Without Building a Single Unit: The Housing Crisis Solution Already Exists

While approximately 85,000 new apartments await buyers and more than 100,000 households compete for only a few thousand discounted units, the state can convert thousands of apartments that have already received occupancy permits into long-term rental housing. Such a move could expand supply, curb rising rents, and ease inflation. A guest column by the Chairman of the Contractors and Builders Association, Tel Aviv and Central District.

Written by Amit Amit Gottlieb for Nadlan Center

Israel’s housing market currently presents a picture that seems almost impossible: according to the Central Bureau of Statistics, there are approximately 85,000 new apartments in Israel awaiting buyers, while at the same time more than 100,000 households registered for the latest “Discounted Home” lottery, which will include only around 8,000 units. On the surface, this appears to be a contradiction, but in practice it signals above all that housing demand has not disappeared — it has simply been deferred.

Young families continue searching for housing solutions but struggle to reach the point of purchasing an apartment due to high interest rates, financing costs, and prices that require substantial equity in the open market. When purchasing an apartment becomes less accessible, the public turns to the natural alternative: the rental market. But there too supply is limited relative to demand, and the outcome is predictable: rental prices continue to rise.

This increase carries significance that extends well beyond the family budget. The rental component accounts for roughly a quarter of the Consumer Price Index, meaning every change in rental prices directly affects inflation and, in turn, the Bank of Israel’s interest rate decisions. The rental crisis is not only a social issue — it is also a macroeconomic issue that affects the entire economy.

Israel’s housing market currently presents a picture that seems almost impossible, but within this data lies a solution that can be implemented almost immediately. Of the approximately 85,000 unsold apartments, an estimated 15,000 to 20,000 have already been completed, received occupancy permits, and are ready for immediate occupancy.

Within this data lies a solution that can be implemented almost immediately. Of the approximately 85,000 unsold apartments, an estimated 15,000 to 20,000 have already been completed, received occupancy permits, and are ready for immediate occupancy. A significant portion of this inventory is located precisely in Israel’s high-demand areas and most major cities: Jerusalem, Tel Aviv, Bat Yam, Ramat Gan, Petah Tikva, Netanya, Rishon LeZion, Rehovot, Ashdod, Ashkelon, Beit Shemesh, Bnei Brak, Haifa, and more. These are cities where housing demand has remained high and stable over time.

A Move with Benefits for All Parties

Instead of waiting many months for apartments to sell, the state can enable developers and contractors to convert part of this inventory into long-term rental housing for periods of five to ten years. In return, tax benefits and regulatory relief can be granted, similar to mechanisms that operated in the past under the Capital Investment Encouragement Law, which led to the construction of long-term rental units. A mechanism that worked excellently and produced a substantial number of units available for long-term rental at regulated prices.

This is not a subsidy of the sector, but rather a move that creates benefit for all parties. Renters will benefit from expanded supply and certainty, with rental prices set in advance for the long term, generally lower than market rates. The state will gain from curbing inflationary pressures, from the continued activity of developers in advancing additional projects and thereby expanding future housing supply, and developers will be able to convert frozen inventory into income-generating assets, improve their financial standing, and gain breathing room to enter additional tenders.

Renters will benefit from expanded supply and certainty, with rental prices set in advance for the long term. The state will gain from curbing inflationary pressures and the continued activity of developers in advancing additional projects, thereby expanding future housing supply, while developers will be able to convert frozen inventory into income-generating assets and improve their financial standing.

A mechanism for rental price oversight can be established, and consideration can be given to granting priority to reserve duty soldiers. In this way, the state would combine an efficient economic solution with recognition of populations that bear the security and civic burden. For example, determining in advance that approximately 50% of these apartments would be designated for reservists. If desired, the scope can be broadened to include education and medical staff among those given priority.

The great advantage of this move is its immediacy. Unlike other plans, there is no need to wait for master plan approvals, land tenders, or construction completion. The apartments and infrastructure exist, and a significant portion of them can be occupied in a short time.

Israel is currently grappling simultaneously with the cost of living, a shortage of rental housing, all within the geopolitical situation we are in and an election period approaching. It is not always the case that a single solution can address several problems at once. The inventory of unsold apartments does not have to be a problem — it can become part of the solution.

Addressing Israel’s housing crisis does not require more committees, more plans, or more years of waiting. Part of the solution is already built, with occupancy permits in hand, waiting for residents. What is needed now is primarily a decision and the courage to make it on the part of decision-makers.

The author is Chairman of the Contractors and Builders Association, Tel Aviv and Central District, and Deputy President of the Contractors Federation.