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The solution to the housing crisis at hand.

So why is it not applicable in Israel?

"Multi-family" complexes in the United States are a model for long-term and affordable leasing in urban spaces, only in Israel the terrain conditions block the developers. And who loses? All of us?

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• Real Estate

CPA Yaron Shamir, guest column

Sunday, 05 December 2021, 14:50

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One of the most common models for long-term and affordable rent in the urban areas of the United States - the "multi-family" housing clusters, do not "catch" in the Holy Land. , Offers completely different rental standards: a unique model of housing clusters that include apartments for rent with a shell of public facilities and environmental development for the well-being of tenants, combined with ongoing maintenance services around the clock.Despite its obvious advantages, The locals bury the developers' money deep in the ground.

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US Multi-Family Complex (Photo: ShutterStock)

Gaps in worldviews and lifestyles provide only one explanation for the lack of interest of Israeli developers in building rental complexes. These include the Israeli preference to own the home, and the Israeli tendency to choose where to settle in real estate and only then seek a close livelihood, instead of roaming in rent due to employment opportunities. It should be noted that while in the American model tenants enjoy quality long-term housing at affordable prices, this is also a successful model for investors with an advantage at the financial level: a win-win situation. According to cash flow, such as commercial real estate, and therefore less dependent on market fluctuations. Additional benefits for investors include convenience in managing a complex with dozens of apartments, reducing expenses and the ability to quickly improve a property and raise rents.Institutions prefer to engage in large projects with a single address.

Against the background of the housing crisis in Israel, rising rental prices and the shortage of suitable housing for rent - the conditions are ripe for Israel to adopt the model and allow its economic feasibility for developers, so why is this not happening?

The main reason can be found buried deep in the ground: while in Israel the building permit times are long, regulation is burdensome, bureaucracy is exhausting and stinging developers' money, in the US the whole process is fast and efficient. Lease it in its entirety. As a result, his equity is released and available for investment in the next profitable project. Complicated construction in the country significantly increases the uncertainty of the project and the risk for the developer and the lending financing bodies, and the banking system in response - provides up to 50% financing on the land at most. For construction in a short time and set off immediately.

In fact, the Israeli entrepreneur has no money to start a rental housing project, the high land costs embody financing costs over many years, and his money gets stuck, accrues interest and actually raises the price of the final project.

In addition, the banking support provided in the country is rigid, and banks are required to pre-sell and sell the apartments in stages, as the project progresses.

This fact omits the land from the multi-family model that does not allow, as will be remembered, the sale of the apartments separately - but only as an entire holistic rental complex.

Bury the money of the developers in the ground

Yaron Shamir (Photo: Michal Revivo)

If all this is not enough, the tax system currently used in Israel also makes it difficult to build rental housing, because it makes the transaction uneconomic. Today, following significant tax breaks granted to contractors in the construction of long-term rental housing for up to 10 years, there are more such construction starts, but it is not enough. Aside from tax breaks and the handling of onerous regulation, a real line can perhaps come from the banking system. For example, the American model, existing federal funding agencies, designed to provide funding for the construction of residential real estate. The loans that these institutions provide, is considered a public interest backed by the Minister: what does not exist in the country.

In summary, the difficulty of importing a model building for rent Long-term Israel is multi-systemic: bureaucracy, long schedules and onerous taxation, affect project funding, and bury developers' money deep in the ground, even though promoting rental housing projects is a real public interest.

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