Ep 400 Thu. July 28, 2022
An unusual episode. No daily news today, just a deep dive/special report on the state of housing and its rising costs in Israel with an emphasis on Tel Aviv.
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Music: Shabatot v’Hagim; Yaara Shaulian https://open.spotify.com/track/5un6lexs0vAS1y7jBenn5b?si=9bba9d63d39648c4
Tel Aviv housing costs have tripled within the last 20 years, making the city increasingly unaffordable to renters and home buyers who say they just can’t meet the expenses of purchasing a home. This special report takes a deep dive into the housing market of Tel Aviv and explores the various reasons as to why the market is growing at light-speed. Our reporter Eliana Neill has the story.
A recent report shows between March of 2021 and April of 2022, the cost of housing in Israel went up almost 22%. According to Globes, by the end of last year, the average price for a three bedroom home in Tel Aviv was about three and a half million shekels or slightly over 1 million U.S. dollars. While the average annual salary in Israel was only about 136,000 shekels or almost 39,000 U.S. dollars. So why are housing prices so high? An expert we spoke with says the answer is simple. Tal Alster, an urban planner who works with the Tel Aviv municipality, on developing housing policy, says he spent many years working with the Urban Clinic in Israel and is an organization whose mission statement is to nurture urban leadership and local knowledge for just and inclusive cities. He’s also been teaching housing policy at Hebrew University for the past three years. He says the biggest problem for the Tel Aviv housing market is the role it plays as the only major urban hub in the entire country.
TAL: Really in Israel, there’s a very concentric market. You can see that prices. Just, uh, you know, they, they peak in Tel Aviv. And as soon as you go further from Tel Aviv, they go down, it’s like a pyramid structure of prices. I guess it’s not completely unusual. There are places like this in the world that I think that it’s very extreme in Israel that, you know, you have one urban center. Most of the hiring jobs are concentrated in this center and the kind of urban life that these kind of professionals who have these high incomes is really only relevant in this small area of Israel.
Alster also mentioned unprecedented levels of supply pressure. Tel Aviv is the biggest metropolis in Israel and thousands of young people from around the world flock here every year in hopes of starting a new and exciting future in the big city. The problem is, housing supply just can’t meet that heavy demand. More than 90 percent of the land in Israel is government owned, meaning that building new apartments is often met with a wall of bureaucracy. Without enough apartments for inhabiting residents, landlords can keep prices high because the market is just so competitive.
Another explanation comes from Israel’s future city plans. In November of this year, the Tel Aviv Light Rail system is expected to open its first and biggest line. The Light Rail is a mass transit system that is predicted to carry 195 million passengers per year. Its lines will connect to virtually all corners of Tel Aviv and hopefully make it even easier to get around the city. But, all good things come at a price. The real estate market has already responded to the Light Rail by raising prices of apartments and houses near the line due to their future accessibility. When the lines actually open, these prices are expected to rise even more.
We spoke with two real estate agents based in Tel Aviv who explained the shortcomings of the housing market, and both seemed doubtful that the market will improve any time soon.
MEIER: Like, you know, the prices are going up very randomly, so you can find one apartment at 9,000 for two room or three room apartments. And the next building on the next street, the same apartment for 2,000 less. And there is no reason it’s just because the landlord wanted to put their price and to check and because people are ready to pay more. So everyone’s trying to have a good choice and to get more money.
SHAI: People keep saying, it’s gonna drop, it’s gonna drop. It’s gonna drop, but I don’t see it dropping. Cause Israel is so small and when somebody wants something, then they’ll go for it and Tel Aviv is even smaller. And it’s a hotspot where everybody wants the same place. And at the end of the day, it’s the people that have money that are gonna get it at the end.
In an effort to combat the costs, the Ministry of Housing and Construction released a second round of lottery housing on July 3rd. This newest lottery system offers 5,500 housing units at a rate 20 percent less than market value. To enter the lottery, buyers need to be able to prove they don’t currently own a home and are in need of discounted housing.
