Minister Ze'ev Elkin's flagship plan, which was presented at the Housing Ministry conference a week ago, amounts to the expansion of long-term rental.
Elkin presented a survey according to which a significant percentage of renters would give up buying an apartment if they could live in a guaranteed long-term rental.
Eureka!
A magic solution has been found (the 500th in number) to the high cost of housing.
Let's start with the survey.
If we asked the public "Suppose you had an unlimited shipping budget, would you give up buying a refrigerator for your home?", the public in the survey would answer yes.
It is possible to get the public to agree to any government program, provided that its costs are hidden from the survey respondents.
It is understood that large sections of the public would give up buying an apartment if the state would guarantee them discounted rent for life.
The option of living in discounted rent is worth a lot of money, so surely they are willing to accept this option for free.
The problem is that free is a huge capital for the public coffers.
Today the return on rent is only about 3%, and in an era of inflation and rising interest rates - buying an apartment for investment is not worthwhile.
If we add to this the risk involved in long-term renting, the landlords will be required to pay considerable compensation.
This is the point where Elkin starts pouring money in quantities: subsidizing mortgage interest, building rights, deducting expenses, brownfield sites, tax benefits, etc.
Both institutional investors and private investors are guaranteed a large share of the public pie - at our expense, of course.
Until a few years ago, they tried to fight the investors, who were presented as the enemies of the people.
Today they try to subsidize them and present them as saviors.
In both cases it is a matter of buying votes, once of winners at a price per tenant (Kahlon) and once of investors and winners at a discounted rent (Elkin).
Long-term renting is a premium product that many young people see as unnecessary, because the mobility provided by changing apartments has great value for them: sometimes people need to be close to the university, and sometimes to the workplace, and sometimes to a better workplace.
Why fight this leadership?
It is not clear.
For those for whom long-term rental is a good product, they can purchase it.
The entry of the state and the creation of distortions will only worsen the situation, not to mention the public cost.
In his proposal to raise the tax exemption ceiling on rent from 5,200 to 7,000 shekels, Elkin also separates investors in the periphery from investors in the center and between the poor and the rich.
Those who will benefit from the tax benefit are relatively rich renters and even richer renters.
Any tax benefit requires an increase in another tax, income tax or fuel tax or VAT, or alternatively - a cut in government services. Why does Elkin choose to take from the poor and give to the rich? Again - votes.
The State of Israel needs to improve the welfare of its citizens in the field of housing.
Converting a purchase tax to a sales tax will improve geographic and social leadership.
Canceling exemptions and tax benefits will allow the increase in welfare.
Simplifying the regulation in construction will allow the apartments to be cheaper.
Densification and urban renewal will increase labor productivity.
Instead, Elkin and his people are trying to engineer the market.
were we wrong
We will fix it!
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