A whole day was devoted to discussions on social housing, in which the Adva Center played a central role as a leading research and advocacy institute that is deeply involved in housing policy, including social housing in Israel. The thrust of Adva’s remarks was a call to significantly increase the stock of social as well as affordable housing.  It should be noted that Adva has for many years and continues to advocate for the right of all individuals living in Israel to have a safe and stable roof over their heads.

Some ten different parliamentary committees held meetings centered on the issue of social housing. At the main event, led by MKs Lazimi and Biton, the emphasis was on the demand for immediate improvement in social housing policy, including changes in eligibility rules and an increase in the number of apartments available. During the same day, two exhibitions were on display at the Knesset, one entitled “It Could be Better,” in which photographs showed the contrast between Israel’s social housing, obviously suffering from neglect, and well-kept social housing in Austria and Scandinavian countries. Another exhibition, entitled “Lionesses,” featured photos and stories of women living in social housing who are untiringly fighting for their rights.

Adva researcher Yaron Hoffmann-Dishon took part in three different discussions, including the main event, where he presented findings from studies of the budgeting trends of housing in Israel in recent decades. The figures testify to the fact that while state income from real estate taxes and land sales reached new heights in recent years, state investment in housing underwent erosion. Hoffmann-Dishon’s comments in committee discussions revealed that while the real estate market has become an important source of national income, the national investment in the various types of housing assistance has been on the decline, at the same time that the social housing stock, which suffers from neglect, continues to decrease.

Adva researcher and policy advocate Tehila Sharabi, who took part in the discussion organized by the Knesset Committee for Gender Equality and the Advancement of Women, presented the implications of housing policy for gender inequality, emphasizing its effects on women from disadvantaged social groups and women suffering from family violence; for the latter, the lack of accessible, suitable and safe housing forces them to choose between the devil of remaining in violent situations or the deep blue sea of becoming homeless. Sharabi emphasized the need to develop programs that would offer long-term housing solutions for abused women.

הפוסט Adva Center Promoting Social Housing: ‘Public Housing Day’ in the Knesset – 2025 הופיע לראשונה ב-Adva Center.

For women who experience domestic violence, the absence of accessible, suitable alternative housing leaves them with only two choices:  to remain at home, where they continue to suffer from violence or to become homeless. In other words, for many, escaping violence means the loss of housing.

In April 2024, the Adva Center, together with the Forum for Public Housing and the Friedrich Ebert Foundation, presented a position paper to the Knesset Committee for the Advancement of Women entitled, “Expanding Housing Assistance Mechanisms for Women Survivor of Violence and their Children”. The paper demonstrated how the absence of alternative housing gave abused women and their children no choice but to remain in dangerous home environments.

The fact that in Israel, domestic violence does not constitute a criterion for eligibility for social housing means that the only option for abused women is to receive housing assistance for rent from the Ministry of Construction and Housing. This assistance is predicated on having spent time in a shelter for women survivors of domestic violence, which means that women who could not find a place in a shelter or whose husbands received a court order to stay away from the family home but did not honor it were not eligible. In addition, financial assistance from the Ministry is available for no more than three years. The first year of assistance is awarded without many strings attached, but subsequent years involve presenting proof that the potential recipient is devoid of housing options. According to information supplied to the Knesset Center for Information and Research by the Ministry, if the woman and her husband are joint owners of an apartment in which the husband resides, whose value has yet to be divided between the spouses, the woman’s eligibility for housing assistance will be renewed.

According to a report published by the OECD in 2023, most countries provide survivors of violence with emergency shelter for a short period; however, in most countries, the demand is greater than the supply. The same report indicates that some states provide transitional housing for longer periods than in Israel. For example, in Hungary, there are transitional apartments located close to centers for the treatment of domestic violence that offer housing for up to five years. Figures published in 2019 indicate that the average stay in those apartments is two years, after which the women rent on the private market or receive social housing.

Some OECD member states, among them Netherlands, Belgium, Portugal, Spain, Japan and Australia, give precedence to survivors of domestic violence when it comes to eligibility for social housing. This policy could be adopted by Israel as well.

הפוסט Housing Opportunities for Women Survivors of Domestic Violence in Israel and in OECD Member States הופיע לראשונה ב-Adva Center.

