We were slaves to housing prices – and we still are
TERRA INCOGNITA
In early April housing minister Yoav Galant said he was no longer trying to lower housing prices. During the election campaign in January 2014 both Zionist Union and Kulanu fought over the importance of reducing housing costs. Various schemes were advanced, such as providing “free land” to developers. Discussions focused on reducing the price of housing by 15 percent by 2017, or reducing apartment costs by 25%. Now the politicians have faced reality: a massive reduction in housing prices is not only impossible due to a lack of increased supply of housing, but also because it would cause a financial crisis among existing homeowners that would have ripple affects across the Israeli economy.
So. The people will remain slaves to the unaffordable housing costs, a cogent lesson considering the upcoming Passover holiday.
My office is located down the street from two new luxury housing projects. In one of the poorest cities in Israel, luxury towers are mushrooming. It is visible evidence of the problem people face across the country. When developers have a chance to build a new building, they opt for the highest and best use, which is to sell to wealthy foreigners and immigrants or to the wealthiest Israelis.
Housing reform was supposed to have been a priority since the 2011 social protests. However because of the nature of the coalition government, those parties that ran on platforms devoted to aiding young middle-class couples afford housing are always absorbed into large coalitions that merely pay lip service to the needs of young people. Even simple reforms, such as Galant’s decision to have foreign firms bid on construction, face hurdles. Ideas such as rent control are put forward and then never materialize.
Bloomberg mocked how Israelis are held hostage to the housing market’s inefficiency by noting, “In country of top scientists, no one can fix housing market.” The measures proposed to support “public housing” tend to be a drop in the bucket. In February the Public Housing Forum, an advocacy group, noted that there were some 170,000 people in need of assistance, while the Housing Ministry was talking about fast-tracking help to 2,700. The Roman emperor Nero fiddled while Rome burned, but in Israel it’s more like fiddling while people are slowly, grindingly, driven into penury. A recent article in Globes noted that in the major cities Tel Aviv, Rishon LeZion, Netanya and Modi’in were all seeing price rises, not reductions, or even stagnation. Want a four-room apartment, the minimum required by a young family, in Tel Aviv? NIS 3 million.
Israel is facing a catastrophic catch-22 when it comes to housing. More government programs for public housing tend to be bureaucratic and create a reliance on government. Attempts to reduce housing prices can harm the economy, the very livelihood of the young couples and renters who make up 28 percent of households and who want to buy an apartment.
How did we get here? How did Israel fail so miserably to provide the environment that would empower its people to live a dignified life with an affordable home? Every country has housing markets that are unaffordable. In San Francisco you’d have to earn $115,000 a year to buy a home, far more than more people earn. In London average salaries are a quarter of what is needed to buy a home. But Israel’s eight million people could fit into the population of Greater London or the San Francisco Bay Area; whereas residents London can escape the confines of their skewed housing market, Israelis are trapped. Some young Israelis get financial assistance from relatives, driving families into financial distress, but this is living on borrowed time and borrowed money. The only economic solution for some is to leave the country.
There is evidence that many young professionals in Israel have considered leaving the country or have already left. This is particularly true of descendants of the founding generation. Avirama Golan noted in a 2014 article that “many among you have already managed to find yourselves a foreign passport and a sought-after occupation. Many of you have done well abroad.” The iconic Israeli journalist Uri Avnery noted in a recent column, “Almost all of my friends have sons and daughters living abroad.” Anecdotal evidence reveals that some of the best and the brightest, especially those needed to form a muscular middle class, are leaving, and those abandoned to stay behind are the poorer people and wealthy elites or tourists who can afford housing.
The inability to address the housing crisis is part of the DNA of the Israeli political mentality which generally prefers putting Band-Aids on long-term problems rather than rocking the boat and tackling them. The problem is that it may be too late to address some of the systemic problems. Here are some of them:
A city state
Israel is becoming a one-city state, in which the largest city (Tel Aviv) has a majority of the population. Currently Israel’s largest metropolitan area has 47% of the urban population. In terms of population concentration in a single city, at 27th in the world Israel has similarities with Senegal, Armenia or Egypt. A healthier situation would be to have a larger percent of the population in the Negev, where there is ample land, but planning policies have strangled outlying cities and have focused everyone on Tel Aviv.
A failure to redistribute failed agricultural land
A strong agricultural and environmental lobby has encouraged extreme bifurcation between cities and small, bucolic agricultural communes with acceptance committees that do not develop naturally. The barriers of entry to the rural areas create two classes of people and two classes of development. This is not an accident. Zionist planners of the 1950s adopted German geographer Walter Christaller’s rank-size Central Place Theory which believed society could be organized perfectly by planning efficiently. This might have worked on the blank-slate of Israel in the 1950s; with most of the Palestinian Arab rural population gone after the 1948 war, planners could dream. They thought along the lines of Soviet planners of the same period, and like the Soviet Union their long-term planning led to soulless housing projects and market inefficiency.
What might have worked in the 1950s could not possibly work in the 1990s. Unfortunately the strangling of many potential urban centers in places like the Negev, and the soulless nature of government-built housing, drove the innovative people to Tel Aviv, raising housing prices in the center. Rural communities that should have been forced to grow naturally became gated communities preserving a tiny rural feudal oligarchy. The inability to solve the Beduin land claims, affecting 50 communities and 80,000 people, and the lack of planning or infrastructure for most Arab communities – which account for 20% of the population – represents a massive hurdle for any long-term housing solution.
The West Bank aids and abets the housing failure
Around 600,000 Israeli citizens have moved over the Green Line since 1967. Most of that population movement has taken place since 1985. Large towns such as Ma’ale Adumim have increased from 24,000 residents in 2000 to 40,000 residents today. Some will see this as a political and ideological challenge to the two-state solution and peace, but the reality is that it has been considerably due to economic reasons.
The West Bank has provided a release valve for the failed housing policies, with different rules that are sometimes streamlined and ideological support for building in the West Bank and east Jerusalem. Without these areas for people to buy apartments in, the prices and housing crisis would be even worse. The ability to keep increasing the Jewish population in the West Bank is diminishing, which means this “pressure release” on prices will not continue, further harming housing prices.
A free people in the land?
One of the central concepts behind the foundation of Israel was to re-constitute a Jewish state in the Middle East that would empower Jewish people and provide a haven for them. In the first decades of the state’s existence existential threats meant freedoms had to come second. In recent decades Israel has become a regional power, and the excuse that terrorist threats mean quality of life issues come second is false.
The country is squandering its human resources by impoverishing its residents and providing them less and less opportunity to afford a dignified lifestyle. With prices in the range of NIS 1.5m. for an apartment and salaries around NIS 6,000NIS 10,000, affording even a meager home is no longer possible for many Israelis who didn’t purchase one a decade ago. The housing issue should be seen as a national threat and political leaders should treat it as a constant priority. It is an issue that the Right and Left, Jews and Arabs, all agree on. They may not agree on the exact nature of the solution, but the time to work together is now. With Passover, people should demand that they not become slaves to a failed housing market through poverty.