Israel is facing an unprecedented housing crisis, with home prices more than doubling over the past 15 years. A hard-hitting report by State Comptroller Matanyahu Englman now reveals the government failures that helped drive this crisis. 

The audit focused on the Israel Lands Authority (ILA), the main government body responsible for increasing housing supply through state-owned land. It found a litany of problems including tenders that weren’t ready for publication, double-counting of units, inefficient use of state land, and failure to formulate an urban renewal plan. 

189,000 Missing Homes Lead to 208% Price Surge

A key factor underlying Israel’s housing crisis is that the number of homes built from 2006-2022 was lower than required for Israel’s housing needs. This amounted to a shortage of 189,000 units nationwide over 16 years, which was a major contributor to the 208% spike in home prices since 2007. 

According to the comptroller, in high demand areas like Tel Aviv and the Center district, the number of units approved for construction was below government targets. For example, in the Tel Aviv district only 83,000 units were approved instead of the target of 86,000. At the same time, in peripheral regions like the North and South districts, the state exceeded targets even though demand is lower there.

“A shortage of 189 thousand housing units over 16 years is a figure one cannot sleep well with,” said Comptroller Englman. “It is no wonder that housing prices jumped by more than 208% since 2007. The government must immediately correct the deficiencies raised in the report.”

28% of Plans Approved Late, Delaying Construction 

The audit also found that 28% of plans were approved by planning committees past the standard 18 month deadline. This included 52% of all units in 2017-2021, causing significant delays in construction starts.  

For public land tenders, only half were approved on time over the same period. The comptroller emphasized that the lengthy approval processes, especially in high demand areas like Tel Aviv, hurt housing supply and put further upward pressure on home prices.

ILA Marketing Numbers ‘Inflated’ by Double Counting

The investigation uncovered problems in the ILA’s reporting of progress in housing tenders. The audit found that units which failed to sell in one tender were often counted again when they were re-listed in a later tender. This meant the total supply reported over the years was inflated.

“Hence, the cumulative reported number of units marketed in all years together is greater than the number that was actually added to the market,” wrote the comptroller in his report.

The study also revealed that the ILA data included units allocated outside of tenders, even though government goals only applied to tendered units. In some cases, tenders were published at year-end that clearly faced barriers and weren’t ready, in order to meet annual targets.

Missed Targets for Haredi and Urban Renewal Housing

The investigation focused attention on sensitive housing shortages for Israel’s Haredi community, which is experiencing rapid population growth. 

The audit found that from 2017-2021, only 4% of housing plans approved were designated for the Haredi community, far below their needs. In addition, examining expansion of existing Haredi settlements failed to significantly increase land for Haredi housing.

Urban renewal was another area scrutinized in the report. The strategic housing plan called for designating 33% of all new units to urban renewal, but actual approvals fell short. For 2021-2030, planned urban renewal met only 51% of needs, according to the comptroller.

The Ministry of Construction and Housing was taken to task for failing to formulate an urban renewal plan in conjunction with the Treasury, contributing to lags. The comptroller highlighted that 79% of approved urban renewal plans were private initiatives versus just 21% with public cooperation.

Key Recommendations to Reform Housing Policy  

Based on these findings, the State Comptroller outlined a number of key recommendations to reform Israel’s housing policy and boost affordability:

– The Ministry of Construction and ILA need to formulate an action plan for more detailed planning of units on state land.

– The Ministry of Construction and Finance Ministry should devise an urban renewal action plan.  

– The ILA must utilize state land more efficiently and avoid re-counting failed tenders.

– The Planning Administration has to streamline and expedite approval processes.

– More state resources should be allocated for urban renewal and Haredi housing.

– The government has to take a more targeted approach, focusing approvals on high-demand areas.

Housing Minister Ze’ev Elkin said the report findings are being studied in depth to correct shortcomings in policies. With housing costs spiraling out of control, the pressure is now on the government to take decisive steps. Implementing the comptroller’s recommendations could help stabilize Israel’s real estate market and make homes affordable again.

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