Given the challenges associated with the maintenance and adequacy of numerous public and shared shelters, the primary and widely endorsed solution to ensure effective protection for the entire population is the construction of a mamad within residential units. This aligns with the directives of the Home Front Command, emphasizing that “Mamad provides the best response against the threat of rockets and missiles.”

Yet, the level of protection of the population is affected, among other things, by discriminatory planning policies and unequal allocation of resources.

In 1992, it has been mandated that every new residential construction includes a mamad. However, a considerable number of residential units constructed before 1992 lack adequate protection. Notably, there is a correlation between income levels and the presence of mamad-equipped apartments, as more affluent households, typically residing in newer developments, have a higher likelihood of having them. Consequently, there is a higher proportion of households with mamads in the higher income deciles, whereas the lower income deciles exhibit a lower percentage of households without such protection.

Presently, the primary strategy for increasing protection in existing apartments across much of the country revolves around urban renewal plans, with a particular emphasis on initiatives rooted in TMA 38 that was originally designed to strengthen buildings against earthquakes and not for protection against rocket fire. The fact that the possibility of urban renewal plans depend on economic feasibility and the potential for entrepreneurial profit left out of the plan many apartments in Israel, mainly in the periphery.

Addressing the challenge of safeguarding residential apartments in Israel comprehensively and over the long term requires an integrated strategy that includes strengthening against earthquakes and restoration of old buildings, within a broader policy of housing equality nationwide. Such a policy, which will be devoid of profit-driven motives and based on direct state investment, is the only a viable alternative to relinquishing the responsibility for protection, specifically in housing matters, to the ‘private market’.

Protection of residents of the conflict line communities in the north and south

Even the government policy of financing the construction of shelters in localities very close to the border suffers from under-budgeting and under-implementation. Apart from localities in the ‘Gaza Envelope’ within a range of up to 7 km from the Gaza border, in more distant localities, the proportion of unprotected apartments is relatively high, and the budget for construction of shelters is insufficient.

The city of Ashkelon, located beyond the 7 km range, and thus excluded from the shelters budgeting plan, has become a primary target for rocket attacks.  In March 2022, the government approved a plan to protect Ashkelon from trajectory-based attacks, allocating a budget of 320 million NIS over a 5-year period. Astonishingly, a mere two weeks (!) after publishing the detailed implementation plan, on July 30, 2023, the government issued a new decision that not only froze and shelved the outlined measures but also significantly curtailed funding for loans and grants earmarked for constructing mamads in the city. In fact, the government once again shifted the primary responsibility for safeguarding the city to urban renewal programs.

The Bedouin population of the Negev is particularly under protected.  The lack of shelters in the Bedouin communities results not only from the economic inability of this population to finance the construction of protected spaces, but also a result of the discrimination and neglect that characterize the government policy towards the Bedouin and Arab population in Israel.

In contrast to the communities in the Gaza Envelope, where a protection project and mamads construction were implemented in line with government decisions made in 2008 and 2012, localities along the northern border suffer from notable deficiencies in protection. According to the State Comptroller’s report, in 2018 there were 11,400 apartments lacking standard shielding in localities situated less than 4 km from the borders of Lebanon and Syria (15% of all residences in these areas). The Comptroller’s report highlighted a particularly critical situation in Arab communities in the north, that suffer from a low rate of residential protection, but also from a severe lack of public shelters.

As part of the budget proposal for the years 2023-2024 approved by the Knesset in May 2023, the budget for the “Defense of the North” program was significantly cut, and was set – under the new name “Defense of the Homeland” – to 68 million NIS in 2023 and 63 million NIS in 2024 (at 2022 prices). Although these amounts were similar to the executed amounts of the plan in previous years, they are much lower than the budget allocated for the implementation of the plan in 2022, and even lower than the original target set by the political-security cabinet, which was NIS 500 million per year.

הפוסט Shelters under market conditions: Residential shelters in Israel subjected to the ‘private market’ interests הופיע לראשונה ב-Adva Center.

The nature of socio-economic data is that they become known with the passage of time – some after a few months and others after a year or two or more. In the meantime, the latest socioeconomic data for Israel published by state institutions – the Bank of Israel, the Central Bureau of Statistics (CBS) and the National Insurance Institute (NII) – are, at best, for 2021, while some are for 2020 and others for 2019.

