Only two days ago, the Ministry of Housing and Construction announced that a tender for 1,200 discount apartments in the city of Modi'in-Maccabim-Reut in the target price framework would be issued in the coming weeks. It was learned today that the mayor of the city in which the tenders are planned was not informed about it. In a conversation with "Globes," Modi'in-Maccabim-Reut Mayor Haim Bibas, who also chairs the Union of Local Authorities in Israel, wonders how the Ministry of Housing and Construction is planning to market the tenders without his knowledge and also explains why he opposes marketing of price target tenders on a large scale in his city.
"They can't issue a tender for 1,200 discount apartments. They know it, and I explained it to them. I explained to them what numbers are practical, and which aren't. They have to bring a lot of their own money before I'll agree. This is in the town center, and at least 60% of the apartments in a place like that have to be at full price. I know they wanted to cancel the tender in the Nofim neighborhood and publish it at a target price, but they eventually gave up that idea. In any case, it won't happen without my consent. Only on December 15 will we have a meeting about the tenders, and that's where things will be decided," Bibas declared.
As both the mayor and the Union of Local Authorities chairman, Bibas also believes that there are several problems with the target price plan: "The target price plan is a good idea that provides an incentive, but it has several problems. Two main things have to be changed, and I have spoken about it with the Ministry of Housing and Construction. You can't have target price tenders on too large a scale on every lot or in every city. The ratio has to be 30% target price, and the rest ordinary tenders. If the concentration of such tenders is too high, the local authorities will have problems, because they'll lose revenue. The land values from which they derive this discount are the money that is supposed to come in the form of taxes for the construction of public buildings, education, infrastructure, and so forth. It will be lost. Furthermore, publishing target price tenders on too big a scale will have a negative impact on the outlying areas. If the price in Ofakim or Beer Sheva is the same as in Modi'in or Rosh Ha'Ayin, it will lead people to buy in the central region, and that's a mistake. It will kill the outlying areas. This is a very important point."
It should be noted that the target price plan also addresses the local authorities' loss of money in the framework of the tenders, and proposes a solution in the form of a substitute for the betterment tax - a sum of money to be paid to the local authority as compensation for each apartment. Bibas answers the question of whether this will solve the problem he posed by saying, "The compensation that the state is offering is good, but a very large volume and a lot of money are at stake, and in my opinion, the state will not be able to supply it. If they have so much money, they can build discount apartments themselves, or they can leave it to me, and I'll do it myself."
The Ministry of Housing and Construction said, "We are surprised at what the Modi'in mayor said. Large scale land marketing in Modi'in under the roof agreement has been fully coordinated with him throughout."
Published by Globes [online], Israel business news - www.globes-online.com - on December 11, 2014
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