Government may extend TAMA 38 following Operation Guardian of the Walls

A week and a half of rocket fire has called into question one of the most significant reforms the government has tried to implement in the field of planning and construction: repealing TAMA 38 and replacing it with another urban renewal plan. 

TAMA 38 is currently the main program through which old buildings in Israel are renovated. In 2019, the government announced that the program would expire in October 2022. Over the past two weeks, however, the Israeli press has revealed that the Ministry of Finance is now working hard to postpone the cancellation date, alongside the Israel Builders Association, which has led an aggressive campaign demanding that the State continue the program and extend TAMA 38. 

Meanwhile, the Israel Planning Administration, the professional body entrusted with formulating Israel’s planning policy, is still committed to wrapping up TAMA 38 on the appointed date. However, as pressure from the Ministry of Finance increases, so do the chances that the expiration date will be postponed.

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The goal of TAMA 38 is to reinforce old buildings

TAMA 38 was first enacted in 2005 to protect old buildings against earthquakes. The underlying principle of the plan is that the contractor receives the rights to build two new floors on top of the old building, containing apartments that will be sold to fund the renovation – including the addition of a safe room (mamad), a room built from reinforced concrete which serves as a shelter from rocket attacks. All new apartments constructed in Israel are obligated by law to include a safe room. Through the TAMA 38 program, both the residents and the State benefit from increased security, without either party having to bear the financial expense of such a renovation. 

Approximately 60% of apartments in Israel do not have safe rooms

Throughout Operation Guardian of the Walls, the Israeli media dealt extensively with the fact that even today – 28 years after the law required all new apartments to include a safe room and 16 years after the start of the TAMA 38 program – approximately 60% of apartments in Israel still do not have safe rooms. 

This is obviously perceived as a failure of TAMA 38, which has been implemented mainly in central Israel, where it is more financially viable for contractors due to the high value of the land, as opposed to down south where there is greater need for protection from rockets.  

While this statistic is often used as an argument for why TAMA 38 needs to be replaced by a new plan that will better serve Israel’s peripheral regions, the Israeli public largely supports extending TAMA 38 in order to reinforce more buildings across the country.

Contractors and officials working to prevent the repeal of TAMA 38 claim that although it is a problematic plan, it is the best available at the moment, especially when compared to pinui-binui (literally, evacuation-construction). This refers to another urban renewal program, which is riddled with bureaucratic obstacles. Significantly fewer apartments have been built through pinui-binui than TAMA 38. 

There are both political and economic reasons to consider extending TAMA 38

Another factor that must be taken into account is that Israel’s political system has been in complete chaos for more than two years. The complex and lengthy legislative process required to implement a replacement plan requires the backing of a stable government. Therefore, according to the sources in the Ministry of Finance quoted in the Israeli press, repealing TAMA 38 right now may actually make it even more difficult that it currently is for the State to defend its citizens.  

In addition to the security factor, there is also a basic economic argument. Despite its shortcomings, TAMA 38 has supplied the market with many new apartments. Over the past few years, an average of 5,000 new apartments have been built each year through TAMA 38, almost all in areas of high demand, including Tel Aviv, Ramat Gan, Givatayim and Herzliya. With real estate prices back on the rise in the past six months, the Ministry of Finance fears that repealing TAMA 38 will limit supply and lead to an even greater jump in prices.

The Israel Builders Association is pressuring the government to postpone the expiration date

The policy change came following an aggressive campaign led by the Israel Builders Association (IBA) – the largest organization representing contractors in Israel. Immediately after the start of the violence, the organization began calling for the implementation of more TAMA 38 projects in order to reinforce apartments and add safe rooms that would protect the citizens of Israel. The IBA published large ads in newspapers and conducted multiple media interviews to bring this issue to the awareness of the public. 

extend TAMA 38
An ad that was published in Yedioth Ahronoth (with permission from the IBA)

On Friday, May 14, just four days after the fighting began, the Israel Planning Administration (IPA) issued a statement condemning the campaign: 

In the last few days, we have witnessed a cynical exploitation of the security situation in Israel by parties interested in extending TAMA 38 only due to economic considerations that serve their own interests. These parties are not concerned with the wellbeing of the citizens of Israel, as they know full well that TAMA 38 failed because it was implemented mostly in the center of the country, where it was more financially worthwhile for contractors. The “success” to which the contractors are referring is the strengthening of 1% of all buildings that need reinforcement in Israel over the course of fifteen years! In order to defend the entire population, we need to find another solution that will provide optimal protection for all Israeli residents.

Raul Srugo, President of the Israel Builders Association, issued a press release in response a few hours later:

During this time, when terrorist organizations are launching thousands of missiles throughout the country, it is clearer than ever just how ludacris, irresponsible, and blindsighted it was for the National Planning and Building Council to decide in late 2019 that TAMA 38 would expire in October 2022. The purpose of the project is to build safe rooms and reinforce buildings against missile attacks and earthquakes. Unfortunately, many in our midst seem to think that those who are responsible are not guilty, and those who are guilty are not responsible. Those in positions of authority are not being held accountable, and the citizens of Israel are paying with their lives.

Now that there is a ceasefire, it will be interesting to continue to monitor the debate over the future of TAMA 38. While there is no final decision yet, every day that passes without a functioning government increases the chances that the program’s expiry date will indeed be postponed, since it is currently not possible to advance a replacement law. Whether Israel is moving toward a fifth election within two years or will somehow manage to form a government, despite the political chaos, will have a significant impact on the future of TAMA 38.

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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