And during those years, we were subject to another worldwide crisis with socio-economic implications – the Corona epidemic. That epidemic, which has yet to run its course, though it was shunted to the margins of the news by the sights and sounds of the Russian war against the Ukraine, caused the death of millions, the closure of numerous businesses, unemployment rates unknown since the 1929 crash, as well as huge government outlays for aid to individuals and businesses and, of course, on health.

At the same time there were individuals who not only were not adversely affected during the Corona crisis, but actually profited.

This was the case of the ten richest persons in the world, whose combined worth prior to the epidemic stood at 700 billion dollars, a sum that had doubled by 2022 to 1.5 trillion dollars.

Israel’s wealthy partake of the same phenomenon: according to the financial newspaper “The Marker,” the wealth of the 500 richest persons in Israel quadrupled over the last four years and grew by 32% between 2020 and 2021.

The figures presented below reflect the first chapters of the story of the epidemic, which is also a story of the widening of inequality in Israel and elsewhere. This, in hope that the war currently raging in eastern Europe ends quickly and will not become the main story of Israel: A Social Report next year.

הפוסט Israel – A Social Report 2022: The Inequality Epidemic Still Rages הופיע לראשונה ב-Adva Center.

To launch this new document, we organized an event for the general public, in which representatives from the city of Vienna and from the Austrian Federation of Limited-Profit Housing Associations, as well as relevant Israeli representatives, discussed whether and in what way it may be possible to guarantee in Israel – housing for all.

PROGRAM:

Opening remarks

Max Grubman, Adva Center
Mr. Yaron Hoffmann Dishon, Adva Center

Introduction to Housing Policy in Vienna (In English)
DI Daniel Glaser, Department of Housing Promotion, City of Vienna
Dr. Gerald Koessl, Researcher at the Austrian Federation of Limited-Profit Housing Associations

Questions and Answers

Panel: What Can We Learn from the City of Vienna; How Can We Implement ‘Housing for All’ in Israel? (In Hebrew)

Moderator: Mr. Yaron Hoffmann Dishon, researcher at the Adva Center

Mr. Netanel Lapidot, Deputy Director for Assets and Companies, Israel Ministry of Construction and Housing
Ms. Ella Weber, Senior Planning Coordinator at the Strategy Planning Unit, Municipality of Tel Aviv-Jaffa
Ms. Riki Kohan Benlulu, Social Activist in the Israel ‘Forum for Public Housing’

// The project was supported by the Van Leer Institute in Israel // The document was published with the support of the Austrian Cultural Forum, Embassy of Austria, Tel Aviv

הפוסט Online Event: Housing for All in Israel – What We Can Learn from Vienna? הופיע לראשונה ב-Adva Center.

Israel’s top one percent received the most expeditious state protection and benefits. The Bank of Israel supported big corporations by purchasing 15 billion NIS worth of corporate bonds. This aid contributed to the fact that while the real economy shrunk, the Tel Aviv 90 Index increased by some 18% in value during the first year of the corona epidemic.

The government exempted the wealthy from the burden of participation in financing the costs of the corona crisis. Israel expended an estimated NIS 137.3 million on aid to businesses and citizens. As this sum was not budgeted, it increased the budgetary deficit and the national debt. The Netanyahu-Gantz coalition did not consider raising taxes, despite Bank of Israel declarations that tax increases were unavoidable.

If tax increases are not imposed on the wealthy, such increases will either fall to the lot of the middle class or, alternatively, result in the privatization or reduction of public services – moves that will hurt middle and low-income families. In light of these possibilities, the report recommends imposing a wealth tax.

Hi Tech in Times of Corona: Like its ultra-rich, Israel’s hi tech sector has not been adversely affected by the corona epidemic. In fact, the hi tech sector continued to grow despite the corona crisis. For example, the financial newspaper The Marker reported in January 2021 that “the 13,500 hi tech workers employed in the ten largest technology companies listed on the stock exchange gained no less than 2.5 million dollars in income.”

Small Businesses in Times of Corona: Small businesses are the main reason for the increase in employment in the Israeli economy that occurred over the past two decades and the concomitant decrease in unemployment. While the businesses in question are small, together they constitute the largest employer in the Israeli economy. In 2018, small and medium sized businesses accounted for 1.92 million employee posts, or 60% of the 3.17 million posts in the private sector.

Small businesses were the main losers in the corona crisis, primarily service providers, many of whom had become upwardly mobile due to increased consumption in the decades preceding the crisis. In 2020, private per capita consumption in Israel decreased by 11.1%, more than the average in OECD countries – 6.3%.

