Despite recent attempts by the government to change the housing situation, the housing market in Israel is still in crisis, and if far-reaching changes are not implemented immediately, the crisis will turn into a socio-economic disaster in the years to come, Israel Builders Association president Raul Srugo warned at the association’s annual conference, which took place over the weekend in Eilat.
Srugo told the conference that the government must “stop pulling the wool over the public’s eyes.”
“There is a shortage of apartments here, much greater than the 146,000 households that have registered for the Mehir Lemishtaken [“Move-in Price” subsidized housing program for first-time buyers] lotteries. For years, we have been building fewer than 50,000 new housing units per year. To solve the crisis in the short term, we need to add another 20,000 housing starts a year in sought-after areas and get to 70,000 housing unit starts per year,” he said.
Addressing the conference, professor David Passig, a future studies researcher, discussed global trends in housing, and explained that the housing market in Israel was going in the opposite direction from the rest of the world: While global population growth has been checked, Israel is seeing impressive population growth. Passig presented a model showing that by 2050, Israel’s population would number at least 16 million.
“Not preparing for that scenario is a crime. Our children will blame us if we aren’t ready for the future because we know that this is what is going to happen. It’s not something we can say we didn’t know about,” he said.
Srugo called on the government to establish a strategic planning authority while keeping its housing task force active.
“We are on the brink of a socio-economic abyss. As long as the government doesn’t begin strategic planning for the next generation in Israel, we’ll find ourselves in the biggest crisis since the state was founded. In 2030, there will be 12 million residents in Israel, and in 2050 there will be 17 million people here. Remember, this is a country where it takes 15 years to approve construction of a single [new] neighborhood, so 2030 is tomorrow and 2050 is the day after tomorrow. By then, Israel will need two more major metropolitan areas. Not two cities—two new major built-up zones.”
Srugo warned that residential construction could not grow at the rate of demand without a dramatic increase in investment in infrastructure. To allow infrastructure work to take a leap forward, he demanded that the government address immediately the growing shortage of stone and other construction aggregate, thereby lowering the cost of raw materials for construction. He also demanded that the government keep Chinese construction companies out of Israel, as most Western nations have.
“We don’t need to bring in the Chinese, and if we continue to do so, it will have serious ramifications for the [construction] sector, as well as our economy and security. Israel needs laborers, not foreign companies,” he warned.
“The government must encourage the population to move to the periphery by investing in education, culture and jobs, as well as building the necessary infrastructure,” he said.
“Immediately expanding construction activity, which we need to do now, is the right thing for society and, no less important, for the economy. In the next few years, Israel will need to handle a deficit. Expanding construction and infrastructure as needed will contribute to economic growth, adding 4.1 percent per year to the gross domestic product, an additional 18 million shekels [$5 million] per year to the state coffers from the sale of land and taxes, and 70,000 jobs for Israelis,” he said.
According to Israel Builders Association CEO Amnon Merhav, all the data presented at the Eilat conference “points to the need for a major change in how the government is handling the housing crisis.”
“Only 18,000 apartments have been sold through the Mehir Lemishtaken program thus far, and even though the government hasn’t made it public, we can assess that the number of apartments that have actually been handed over to the buyers is even smaller, a few thousand,” Merhav told the conference. “So government intervention has resulted in an increase in the gap between supply and demand for apartments. At the same time, construction inputs, which jumped by 3 percent in 2018, and the shortage of raw materials, have become a major threat to our ability to address housing prices.”