Dear Minister Elkin,
As president of the Chamber of Contractors, engaged in an ongoing struggle to promote the Israeli housing market, I was especially glad to hear of your appointment as Minister of Construction and Housing – a truly challenging position. As a man of many achievements and talents, among other things a gifted chess player, I'm confident you will be able to plan ahead properly so as to extricate the real estate sector in general, and the housing market in particular, from the quagmire in which it has sunk in recent years.
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As I'm sure you know, the market's failure had numerous reasons, most of which stemmed from the same fundamental cause: the position of Minister of Housing was filled for many years not by true leaders, but by politicians lacking basic skills and understanding of the housing market and consumed by narrow sectorial interests, not to mention a lack of overall strategic understanding of the market's needs. These politicians blindly followed bad, rehashed, and useless advice that only made things worse, pushing the market to the low point where it is today.
What's going on at the Israel Land Authority?
Sir, as your first act in the new ministry, I recommend you carefully check – preferably with a magnifying glass – what exactly is going on at the Israel Land Authority.
Is this executive body of the Israeli government and your ministry truly executing its role as it should? Or has it, over the years, become the state's land dealer, issuing tenders like an auction house and causing the developers applying for those tenders to fight amongst themselves tooth and claw, leading to speculative price hikes? This was the case recently with tenders at the Modiin Commercial Center and in Ramat Beit Shemesh, which were priced at 20% above current levels.
Speaking of the ILA – what could explain the fact that, in such a critical year as 2020, when we all endured the coronavirus pandemic and a profound economic crisis with massive layoffs, ILA offices were shuttered and inactive, with the result that only a third of the number of apartments expected to be offered for sale were in fact placed on the market? This caused sky-high demand in the year's last two quarters, with a stampede for apartments the likes of which we've never seen.
Critical mistakes
Furthermore, Minister Alkin, I strongly recommend that, in your new capacity, you exchange a few words with the heads of the Bank of Israel and ask them how they made the idiotic decision to implement a mortgage reform that will allow buyers to take out a mortgage on two-thirds of the property's value at the prime interest rate – a decision that has also driven the market to unprecedented levels of demand. The scope of mortgages taken has reached NIS100 billion per year – about a quarter of the total amount of mortgages ever taken in Israel.
As an excellent strategist, you'll surely understand the fatal mistakes made by your predecessors – errors that, in a game of chess, would lead to immediate checkmate. How can one explain, for example, that for five whole years, a niche program such as "Buyer's Price" was implemented – a program that has grown to monstrous proportions? Not only did it fail miserably – it also irreversibly damaged the entire housing market and brought about a total freeze of the housing upgrade and real estate investment markets. And, having finally understood that it was a failure, why haven't we replaced it with a worthy alternative?
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I'm sure you're familiar with the decision of the Planning Administration to discontinue the TAMA 38 program and allow it to expire in 2022. This decision has already brought urban renewal to a near standstill, since what sane developer or contractor would be willing to embark on a plan whose days are numbered? This decision is not only senseless in terms of the housing market, but also amounts to criminal negligence (yes, absolutely!) in an age when millions of Israelis are exposed to missile attacks and lack security rooms, not to mention the imminent earthquake which is sure to arrive, as it has every hundred years.
My proposal is quite simple. First of all, take matters into your own hands, put things in order, and reject those who would give you bad advice, from the ILA to the Planning Administration. You, and only you, should be landlord of the Housing Ministry. Secondly, do all you can to increase supply in general, and in areas in high demand in particular. I suggest adopting, again, the simple solution of an automatic 30% increase in building rights for developers (the Sheves-Kahlon amendment) in all projects to be built in high-demand areas. In return, developers will set aside 20% of the apartments they build for affordable housing programs and another 10% for subsidized long-term rent.
I'm quite sure that your term serving in this important position will bring about a revival of the housing market and the real estate sector, which supports hundreds of thousands of families and is in many ways the engine of Israel's economy. Good luck!
Roni Mizrachi is president of the Chamber of Contractors and owner of Mizrachi & Sons Group.
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