Dun and Bradstreet estimated that in the first half of 2020, 37,600 Israeli businesses shut down, among them 1,550 restaurants, bars and coffee shops; more than 1,000 construction and renovation firms; some 600 transportation companies; and 450 clothing shops. Their estimate was that by the end of the year, 80-85 thousand businesses would close down – an increase of 85% over 2019.

The chief economist of the Israel Ministry of Finance estimated in May 2020 that 54% of workers furloughed were employed in small businesses.

Food Insecurity in Times of Corona: The highest proportion of persons reporting food insecurity during the corona epidemic was found among Arab citizens of Israel. In April 2020, 23.5% of Arabs reported that they or members of their family had reduced the amount of food or the number of meals during the previous week, compared with 14.1 % among persons in the general population of Israel aged 21 and over.

Inequality in Health in Times of Corona: Israelis of low socio-economic status sickened more than Israelis of high socio-economic status, among other things due to the higher incidence of health risk factors like high blood pressure and diabetes among them.

The corona epidemic threatens everyone, but the threat is especially acute for persons whose living conditions promote contagion. Housing density and household size are larger among Haredi Jews and Arab citizens of Israel than among others, resulting in greater susceptibility to infection from the virus.

Another factor influencing the rate of illness from the corona virus is the sense of alienation of these same two population groups from the central government of Israel and its institutions, resulting in indifference or non-compliance with official instructions issued as to how to keep safe from contagion.

The result: the death rate of Arab citizens of Israel aged 60 and older from the corona virus was three times that of non-Haredi Jews; and the death rate of Haredi Jews four times that of non-Haredi Jews.

Mental Health in Times of Corona: The corona epidemic has had an adverse effect on the mental health of Israelis. During the first lockdown, about one-third (34%) of persons aged 21 years and over suffered from tension and anxiety. That proportion rose to 42% when the lockdown was lifted in July 2020. In November 2020 the proportion decreased to 37% — still quite high. Those reporting the greatest suffering from tension and anxiety were women and Arab citizens.

Feelings of loneliness and depression were revealed by the Citizen Resilience Survey conducted by the Israel Central Bureau of Statistics, which showed that in April 2020, 30% of interviewees aged 65 and over reported loneliness and 19% reported depression, compared with 24% and 16%, respectively in the general population.

Housing in Times of Corona: Before the outbreak of the epidemic (2018), Israeli households from the bottom income decile living in rental housing expended 54% of their disposable income on rent and related outlays. For households in the second lowest income decile, that expenditure constituted 34% of their disposable income; in both cases, housing expenditure was higher than the 30% considered the maximum households should have to pay for housing. The economic hardships of the epidemic for households residing in rented housing led to an increase in requests for rent assistance, along with an increase in the number of eligible households waiting for public housing units.

While the economic crisis accompanying the corona epidemic had an adverse effect on renters as well as on home owners with mortgage payments to meet, the benefits given by the government in the area of housing were directed not to them but rather to persons purchasing housing units as investments. With the expressed purpose of stimulating business in the real estate sector by incentivizing investors,  in July 2020 the purchase tax for investors was reduced, thus abrogating the increase made in 2015 to discourage real estate investments in favor of the purchase of own homes.

The full report is available in Hebrew here

// The report was produced in cooperation with the Friedrich Ebert Stiftung, with support from MAZON: A Jewish Response to Hunger and The New Israel Fund

הפוסט Social Report 2021 – Corona: Epidemic of Inequality הופיע לראשונה ב-Adva Center.

The good news is that since the 2008 real estate slump, the value of these properties has soared some 130 percent — more than anywhere in the West. This is an impressive value hike, certainly for an asset as conservative as homeownership, making real estate investments far more profitable than investing in one’s pension fund.

Climbing housing prices have been especially good for those fortunate enough to own at least two homes, which is about 10% of all households. If one of those homes happens to be in an area that is in high demand, then owners are even better off — even if the majority of real estate equity is still mortgaged.

Climbing housing prices have been especially good for those fortunate enough to own at least two homes, which is about 10% of all households. If one of those homes happens to be in an area that is in high demand, then owners are even better off — even if the majority of real estate equity is still mortgaged.

