It will be alright. Another week, another month, a year at most, and every young couple in Israel will be able to buy an apartment. Really? The problem with the new plan from the Ministry of Finance, headed by Yuval Steinitz, for reducing housing prices is precisely the problem of the flood of declarations from Minister of Housing and Construction Ariel Atias and Governor of the Bank of Israel Stanley Fischer. Statement after statement, to no purpose. Unless these people are relying on cheap psychology: if we repeat often enough that the bubble is about to burst, then it will burst. But as long as building starts fail to keep pace with annual demand, the bubble will never burst. And we have still not taken into account the special situation in the current period, of virtually zero interest rates, so that older middle class savers buy a property for investment, worsening the building starts deficit, and raising prices.
The Ministry of Finance has published the main measures that will be promoted in the next Economic Arrangements Bill accompanying the state budget.
1. Setting quantitative targets for approval of residential construction plans. No longer approval of 45,000 units a year, but 140,000 in two years. The planning process in real estate is long, from one year to many years. The Treasury's declaration of a massive rise in planning and approvals is based on one thing only: that you can write whatever you like, any statement, any target, fantastic as they may be.
The planning bodies currently approve 40-45,000 housing units annually, but when these plans pass to the execution stage, they meet with dozens of kinds of obstacles. Actual building starts barely reach 20,000 a year.
Anyone who expects the planning committees, particularly the regional committees, which deal with the large building projects, to double their output, has to offer at least a doubling of the professional manpower on the committees, first and foremost at the level of those who examine the plans. Does the Treasury plan to raise the budgets of the regional committees, the very committees that are supposed to disappear in the planning reform being promoted by Prime Minister Benjamin Netanyahu?
2. Promoting quality housing in outlying areas. Even today, anyone who wants to buy a plot for a "quality" house in the periphery can do so, including in extensions in kibbutzim and moshavim. The problem is that, in the periphery, there is no need for extraordinary attractions; there is a need for transport, roads, accessible and efficient buses and trains that will bring workers to their places of work in a reasonable amount of time. But only a few months ago, the Treasury cut the transport infrastructure plan put forward by the Prime Minister's Office.
A further comment: The Treasury plan clearly favors the center of the country. That's convenient, because that is where infrastructure, employment, demand, and constantly rising prices are to be found. The problem is that the future lies in the Negev and the Galilee, where there is a plague of illegal construction, and the enforcement authorities don't dare come near.
3. Simplifying and expediting the process of ejecting squatters from land. Excellent idea. Now let's see the Treasury pass legislation in a reasonable time, in the face of basic laws and the High Court of Justice. Then let's see it fund implementation.
4. Urban renewal and change in National Outline Plan 38. Central to this is encouraging vacate and build, which are critical in old neighborhoods in the center of the country. Reducing the ability of people to frustrate a project is welcome. Changing the majority required from 80% to 66% in a complex or individual building could indeed pave the way to turning dozens of old complexes into modern, high-rise neighborhoods. Now tell us how exactly to compel a recalcitrant objector, or even an old person who just wants "to die in his apartment", to agree to leave their home? By force? They'll bring a police crane? The Basic Law: Human Dignity and Liberty tends towards protecting private property. It will take ten years or more to overcome that.
5. Promoting a policy of returning agricultural land that has been rezoned. Excellent idea. Only up to now, Israeli governments, whether of the right or the left, have capitulated to the agricultural lobby. We have yet to see the Israel Land Administration dare inform a moshav or kibbutz, unilaterally, of the end of its lease and of a demand to return the land, even in cases where the land is quite openly being used for warehouses, shops, and banqueting halls. No minister or member of Knesset has the courage to raise the matter for discussion. Petitions on the matter have lain with the High Court of Justice for 15 years, and nothing has happened.
What isn't in the Treasury plan? Anything that costs money. The whole question of taxation isn't mentioned at all, not exemption from VAT for a first home, not recognition of mortgage interest for tax purposes, and who even talks about reviving grants for building in specific paces. The Treasury is passing the buck to the other ministries, and doesn't propose participating itself in any part of the deal.
Published by Globes [online], Israel business news - www.globes-online.com - on June 14, 2010
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