Sunday, October 05, 2014

The Solution for Israel’s Housing Shortage

By Moshe Feiglin

It is becoming more and more difficult to attain housing in Israel. Here are some interesting statistics: In 1984 – thirty years ago – Israel’s GNP was 30 billion dollars. Today, it is 300 billion dollars. Back in 1984, the average income per person was $7,000, while today it is $38,000.
Sounds wonderful.
But take a look at the next statistic: In 1988, approximately 60 average salaries were needed to buy an average 4 room apartment in Israel. For the same apartment today, one would need 144 average salaries.
In other words, we are producing 10 times more than in the 80’s. We earn 5 times more and nevertheless, we must work more than twice as much in order to buy an apartment.
First of all: Lack of Space
The first reason for the housing crisis is because in the early nineties, Israel stopped building in Judea and Samaria. Land reserves in Israel’s pre-1967 borders are practically depleted. Those who think that there are land reserves in the Negev are mistaken. Although the Negev looks large and empty, it is mostly occupied by the army, illegal Bedouin settlement, infrastructure and green areas. With the current (blessed!) population growth trend, Israel needs 70,000 new housing units annually. That is more or less like a new Ramat Gan every year. Add to that the million and a half new olim (immigrants) expected to arrive in Israel over the next decade, with G-d’s help, and we have a serious shortage on our hands. There is nowhere to put all of this new housing, and there is already talk of building into the sea…
At the present pace and the existing construction plans, our children will have nowhere to live. We can close the country in two decades, or choose the Hong Kong option and live in one-room apartments in skyscrapers, which would only put the problem off for a short while.
When there is no land, the price of available land rises. That is very simple. As soon as we admit to ourselves that this is our Land and once again build in Judea and Samaria, the housing market – particularly in Israel’s central region – will regain its sanity. A large city like Modi’in that would be built in the foothills of the Talmonim region, 10 minutes from the Ben Gurion Airport, would relieve the pressure from greater Tel Aviv and lower housing prices. Israel must immediately plan and build these types of cities all along the western foothills of Judea and Samaria.
The second problem is that within Israel’s pre-1967 borders, the situation is fundamentally flawed. The State of Israel owns approximately 90% of the land reserves within those borders, an effective monopoly. It makes no difference that it is the State that holds these lands and not a private company. The monopoly dramatically raises the price of land for construction. The solution is to privatize, or more precisely – to return – the land to the nation. (To the nation – not to controlling interests!) Israel must introduce a process of registration of parcels of land to its citizens, (by lottery according to criteria to be established) and to allow the market forces to determine the price.
The third problem, of course, is the bureaucratic monster that stands in the way of anybody who requires a building permit. The wait for the permit can take as long as 15 years!
Until now, Israel had focused its attention on the third problem or on magic solutions like 0% VAT. As important as these solutions may be, nothing will fundamentally reduce the price of housing without solving the land reserves and state monopoly issues.
The solution for the housing problem is to restore the national lands to the nation on both the personal and national level.

1 comment:

Axel Berger said...

One question: There is and always has been a general world-wide tendency to build mostly on prime agricultural soil, because those areas are the ones where people settle first. What do you propose to ameliorate that problem?