Much of this capital has been inherited and has naturally made the heirs’ lives more financially secure. But the gaps in housing capital in Israel actually create multi-generational inequality that is expanding at an ever-increasing rate.

This is because the top income decile has accumulated more than NIS 3 million (roughly $852,000) in equity from the apartments they own – 7.5 times more than the lowest-income decile, which accumulated only NIS 400,000 ($114,000) in equity.

“Young people who have an inheritance manage to buy an apartment at an earlier age. They live in a better location and can afford a better education. As they don’t have to spend all their money on housing, they have a better starting point [in life],” Yaron Hoffmann-Dishon explained to Zman Yisrael, the Hebrew sister site of The Times of Israel.

Hoffmann-Dishon is a researcher with the Adva Center, a Tel Aviv-based think tank that monitors social and economic developments. Continue Reading…

From an article by Omer Sharvit, published on the “Times of Israel”, 8 September 2019

הפוסט State’s inability to fix the housing crisis leaves many out in the cold הופיע לראשונה ב-Adva Center.

Dr. Shlomo Swirski, co-author of the report, contends that “the economic miracle of which the government boasts is relevant mainly for a minority of Israelis, whose achievements raise the general average. A real miracle will occur if and when Israel jettisons its policy of budget austerity and limited responsibility in favor of a balanced economic growth that benefits the general public. Dependence on the private sector with hi-tech at its head as the engine that will pull the whole economy forward has no basis in reality. The research and development centers that multi-nationals established here are interested mainly in “milking” the ability of Israelis; the present supply of educated manpower is sufficient for them and they have no incentive to expand the limits of the “start-up nation” located in Tel Aviv and its environs.”

Economic Growth
The Israeli economy did experience growth; however that growth was based to a great extent on an increase in private consumption – car imports, for example – which it can be assumed reflected the demands of the upper income deciles and led to their upgrading their own standard of living. The other side of the coin is the expansion of employment serving, usually at low wages, the increasing consumption of the upper income deciles, like saleswomen, waitresses, security officers, and the like.

“Let Them Go Out and Work” – and They Did
As Minister of Finance, Binyamin Netanyahu was responsible for widespread cuts in social security, under the slogan, “Let them go out and work.” The cuts, together with various programs designed to encourage employment, did indeed push many people into the job market. Between 2000 and 2016, the number of bread winners in households in the bottom income decile grew by 58%, in the second lowest, by 73%, in the third, by 45% and in the fourth, by 35%.

From the perspective of the new bread winners, there is much to be said for being in the job market, as living from work is considered more respectable than living from social security payments. However, the addition of more bread winners, even if it did increase household income, did not lead to a significant change in the distribution of income. Many of the new bread winners found workplaces hiring on a part-time basis paying low wages. In some instances this was done at a high social cost, for example, for men and women working at exhausting jobs in which they experience burnout.

The top income decile earned 12 times the bottom income decile; the top centile – 23 times the bottom income decile
Since 2012, the gross income of households in all income deciles grew by between 10% and 17%. At the same time, income gaps remained high: in 2016, the average gross monthly income of households in the top income decile was NIS 58,846, 12 times the average income of households in the bottom decile – NIS 4,898.

Discussions of income inequality usually focus on gaps between the different income deciles, but the gaps within the top income decile itself are especially high. In 2016, the average monthly income of the top centile of households – NIS 113,621 – was 2.2 times the average income of the nine other centiles in the top income decile, and 23 times the average income of the bottom income decile. In other words, households in the top centile are worlds away from the economy of the remaining 99% of households in Israel.

Tell me How Much You Earn and I’ll Tell You Where You Came From
The recent improvement in salaries is more notable among women than among men. Between 2000 and 2015, the percentage of women earning more than the average wage increased from 18.6% to 25.9%, while for men the increase was from 37.7% to 43.9%.

In 2016, the top of the income ladder was occupied by first generation Ashkenazi men who had arrived in Israel by 1989, with an average monthly wage of NIS 17,640; next were second generation Ashkenazi men, with NIS 15,099; followed by second generation Mizrahi men, with NIS 14,406; first generation Mizrahi men who had arrived by 1989, with NIS 12,761; Ashkenazi men who arrived after 1990, with NIS 12,005; and first generation Ashkenazi women who had arrived by 1989, with NIS 11,037.

