The rent crisis has resurfaced - and the solution is in the hands of the state

The rise in inflation has re-flooded the problem of supply and prices in the rental market.

Is it possible to curb it?

Certainly, but to do that the state needs to help with a "target price" program for the rental market

Shaike Nafha, guest column

06/06/2022

Monday, 06 June 2022, 08:30

• Share on Facebook

• Share on WhatsApp

• Share on Twitter

• Share on Email

• Share on general

• Comments

  Comments

The exit from the corona that met a huge gap between supply and demand combined with the war in Ukraine and the closures in China created a worldwide price spin and galloping inflation.

Although the rate of increase in inflation in Israel is lower than in Europe or the United States, since it exceeded

the Bank of Israel's forecasts, the cost of living has taken over public discourse in Israel again.

The

reason why the rent issue has become a problem is mainly because the rent index is part of the consumer price index, and after many years of stable rent prices, despite a tens of percent increase in apartment prices, we hear complaints about a jump in rental prices.

More on Walla!

Digital currencies: 6 questions and answers that you should know before buying Bitcoin

In collaboration with max

Buildings in Tel Aviv.

The market is too small and prices are soaring (Photo: Reuven Castro)

Tenants complain about the lack of apartments for rent.

Although the state has set up an apartment rental company that is supposed to produce a stock of apartments for rent on long-term contracts in the market, it is not keeping pace and is currently its contribution to solving marginal distress.

In addition, we see that rental prices in apartment rental projects are only about 10-15% lower than market prices, so it is a still high rent that makes it difficult for young couples.

Israel is a unique case in the world.

The high rate of natural increase combined with a shortage of space exposes us to a state of perpetual shortage of apartments.

Although GNP in Israel is among the highest in the world, which produces high purchasing power for Israelis compared to most countries in the world, but despite all this, fewer and fewer Israelis can buy an apartment.

The problem is that owning an apartment in Israel, unlike the world, is considered a basic right and we do not have a culture of renting.

This is why anyone who can afford it prefers to purchase an apartment for investment over long-term savings in the capital market, even though in all the comparisons made, in the long run the capital market beats the real estate market in returns.

A study by the Adva Center conducted by Yaron Hoffman Dishon, quoted by Guy Nardi, shows that 66% of the city's residents live in housing that is not affected by market prices.

Only 20% own an apartment in the city.

In Israel, on the other hand, the situation is the opposite.

We will not go into mechanisms that allow residents of Vienna and other cities in the world to enjoy normal rental prices, as they are not relevant to Israel as long as the state is addicted to real estate taxes. Where a project that purchased land at a price of one and a half million per housing unit can be expected to be rented at a price of NIS 4,500.

Shaike Nafha (Photo: Tamar Mitzpi)

In order for us to change the culture in Israel and bring about the fact that owning an apartment will not be a major component in people's savings and there will be no existential conditioning, the government must cut off people's dependence on market fluctuations.

It does not have to be a zero-sum game.

Entrepreneurs will be able to continue to initiate and profit, the state will continue to enjoy income because it will allow young people to continue consuming and the authorities will benefit from a property tax mechanism that reflects reality and allows them to provide services.

To do this, you need to initiate a plan that is a kind of 'target price' for the rental market.

In the first stage, the state must subsidize the land in RMI tenders. If it is currently acceptable to enjoy a 3% yield on an apartment, it is possible to create a mechanism that will maintain this yield. Provide 15 years of rent instead of 5 today in exchange for larger benefits. The state hopes to attract the institutional and stimulate the field. In the last two years more and more entrepreneurs are accumulating apartments for rent to enjoy the benefits provided by the Capital Investment Encouragement Law. Long-term equity About six months ago, the law was updated so that the period during which the apartments will be rented was extended from 5 to 15 years, but developers were given a long organizing period and meanwhile few bids were submitted, so most apartments still rent for only 5 years.

In order to change the dynamics of the market, to create a situation where Israelis will no longer have to dream of owning an apartment and fear capriciousness of a landlord, the state must produce a mechanism that frees up land to build apartments for rent while maintaining entrepreneurial profit. %).

• Real Estate

• In the country

Tags

• rent