Tel Aviv Protesters’ Demands

The protesters on the ground in Tel Aviv and other Israeli cities are often disorganized, and lack coherent goals; many have claimed that the very presence of bottom-up protest is good enough on its own (which Israeli blogger Idan Landau notes is evidence for how low the public’s expectations of politics are). However, many organizations for affordable housing have banded together to form a more normal political front, and are calling for concrete reforms. A website can be found here; it is in Hebrew, but has the occasional English article.

While the leftist bloggers are still demanding rent stabilization, it is only one of several demands (Landau proposes it together with public housing and an end to land privatization), and the new Coalition for Affordable Housing has released a nine-point plan that is considerably broader. Their main demands, amendments to a national housing law under discussion, are as follows (translated from a summary article on Ynet and a blog post on the coalition’s site):

1. Every high-rise national housing plan with at least 200 units must include at least 20% affordable rental units and at least 30% units with at most 75 square meters.

2. No plan will be approved if it includes only housing for welfare recipients, in order to avoid creating concentrated poverty.

3. Public housing will have priority, and the state will spend the 2 million shekels (about $580 million in exchange rate value, or $670 million in PPP) it has from previous sales of public housing on new construction.

4. Affordable units will be rented for at most 25% of the maximum income ceiling for eligibility, and the rent could only be increased at a fixed rate, whose value the coalition does not mention.

Separately, the student groups are issuing their own demands, which, in addition to small and affordable apartments, include removal of legal barriers to municipally approved development, taxation of apartment buying for investment rather than for renting, 400 million shekels for construction of student housing, and opening 5,000 500-square-meter lots in the Negev and Galilee for construction of subsidized units.

The government’s own proposals have not gotten popular support, as the protesters consider them to be mere bones or actively counterproductive. Two members of the Knesset – Labor’s Shelly Yachimovich (who is currently running for the top position in the party’s primary) and Likud’s Karmel Shama, have offered a rent stabilization law limiting increases in rent to 5% a year; the protesters rejected it. More cynically, PM Netanyahu tried to buy the students out with a 50% discount in public transportation fare; he was met with the same scorn he got in the 1990s, when he tried to deliver pizzas to students who were on hunger strike.

So far, ideas meant to increase central city housing supply have not been seriously raised by any group. Netanyahu’s plan to accelerate construction must be viewed as an attempt to reward developers rather than as a housing solution; owing to the high land prices, new construction tends toward luxury, just like in New York and other expensive cities. This led to general opposition to any supply-side solution, at least among the bloggers I read; for example, Shalom Boguslavsky, whose article about the Jerusalem light rail I ran six weeks ago, blamed the problem on inflated demand coming from speculation. Note, however, that the student proposals do include some supply increases, though not within central cities.

I still maintain the most effective solution should be to avoid rent controls at all costs, and instead pursue the following set of policies:

1. Subdividing apartments must be legal, as must new construction of small apartments.

2. Zoning should preference contextual housing over towers in a park, and allow 6-story buildings as of right, with 8-story zones on wider streets and in more desirable neighborhoods. Setbacks should be eliminated for future construction, and for front yards this should be retroactive, legalizing enclosed balconies as long as the materials are more permanent and aesthetic than plastic. These two points together should roughly double the allowable intensity of development, while also incentivizing small improvements by building owners over large-scale redevelopment.

3. Low-income people should receive subsidized or public housing. Even if the housing is owned outright by the government, it should be done voucher-style, and buildings should not clearly advertise that they are public. For example, a new public housing company could be empowered and given a budget to purchase small buildings anywhere it wishes, even in expensive neighborhood.

4. Speculation should be deterred by, as the students propose, a tax on buying housing as an investment. I do not have the details of the students’ proposal, but I would propose a capital gains tax. A tax on imputed rents for owner-occupied housing, as in Switzerland, should not be necessary here; the problem is at the upper end of the market, not in the middle.

5. The government should invest in public transportation, including a subway for the inner Tel Aviv region and an upgrade of the rail network to modern S-Bahn standards. Israel is already pouring concrete, i.e. building extra lines to unserved cities, but the organization is still substandard, with mediocre frequency and no ticket or schedule integration with local transit.

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4 Responses to Tel Aviv Protesters’ Demands

  1. Danny says:

    So is this a bubble situation? That is the only scenario in which I could understand buying an apartment building and then not bothering with renting it out.

    • Alon Levy says:

      It probably is. But persistently high land prices could turn it into a safe investment, like in New York or Monaco, creating something like a permanent bubble situation.

  2. No kidding says:

    This is a TERRIBLE list! It is fresh out of the Progressive playbook!

    How about increasing supply by:

    1: Selling government-owned land at auction. The Israeli government owns 93% of the land. Sell all non-military land in an open auction.

    2: Eliminate zoning, housing regulations, permitting.

    3: Eliminating all crony capitalism in the land – all government-backed monopolies from power to land lines to dairy foods.

    That’ll open the market up just fine!

    • Alon Levy says:

      Actually, it’s fresh out of the playbook of every city that’s at all land-constrained, even very non-progressive ones such as Singapore and Hong Kong. Land ownership is not the issue here; in Hong Kong all land is government-owned, though it’s handed out to the private sector with 99-year leases.

      In Israel, the land that’s government-owned is typically the undesirable land; the only government-owned land in or near Central Tel Aviv, where people want to live and are bidding housing prices up, is used for the military (the Kirya), public hospitals, schools, and other public institutions. The demand is not for land in the settlements, where the government concentrates public-sector construction, or in peripheral regions the government wants to Judaize, which get the next priority; it’s in the Tel Aviv area, where the government eschews construction.

      The other issue is that crony capitalism in Israel exists because the government wants it to exist. Bibi has been giving no-bid contracts to allied tycoons for all sorts of services. He also appoints various agency heads who have no qualifications to run the agency they’re in charge of, so that they won’t function well and he’ll have grounds to privatize; for example, the head of Israel Railways has no background in railroading or public transportation, but does have a background in privatizing companies. That sort of capitalism views good government as anathema, and will make government bad just to make an ideological point. In the US, it takes the form of Tea Party Governors who turn away free money and lie to the court about it; in Israel, it takes the form of the Bibi-Barak-Livni constellation.

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