A significant reduction occurred in the gap between second generation Ashkenazi and Mizrahi men. In 2016, the average salary of second generation Ashkenazi men was NIS 15,099, 55% above the overall average, compared with the average salary of Mizrahi men, which was NIS 14,406 – 48% above the overall average. Second generation Ashkenazi women earned an average of NIS 9,017, 93% of the overall average, compared with NIS 8,640 – 89% of the overall average, for their Mizrahi counterparts.

The average salary of Arab citizens of Israel was very low, compared to the overall average: in 2016 the average salary of Arab women was 51% that of the overall average and the average salary of Arab men was 76% of the overall average.

The average salary of Ethiopian Israeli men was similar: In 2016, the average salary of men was NIS 7,233 – 74% of the overall average.

Ethiopian Israeli and Arab women were at the bottom of the salary scale, with averages of NIS 5,376 and NIS 6,004, respectively.

A College Education Does not Always Promise Escape from Poverty
In 2015, Arab households living in poverty headed by persons with at least 16 years of schooling constituted 7.3% of all Arab households living in poverty, up from 2.6% in 2000. Jewish households living in poverty headed by persons with at least 16 years of schooling constituted 23.7% of Jewish households living in poverty, up from  14.5% in 2000.

And There are Some Who Forego Even Food
The economic situation of some Israelis is so dire that they are forced to forego the most basic of human needs: food. The proportion foregoing food grows with declining income: in 2013, 38.5% of persons of 20 or older in the lowest income bracket (households earning on average up to 2,000 per person) reported foregoing food.

Income Gaps are Higher after Retirement
In 2016, 25% of Israeli households headed by persons aged 25-54, most of them in the lower income deciles, were not saving for retirement. That same year, the average income from pensions of the top income decile of households headed by persons aged 68 and above was NIS 14,822. That was 25 times higher than the income of households in the third decile – NIS 562.

Only One-Third of the Cohort Goes to College
Looking at the cohort that graduated from high school in 2008, we find that only 79.2% of the age cohort was enrolled in the last year of high school leading to matriculation. That year only 44.4% of the age cohort passed their exams. Among those who passed, some had diplomas that did not entitle them to admission to institutions of higher learning. The result: only 32.4% of persons who were 17 years old in 2008 entered a university or an academic college by 2016 – 8 years after they graduated from high school.

The education gaps among different socio-economic groups are far from closing. Among students from localities in socio-economic clusters 1-4, the proportion going on to academic studies, which was quite low in 2000 – 22.1% — remained low 8 years later, in 2008 – 23.6%. During the same time, students living in localities in socio-economic clusters 8-10 went on to college at greater rates – increasing from 45.3% in 2000 to 53.1% in 2008 – an improvement of 17%. The four middle socio-economic clusters showed an improvement of 14%.

Most Israelis Cannot Purchase an Apartment in High-Demand Areas
For 60% of Israelis, purchasing an apartment in areas of high demand without significant capital of their own results in a lowering of their standard of living, due to high monthly mortgage payments.

Purchasing apartments as an investment is the prerogative of the affluent. In 2016, 29.1% of households in the top quintile owned at least two apartments – compared with 1.6% of households in the bottom quintile, 2.5% in the second quintile and 6.8% in the third quintile.

Health Has Become a Financial Matter
Private health insurance has become a huge financial bonanza: household expenditure on private health insurance (of both the health funds and insurance companies) and users’ fees for medications and treatments amounted to NIS 4.6 billion (2016 prices) in 2000; in 2016 the amount more than doubled to NIS 13 billion. One could argue that this is a tax just like the health tax paid to the National Insurance Institute (in 2016 the National Insurance Institute collected NIS 21.9 billion). However, in contrast to the health tax, which provides universal care, the tax paid by purchasers of private health insurance benefits only those who can pay more.

The Government Fails to Balance Market Forces
In 2015, civilian expenditures amounted to 30% of GNP. As everyone knows, Israel’s defense expenditure is high, compared to that of other western countries. Still, the low civilian expenditure can be attributed more to the policy of fiscal austerity than to high defense expenditures, which have declined in recent years as a percentage of GDP.

Civilian expenditures include, among others, monies designed to assist households and individuals in times of distress, like old age and disability pensions, services for infants, the elderly and the disabled, and tax benefits. In 2016, civilian expenditures in Israel amounted to 16.1% of GDP, compared with the average of 21% in OECD countries.

