What do the upcoming elections in Israel mean for the housing sector?

With housing prices back on the rise over the past year, identifying key decision-makers in the housing sector will have a major impact on the economic situation of the Israeli public in general, especially first-time home buyers. A review of the main political parties shows that many of them propose reforms that relate to the ​​long-term rental market. There is even a party that aims to completely shut down the Ministry of Housing and Construction. As citizens of Israel head to the polls next week for elections, let’s take a look at the proposals of each of the main parties with regard to housing.

The upcoming elections in Israel will call citizens back to the polls on March 23 for the fourth time in the last two years. Israelis will, yet again, elect their representatives, with the hope that, perhaps this time, the Knesset will manage to swear in a government that will last. Although the issue of Israel real estate is not at the heart of the agenda, the elections are taking place at a critical time for the housing market. After several years in which the government managed to curb rising housing prices, the last few months have seen the development of conditions that will undoubtedly lead to an increase in apartment prices. With a 4% rise in housing prices over the last year, we have already seen the beginning of this trend. 

In the following article, we present the position of each of the main parties running in the Israeli elections vis-à-vis housing. It should be noted that about half of the parties have not published an official policy or plan on the subject, and in such cases, we have relied upon other sources of information, such as media statements and a review of the activities of the current representatives over the past year. 

Likud — encourage demand for housing, protect the construction industry

Israel’s almost-eternal ruling party has not yet presented a housing position, nor has it responded to inquiries from the media on the subject. It is interesting to note that, throughout his years as prime minister, from 1996 until today, Benjamin Netanyahu has always entrusted the housing portfolio to coalition partners, and in none of his five governments has he appointed a Minister of Housing and Construction from his own party. There have also been very few incidents in which Netanyahu himself has intervened to influence policy in this sector.

Nevertheless, Likud’s current approach to housing can be learned from the agenda pushed by Finance Minister Israel Katz over the past year. Katz was the first finance minister in a long time that did not define housing prices as a problem that needed to be fixed. Against the backdrop of the Covid-19 crisis, it was more important to him to encourage demand for housing, presumably based on a fear that a slowdown in an industry as significant as the construction industry would have a negative effect on the entire economy. 

The most significant move he made in this area was reducing the purchase tax for those buying apartments for investment purposes, thereby encouraging investors to return to the market in challenging times. This policy proved to be successful; since the tax reduction in July, we can, once again, see the presence of investors in the market, and both the demand for apartments and their prices are back on the rise.

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Yesh Atid — elections for a sophisticated program for a long-term rental market in Israel

Ahead of the upcoming elections in Israel, Yesh Atid published a comprehensive housing plan that aims to continue some of the initiatives promoted by party chairman Yair Lapid during his tenure as Finance Minister and Chairman of the Housing Cabinet in 2013-14.

At the center of the platform is the continuation of the “Apartment for Rent” project, in which the State will work to establish a sophisticated governmental institution responsible for a long-term rental market of 150,000 apartments. This initiative includes expanding the activities of the governmental body established by Lapid for this purpose, allocating 40% of all apartments built on state land for long-term lease, providing tax benefits to developers operating in the industry, and subsidizing building projects in the periphery and the Arab sector to increase economic viability.

When it comes to the purchase of new apartments, the party did not present new initiatives, but committed to upholding all the agreements signed so far as part of the Buyer’s Price (Mechir LeMishtaken) and Housing at a Reduced Price (Mechir Mufchat) programs. 

In regards to planning, Yesh Atid intends to reduce the activity of the Committee for Preferred Housing Complexes (Vatmal), a body established in Lapid’s days to deal with the shortage of housing supply by ensuring the rapid planning of large residential complexes with thousands of apartments. According to the party, from now on they will focus exclusively on urban renewal.

Yemina — reduce government involvement in the housing sector

Three weeks ago, the right-wing party presented their housing platform, entitled “Ayelet Shaked’s Housing Plan,” referring to the former Minister of Justice and #2 on the party’s list for the Knesset. The plan proposes far-reaching liberal reforms to reduce government involvement in the housing sector and transfer a large part of its functions to private bodies.

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The most prominent section calls for the dissolution of the Israel Land Authority (ILA), which currently manages all state-owned land (93% of all Israeli territory within the Green Line) – referring to the organization as “a central body suffering from extreme inefficiency.” The plan proposes outsourcing land management to private companies that will be monitored and measured according to performance and satisfaction metrics. The companies will be appointed and supervised by the Ministry of Housing —  which will also be shut down, becoming a sub-ministry subordinate to the Ministry of the Interior. 

Yemina also aims to gradually abolish the public housing currently offered to low-income populations, shifting to a model based exclusively on rent assistance. In order to deal with the housing crisis, the plan encourages developers to convert office buildings into residential apartments without any limitations.

New Hope — assistance for non-homeowners, urban renewal in the periphery, a long-term rental market, and reduced government involvement.