Tal Alster, the urban planner we spoke with earlier, said he doesn’t think housing lotteries are a viable solution, saying they only aid a very small portion of the population in need. He calls them an “expensive, not encompassing strategy to have as your main tool in the housing market.” Instead, he proposes building more studio or one bedroom homes to satisfy the huge sector of Israel that doesn’t need big, glamorous housing and just wants an affordable place to live.
TAL: If you look at the numbers. So the, the average house unit in Israel became huge in the last two decades or so, like I’m talking something like in Tel Aviv alone. It’s like 140 square meters. That’s like the urban core of Israel. And I think that if you look at the numbers in Israel, I’m not sure I get this right, but I think it’s like one hundred seventy, one hundred and eighty for the average new home that is built in Israel. And I think there’s a growing mismatch between what households need and more importantly, what they can pay for what, what can they afford, to the units that we’re putting into the market in the last two or three decades where we almost didn’t build any new studio, one bedroom, two bedroom units at the national level.
But it’s not always the experts that we want to hear from. Lauren Selman, a Mexican immigrant who became an Israeli citizen said she’s been here for 3 and a half years and still can’t find a permanent home.
LAUREN: So the first time that when we first got to Israel, I remember telling my husband like, we’re going to Tel Aviv, or we’re not going to Israel at all. That was my, you know, no negotiation card. And the first time that we started renting apartments, we realized really quickly that it was not what we were used to. In a sense, for example, that you go to an apartment to do the apartment to rent, and there’s already like a list of 15 people that were there before you that are interested in renting the apartment. So there’s really like you, you don’t have a chance to like rent the apartment of your dreams and have it, because there’s already a bunch of people that started before.
In a gracious act, a couple in Binyamina decided to rent out a part of their family home. After seeing an influx of people posting horror housing stories in facebook support groups, the couple wanted to help others. Stefany, who owns the house with her husband, says she remembers what it was like for her when she first moved to Israel. Now, they live about 80 kilometers or 50 miles north of Tel Aviv.
Tete: It’s, you know, we just saw people that like needed something. We have, you know, space in our home. We don’t have, you know, worries about, we don’t have children. It’s just me and my husband and a bunch of empty rooms. So that seemed reasonable. You know, when we came to Israel by ourselves, like, you know, people were always helping us, hosting us. So it’s nice to finally be able, you know, to give something back.
Many others have taken to the streets to protest rising housing costs. Since the end of June, dozens of tents have been pitched on Rothschild Blvd in Tel Aviv where protesters have gathered to rise up against the extreme prices. About 2,500 people gathered at Habima Square on July 2nd to protest rising housing costs across the country, saying economic challenges in Israel are so large, young people are being forced to leave the country because they cannot envision an economic future for themselves or their children here in Israel.
The realtors we spoke with had opposing viewpoints on the efficacy of these protests. One said he feels they are empowering, and even wants to join them himself.
MEIER: I want to join them. I’m telling you the truth, because I don’t like to help people to find an apartment and for him to feel like really difficult to pay everything or to do, I don’t know. I don’t want this person to be sad about the apartment. He have the location, but no money after to live so I don’t know, I don’t see the point, but the protests are really good and maybe we can this in the front of the development.
The other realtor we spoke with was less convinced. When we asked about protests, he said the following:
SHAI: What, but then what did that do? What did that, what did that do? Every protest. Okay. They protest, they do whatever they want, but at the end of the day, nothing changes.
These protests are reminiscent of the 2011 social justice protests, where 500,000 young Israelis demonstrated against the government’s failure to address the rising cost of living throughout the nation. The protests all began with tents on Rothschild Blvd, just like what occurred late last month. While the demonstrations received national attention and even led to the creation of a governmental task force that worked alongside protest leaders, very little lasting change was made, in part leading to the resurgence of a housing crisis more than 10 years later. Since 2011, the housing situation has become even more dire. Prices are higher than they’ve ever been and the government is in disarray following its collapse in June. Now, citizens are forced to head to the polls for the fifth time in four years with hopes that a new governing body will bring stability to the State of Israel.