הפוסט Israel: A Social Report – 2017 – An Economic Miracle for the Few הופיע לראשונה ב-Adva Center.

In other words, what we are proposing is a massive increase and significant improvement in public housing, so that it becomes relevant to the middle class, mainly young couples seeking a roof over their heads that is close to good schools and employment offering a living wage.

The proposal is based on the estimation that the economic and social trends that led to the present housing crisis, foremost among them strong market forces commonly referred to as “the investors,” will continue into the foreseeable future, an estimation whose implication is that the model of home ownership, dominant since the establishment of the state, can no longer serve as the sole basis for a housing policy relevant to all.

Following are the main findings and contentions of the report:

1. The accepted rule in many countries is that the expenditure on housing should not exceed 30% of a household’s disposable income. A higher expenditure on housing results in a diminishing of the household’s ability to afford basic consumption items, increases its financial vulnerability and is liable to lead to a real decrease in its standard of living.
2. In actuality, many Israel households, both those living in rental housing and those paying off mortgages on their own apartments, expend more than 30% on housing: In 2014, for 5% of Israeli households, housing expenditures exceeded 30%. The expenditure includes monthly rent or mortgage payments as well as other expenses like water and electricity, maintenance and local taxes.
3. The situation of households with rental housing is worse than that of those living in their own apartments: in 2015, the average housing expenditure of households in the five lowest income deciles living in rental housing was much higher than 30% of their disposable income: In the lowest income decile, the average expenditure on rental housing amounted to 62% of disposable income, and for the next highest deciles, the average expenditures totaled 45%, 37%, 35% and 33%, respectively, of their total disposable income.
4. Our calculation shows clearly that at the present time, purchasing an apartment in high-demand areas is a privilege shared only by households in the top income deciles. For some 60% of households, purchasing an apartment in high-demand areas without the benefit of capital totaling 25% of the price of the apartment, results in a decrease in the standard of living.
5. The recommendation to create a public rental option, rather than continuing to base the rental market exclusively on private rents, emerges, among others, from figures showing that, in essence, the private rental market constitutes an arrangement whereby low-income households transfer capital to high-income households – an arrangement that makes an important contribution to social inequality. 71% of rent monies transferred to homeowners who rent their premises, end up in the pockets of households in the three highest income deciles. In 2015, the top income decile alone received 6.3 billion shekels in the form of rent, which amounted to 45% of the total income from rent of all households renting out premises they owned.
6. The model we propose, centered on a massive increase and significant improvement in public housing, is based on the experience of other countries, mainly in western Europe. At the present time, Israel ranks low in international comparison when it comes to public housing. In 2015, only about 2% of Israeli households were living in public housing, while in European countries, among them Holland, Austria, Sweden, Great Britain and France, the percentage of households residing in public housing units was much higher and ranged between 17% and 32%.
7. Based on the accumulated experience in European countries with regard to extensive public housing, and taking into account real construction times, we propose that the government create a supply of 450,000 public housing units over the next 10 years. This supply should be maintained at a level that constitutes half of the rental housing market and some 15% to 20% of total housing units in Israel.
8. Under the model we propose, the new housing units built are to remain under public ownership and continue to constitute part of the supply of public rental housing, without a stipulation that they be sold to private owners after any given period of time. In addition, the allocation of public housing units is to be done according to criteria that include all households that do not own homes. At the same time, we assume that most of the demand will come from households in the six lowest income deciles.

We propose that the government become an active, direct agent in the housing market in order to create a public option for long-term rental, one that will operate side by side with the options of home ownership and private rents.  Our proposal is being offered as a housing solution for households that either are not able or do not desire to purchase an apartment and at the same time is to serve as a way of lowering rents in the general housing rental market.

הפוסט Public Housing Option הופיע לראשונה ב-Adva Center.

State stakeholders in the housing market – Ministry of Finance, Ministry of Construction and Housing, Bank of Israel, Israel Land Authority, and local authorities – are reluctant to take real steps toward fulfilling the government’s promises to lower housing costs.

Israeli governments are also pressured by powerful private sector actors – the big banks and real-estate corporations – which profit directly from the housing market purchases of the top income bracket.

The authors note that current government policy does not benefit the general public and actually is detrimental to the Israeli economy, as monies that might otherwise be invested in economic activity generating new jobs are invested in real estate.