Led by Gideon Saar, New Hope is committed to “a national plan for a first apartment” that will provide assistance to Israelis looking to purchase their first home in a market with very high prices that are constantly on the rise. The platform does not specify the details of the plan, but seems to be referring to something similar to the Buyer’s Price program initiated by former Finance Minister Moshe Kahlon.

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The party also intends to enable urban renewal in the periphery, which has not had any plan of this kind up until this point due to a lack of economic viability. New Hope even set a numerical target to fulfill this goal – to renovate 5,000 buildings in remote regions in the country within 5 years.

When it comes to the long-term rental market, the new political party has a goal to create a supply of 75,000 long-term rental apartments within 10 years. The party’s platform for the next elections in Israel also aims to reduce government regulation in construction and licensing and shorten the time limit for issuing a building permit by 30%.

Yisrael Beiteinu — encourage heavy financial investment in the long-term housing market, develop social housing projects for immigrants 

While Yisrael Beiteinu’s platform includes an economic component, it has almost no reference at all to the housing sector. Articles published in the media about the party state that it aims to strengthen the long-term rental market by providing incentives for financial bodies – such as pension and insurance companies and other funds – to invest in the field and increase construction.

In the past, Yisrael Beiteinu, headed by Avigdor Lieberman, has requested the Immigration and Absorption portfolio in the governments in which it took part. One of their motivations is to increase social housing projects for immigrants from the lower socio-economic class.

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United Torah Judaism — elections to provide assistance to first-time homebuyers in Israel

The United Torah Judaism (UTJ) party, which represents the two main streams of the Ashkenazi ultra-Orthodox public in Israel – Hasidim and Haredim, has not yet published a housing position ahead of the upcoming elections. However, since the current Minister of Housing and Construction, Yaakov Litzman, was elected on its behalf, it is fair to assume that UTJ will continue to promote its current policy.

Litzman has aimed to provide assistance to first-time homebuyers in two ways: residential land tenders in which the winning contractors are obligated to offer reduced prices to first-time buyers, and a monetary grant to those buying their first home in the peripheral regions of the country. In both cases, the Israeli economic press has accused  Litzman of applying these benefits specifically in areas popular among the ultra-Orthodox sector.

Shas — increasing assistance to the weaker sectors of society

Leading up to the elections, the Sephardic ultra-Orthodox party has also not yet published an organized agenda on the issue of housing in Israel. The press has released vague, general statements such as “accelerating residential construction in the center and periphery and ensuring a fair final price for young couples.” 

A review of its policy over the years shows that Shas has traditionally supported increasing assistance to the weaker sectors of society, from which most of its voters come. Like United Torah Judaism, Shas often works to increase housing benefits specifically for those from the ultra-Orthodox sector.

Labor — rent regulation in the private market, increase public housing and improve public transportation between the center and periphery. 

The party that led Israel in the first decades of its existence and has weakened in the last 20 years does not offer a significant plan to lower housing prices. However, Labor presents clear goals regarding the rental market, where it seeks to increase regulation on apartment renters in the private market, in line with the “Fair Rent Act,” initiated by the party in 2014. 

The party also wants to increase the pool of public housing apartments, which has shrunk by about 50% in the last 20 years. Finally, Labor aims to improve public transportation connecting the center and the periphery in order to reduce the demand for housing in the highly populated and expensive central region of the country.

The Religious Zionist Party — expand construction in Judea and Samaria and the periphery and improve public transportation to reduce demand in the center.

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The right-wing party led by Bezalel Smotrich cites the expansion of construction in Judea and Samaria and the periphery as the main way to reduce housing prices in Israel. Ahead of the elections, the party also seeks to significantly increase investment in public transportation in order to shorten the commute between the periphery and the center.

Meretz — budget construction and affordable housing, fair rent authority, and property tax on investment properties

The left-wing party has presented a comprehensive housing plan in line with their social-democratic values. Among other things, the plan includes constructing hundreds of thousands of housing units with full funding from the State in order to increase supply. Known in Israel as “budget construction,” residential construction from the State budget was very common in Israel until the 1970s. 

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The party also proposes to require that a certain percentage of units in each new construction plan be reserved for affordable housing and to significantly expand public housing reserves.

When it comes to rentals, Meretz supports strengthening the long-term rental market by establishing a “Fair Rent Authority” that will protect the rights of tenants in the private market and supervise rent collection. 

Blue and White — increased housing and infrastructure in the periphery

Benny Gantz’s party has not published an organized housing plan ahead of the elections in Israel. Blue and White’s platform includes a fairly general statement about increasing the supply of apartments, especially in the periphery, while upgrading the infrastructure in these areas, including employment, education, and leisure.

As the elections in Israel draw close, each party’s housing agenda and the effect it could have on the sector remains vague. What is clear though is that the question of whether the next government will commit to moderating housing prices or ignore the issue altogether is likely to have a dramatic impact on both home buyers and the various players in the industry — especially contractors.

The contents of this article are designed to provide the reader with general information and not to serve as legal or other professional advice for a particular transaction. Readers are advised to obtain advice from qualified professionals prior to entering into any transaction.

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