A new government comes with a new subsidized housing program: last week, Minister of Housing, Ze’ev Elkin, announced the renewal of the Target Price plan (mechir matara), which was briefly implemented in 2014. As part of the program, thousands of apartments are expected to be sold each year at a 20% discount relative to the market price. While 60-65% of all apartments built on State Land will be part of this plan, it will not be implemented in “luxury areas” such as Tel Aviv and Herzliya.
Less than two months after the inauguration of the new government, and against the background of a sharp rise in housing prices, Minister of Construction and Housing, Ze’ev Elkin, announced the launch of a new subsidized housing program for first-time homebuyers – the Target Price plan. This announcement came after reaching an agreement with the Ministry of Finance as part of the discussion surrounding the State budget. Through this plan, thousands of apartments will be sold each year to eligible buyers at a discount of up to 20% off the market price.
Since the Target Price plan was actually first approved at the end of 2014 by then Minister of Housing, Uri Ariel, this is actually the renewal of an old program. However, the initial approval of the plan coincided with the fall of the government, so it was implemented for a very brief period of time and only in the cities of Rosh HaAyin and Modi’in. In 2015, it was replaced by former Finance Minister Moshe Kahlon’s Buyer’s Price program (mechir l’mishtaken).
Through the renewed plan, a significant percentage of all apartments built on State Land will be sold at a discounted price to eligible buyers: 60% of new apartments in areas of demand and 65% in the periphery. However, similar to the Reduced Price plan initiated by former Minister of Housing, Yaakov Litzman, the Target Price plan will not apply at all in areas defined by the State as “luxury areas,” including Tel Aviv, Herzliya, and Ramat Hasharon.
The plan is set to be implemented immediately, beginning the Israel Land Authority’s upcoming land tenders in Ashkelon, Beer Yaakov, Ashdod, Yehud, Kiryat Gat, Beer Sheva, and Jerusalem, where discounts of 20% of the average apartment price will be granted.
Lower discounts than the Buyer’s Price plan
So how does the plan work? Similar to the Buyer’s Price plan, Target Price is also expected to offer thousands of subsidized apartments to first-time home buyers, but through a different model. In the Buyer’s Price plan, the State determined the price of the land, and developers then presented bids, offering the lowest possible price to apartment buyers; whoever offered the lowest price won the tender. In the Target Price program, however, the State is expected to predetermine the final price for the apartment in each area and region, and the winner of the tender will be the developer willing to pay the highest price for the land, given the already-decided price of the apartment.
For potential buyers, this means that the apartments will still be discounted when compared to the market price, but far less than under the previous plan. Housing units will be offered to eligible buyers at a discount of 20% of their market value, with a maximum of up to NIS 300,000 per apartment. In contrast, under the Buyer’s Price plan, buyers were able to get subsidies of close to NIS 1 million for apartments in Herzliya and Kiryat Ono.
Buyers cannot sell for five years
Despite the differences between them, the two programs have a lot in common: the required building specifications formulated by the Ministry of Housing for the Buyer’s Price apartments will also apply to those purchased under the Target Price program, and the lottery among eligible buyers will remain the same, as will the criteria for eligibility. The plan is open to single people aged 35+ and married couples of any age that have not had an apartment or part of an apartment registered in their names in the last ten years. Buyers are not permitted to sell the apartments for the first five years, but they are allowed to rent them out.