New government rental plan: Incentives for landlords offering 5-10 year leases

This was revealed today (Monday) by the Ministry of Housing’s Director-General Yehuda Morgenstern during a conference held by the Israel Chamber of Real Estate Appraisers in Tel Aviv. He stated that institutional rental projects “must continue, but we must evaluate where they work and where they don’t.” Knesset Interior Committee Chair MK Yaakov Asher added, “If a public body fails to respond to a permit request within a certain time, we’ll consider it silent approval to proceed.” Chamber Chair Nechama Bugin criticized current expropriation compensation policies as “outrageous.”

Morgenstern, Director-General of the Ministry of Construction and Housing, revealed parts of the government’s plan to encourage the long-term rental market currently being developed by the ministry. Speaking at the “Israel Valuation 2025” conference organized by the Israel Chamber of Real Estate Appraisers in Tel Aviv, Morgenstern indicated the plan assigns a significant role to private landlords renting their properties annually, proposing incentives for offering long-term rental contracts. His remarks came amidst recent headlines about the Ministry of Housing’s opposition to continuing institutional rental tenders in their current form.

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“Rental housing must happen,” Morgenstern said during an interview with “Yedioth Ahronoth” journalist Ori Hudi. “A third of the population lives in rentals. Less than one percent of these are institutional rentals. Over a decade of zero interest rates, we managed to produce tenders. By May 2023, tender failures started piling up. We sat at numerous roundtables to defy the physics of interest rates and find solutions. The state’s lost revenue from those institutional rental units is estimated at NIS 1.5 billion.”

“In rentals, people want stability and long-term living security, regardless of whether they rent from a company or an individual. One of the aspects of our plan is transforming private rentals into long-term rentals. We can create stability with the right incentives for landlords offering 5-10 year leases. This is one of the measures that will be included in the government plan, which the minister will present to the government in the coming weeks.”

Morgenstern added, “Institutional rentals must continue, but we must evaluate where they work and in what mix. It’s not enough to implement institutional rentals. In examining the rental market, whether permanent or not, we met local authorities and discussed brownfield lands. There is significant potential for permanent rentals in municipal and private lots here.”

MK Yaakov Asher: The upcoming Arrangements Law will address ‘silent approvals’

MK Yaakov Asher, Chair of the Knesset Interior Committee, criticized the inexperience of senior government officials in leading ministries, particularly the Ministry of Finance. “Many officials have never conducted appraisals or worked at the local level, yet they propose laws that don’t align with reality. I say this both as a critique and a recommendation.”

Asher detailed significant amendments being introduced by his committee in the upcoming Arrangements Law, focusing on silent approvals. “If a governmental body fails to respond to a construction permit request within a set timeframe, it will be considered approved, allowing progress. We cannot allow bodies like the Electricity Company to ignore requests.”

Asher also addressed expanding the powers of the National Licensing Authority, which began under the previous Arrangements Law: “If regional or local committees delay approvals, the National Licensing Authority will step in to expedite processes.”

Finally, Asher criticized the implementation of the “Discounted Apartment” program, saying, “People who won lotteries three or four years ago still don’t have building permits for the apartments they ‘won.’ Such delays harm Israel’s economic capacity and its population.”

Arbitrating Appraisers for Urban Renewal Processes

The Chairperson of the Chamber of Real Estate Appraisers, Nechama Bugin, spoke during the conference and stated: “Our annual conference is titled ‘Valuation for Israel 2025.’ The impact of the war expenditures and its consequences are evident in the Israeli economy. I want to emphasize the national need to transition to an accelerated growth process. There are critical tasks in the field of national infrastructure, especially in real estate, that the government must advance promptly to bring growth to the Israeli economy. But above all, the primary goal the government must adopt is unity. It is impossible to drive a quality, productive economy from a state of division—it simply does not work.”

Bugin addressed the Chamber’s activities, mentioning that concerning Standard 21, which is used for urban renewal initiatives, the Chamber is engaged in dialogue and is working on a mechanism to regulate discussions about Standard 21. “We are all experiencing situations today where opinions are submitted by Standard 21 to the local committee, but there is no consensus between the parties. The committee’s appraiser, which is his right, does not accept all the components, but no structured process ultimately leads this whole wagon to a resolution. The process we are currently working on is a regulated procedure between the parties that sets a timetable and stipulates that the arbitrating urban renewal appraisers appointed some time ago by the Urban Renewal Authority can also serve as arbitrators for Standard 21 purposes.”

Bugin also revealed that a team of veteran appraisers engaged in financial consulting is “working on creating a construction cost pricing guide that will be accurate and updated to reflect the current reality in possibly the most comprehensive way ever done. I believe this tool can greatly assist all of us—both the committees and the appraisers working with the committees—to genuinely reach agreements on this matter and streamline the processes.”

Another significant process currently underway, described as one of the most critical priorities, is the Israel Land Authority (ILA) appeals committee. “There is a fundamentally problematic situation where the appeals committee, which is supposed to review appeals regarding ILA appraisals, derives its authority, powers, and work procedures from the decisions of the ILA itself. This is unacceptable and must be corrected. There is also an issue with the committee’s authority. When we need to file appeals against ILA appraisals, we must manage a separate legal process, a separate appraisal process, and even a separate process for development costs.”

In conclusion, Bugin noted that “expropriation compensation in Israel is a scandal. It is inconceivable that a person whose property was expropriated for public purposes would ever receive the compensation they are entitled to. First, they have to pay taxes on the compensation; then they are directed to file a claim under Section 197; then there are numerous bureaucratic hurdles. Under the current legal framework, a person can’t receive fair compensation. This is something that must be changed.”

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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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