused to support the extension without a significant change in the allocation criteria. Currently, around 25% of units are awarded to reservists, with a 20% preference built into the existing framework. Smotrich is demanding this be increased to 50%.
Goldknopf has vocally criticized this stance, arguing that halting the program would harm Israel’s real estate market, which he claims shows signs of recovery. “Despite the situation, housing starts and transaction volumes are at a peak, land prices are declining, and our task is to increase deals and construction starts by 15%,” he said. He also emphasized that no alternative plan has been presented by the Treasury, accusing Smotrich of opposing the extension “without reason.”
Smotrich’s Perspective: Rethinking the Program Entirely
For Smotrich, the issue goes beyond reservist benefits. His ministry has criticized the entire structure of the Discount Housing initiative. Deputy Budget Director Matan Yagel labeled it as inefficient and inflationary, claiming that it artificially boosts demand, drives up home prices, and misallocates state resources. He argued that subsidies should be means-tested, based on income and military service, rather than distributed through what he called a “random lottery.”
Yagel further suggested that housing support should focus on Israel’s periphery—particularly the north and south—in light of wartime pressures rather than offer deep discounts in the country’s more desirable central regions. “Why would a young couple move to Kiryat Shmona if they can get a better discount in the center of the country?” he asked, suggesting the program’s format should be dramatically reduced or abolished.
Netanyahu in the Middle
Prime Minister Benjamin Netanyahu, who presided over a meeting of ministers to discuss the matter, has delayed any decision. Although he has not taken a definitive stance, Netanyahu reportedly instructed that no vote be held until further discussion is completed. Smotrich’s message remains clear: “No program will move forward until 50% of the units are allocated to reservists.”
Implications for Israel’s Real Estate Market
Beyond the political battle, stakeholders in the housing sector have expressed concern about the uncertainty. Real estate professionals warn that prolonging the program’s suspension could stall development projects and worsen housing shortages. Critics of the Treasury’s position claim that instead of focusing on undermining existing initiatives, the ministry should prioritize increasing housing supply by releasing more land and facilitating long-term rental options.
At the same time, some market analysts side with Smotrich, noting that deeply discounted housing units—sometimes 40% below market value—create distortions and burden the broader public, which continues to pay high prices.
With the next vote scheduled for mid-April, both sides appear entrenched. Goldknopf is confident he has the support needed to renew the program in its current form, while Smotrich is using his leverage to push for a shift that prioritizes Israel’s reservists. As the government grapples with broader housing challenges, this standoff could have far-reaching implications for the future of subsidized housing in Israel.
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