Thus, it appears that the government vision articulated only a decade ago to provide “a suitable apartment to every family at an affordable price in an appropriate neighborhood” – is destined to remain a dead Letter.

The Share of Affluent Households in the Housing Market

1. The rate of ownership of at least two apartments among the top quintile (9^th and 10^th income deciles) increased from 8.9% in 2008 to 22.4% in 2013. Among the fourth quintile (7^th and 8^th deciles), rates increased from 4.5% to 9.6%.
2. In 2014, apartments owned by the top decile were on average 76% more expensive than an average apartment owned by the rest of the population (an average apartment owned by households in the top decile was worth about NIS 2.54M; an average apartment of households in deciles 1-9 was worth about NIS 1.44M).
3. Some 280,000 apartments defined by the State Revenues Authority at the Finance Ministry as “investment property” were purchased between 2002 and 2013. Households belonging to the top income decile purchased apartments whose total cost accounted for 40% of the total value of the investment properties; the top percentile alone acquired apartments amounting to close to 10% of the total value of the investment properties purchased over this period.

The Housing Crisis 

1. Between 2007, the eve of the financial crisis, and 2015, housing prices doubled, while average and median wages increased by only a few percentages (data for median wage from 2014).
2. Between 2003 and 2013, the rate of home ownership decreased by 7.5% and 6.1% among 4^th and 7^th deciles, respectively.
3. Among married 20-29-year-olds, the percentage of families living in their own home declined from 55.8% in 1997 to 43.3% in 2012. In the 30-39 age group, it fell from 74.3% in 1997 to 63.4% in 2012. This while the rate among married 50-59-year-olds increased from 86.1% in 1997 to 87.8% in 2012. In the 60+ age group, it jumped from 78.9% to 86.7%.
4. The housing problems among the Arab citizens are especially pronounced, as a result of limited development options, the absence of planning and state investment, lack of or dilapidated infrastructure, crowding and poor living conditions. In general, Arab communities are not included in national housing plans.

State Institutions Are Not Necessarily Enthusiastic about Lowering Housing Costs

1. The Construction and Housing Ministry no longer acts to counter market forces. The Ministry’s budget, which in 2000 totaled NIS 9.84B, amounted to only NIS 1.89 B (in 2015 prices) in 2015. In 1997, the Ministry’s budget constituted 5.1% of the total state budget; in 2015 it amounted to only 0.5%.
2. The Ministry of Finance stands to “benefit” from the real-estate bubble. In 2014, the Ministry collected some NIS 7.7B in real estate taxes – a 66% increase compared to 2004. In addition, the state benefits from VAT on new apartments. According to Bank of Israel data, in 2015 this amounted to some NIS 7.6B.
3. The interest policy of the Bank of Israel is one of the causes for the price hike. At the same time, the bank is worried about the possibility of a significant decline in prices. The bank policy is based on the assumption that a sharp drop in real estate prices might lower the value of state assets and translate into a shrinking of economic activity and consumption, which in turn might harm the economy.

The Big Banks and Real-Estate Development Companies Blossom in the Bubble 

1. The banks’ net income from mortgages and credit to the construction and real-estate industries almost tripled between 2005 and 2015. In 2015, the net income of the five largest banks from mortgages was NIS 926M and from extending credit to the construction and real-estate companies, about NIS 2.2M.
2. In 2007, the banks extended some NIS 2B in mortgages each month; by 2015 this figure had become 2.5 times larger, amounting to NIS 5.4B.
3. The construction and real-estate industries continued to dominate business credit. In 2015, credit to construction and real-estate equaled 29.3% of the total credit extended to the business sector – the largest percentage among industries.
4. The average gross profit of the sub-contractors of the large real-estate companies in Israel from residential projects rose from 16% in 2007 to about 19% in 2015; it climbed to 24-25% during 2011-2012. In 2015, the gross profit of the ten largest real-estate companies was NIS 1.1B, compared with NIS 600M in 2007.

The Entire Israeli Market Stands to Lose 

Between the early 2000s and the real-estate crisis of 2008, investment in residential construction constituted about a quarter of the total investment in fixed assets. Since then, this investment has increased significantly; in 2015 it amounted to about 34%. In other words, monies that might have been invested in the real economy and in creating jobs were diverted to financial investments in housing.

הפוסט The Split Housing Market: “Market Forces”, the Housing Crisis and the Forgotten Vision הופיע לראשונה ב-Adva Center.