Israel’s Central Bureau of Statistics reports, as of early 2024, that the average price of an apartment in Israel is 1.974 million shekels, compared to the average monthly salary of 12,492 shekels. Therefore, 158 monthly salaries (about thirteen years) are required to purchase an apartment in Israel. According to data from the World Bank and other government entities, analyzed by the doyen website NUMBEO, to purchase a 90 square meter apartment at the national average, 14.2 years of work (170 months) are required (the calculation is made according to a specific formula that weights disposable household income). In a global comparison, this is a discouraging figure: according to the same measure, 4.1 years are required in the USA; in Italy – 10.2 years; in the UK – 9.9 years; in Germany – 9.8 years; in Spain – 7.4 years; in Denmark and Belgium – 6.8 years. These are dramatic gaps, meaning that in Israel, many more years of work are required compared to similar Western countries.
On March 30, 1995, the 25th government of the State of Israel, led by then-Prime Minister Yitzhak Rabin, made a dramatic decision: “to lead a reduction in apartment prices.” The decision stated that the way to achieve the goal would be “to expedite construction on land held by government entities.” The decision mentioned a potential construction of 290,000 housing units. The Rabin administration’s decision at the time was made in response to a report by then-State Comptroller, Supreme Court Judge (retired) Miriam Ben-Porat, titled “The Planning and Marketing of Land for Residential Construction.”
Twenty-nine years have passed since then – but it seems that the only thing that has changed is the names of the players: the State Comptroller publishes a scathing report on the housing crisis, the government adopts its conclusions – but almost nothing changes. As of the end of 2022, there was a shortage of about 200,000 residential apartments in Israel due to rising housing demand, with only 14% of the apartments approved between 2017-2021 by public initiatives actually marketed to the public (excluding private initiatives). It should be noted that in the meantime, the housing price index has jumped by more than 200% over the past 15 years.
In other words, since the days of the Rabin government, the dream of owning a home for Israelis has become ever more distant. Those who do manage to secure a roof over their heads are forced to part with enormous sums, with mortgage commitments spanning decades that their modest salaries struggle to cover.
“Anyone who sells you miracles is lying – there’s no magic trick that can instantly lower housing prices; you have to work at it,” said former Finance Minister Yair Lapid in 2015 during that year’s election campaign. Lapid made these remarks shortly after being dismissed from his position by Prime Minister Benjamin Netanyahu in December 2014.
Lapid was right. No miracle has occurred to lower housing prices, and they certainly won’t plummet with the wave of a magic wand. Lapid himself tried a “magic trick” in the form of the “Zero VAT” plan he conceived as Finance Minister, which ended in utter failure after no economist agreed to support it – “This is not a plan for economists,” Lapid responded. Lapid’s plan drew sharp criticism from the start and even led to the resignation of the Chief Economist of the Ministry of Finance, Dr. Michael Sarel.
Planning for 2.6 Million Housing Units
In contrast to pulling magic tricks out of a hat, proper and long-term planning is, of course, a crucial and particularly effective condition for a dramatic reduction in housing prices – both in the country’s periphery and its center. However, planning appears to be almost a dirty word in Israel, particularly in the real estate sector. Deep examination of the State Comptroller’s reporting and numerous studies on the subject leads to an unequivocal conclusion: housing in Israel is exorbitantly expensive not only due to supply and demand dynamics but largely because the state, particularly the unelected bureaucracy, insists on holding the real estate sector captive in a chaotic state.
The de facto policy of non-planning leads to increasing dependence on the whims and personal agendas of various officials who step into the public’s shoes and decide on their behalf which project is “worthy” of being developed, which population group “deserves” substantial discounts, and which does not. Elected officials are either absent or, at worst, support the rule of the bureaucrats – who, of course, enjoy broad authority but shirk responsibility for their actions, passing it on to politicians. In other words, the state does everything it can to keep prices as high as possible – and from there, as a paraphrase to ‘Krembo’ (Rami Heuberger) from the iconic film ‘Operation Grandma,’ they gradually increase.
In 2017, the government passed the ‘Strategic Housing Plan,’ intended to define for the Planning Administration and other planning bodies, including the Israel Land Authority (ILA) – which holds most of the land in the country – the quantitative targets required to meet the housing needs of the population. According to the plan, from 2017 to 2040, approximately 2.6 million housing units (HU) need to be planned. A significant portion of the detailed planning targets relied on planning by the ILA within the framework of urban renewal as opposed to new development on freshly released state lands.
In May 2023, State Comptroller Matanyahu Engelman published a critical audit report bearing the same name as the one published by Comptroller Miriam Ben-Porat 28 years earlier: “The Planning and Marketing of Residential Land.” The report was expected to shake the foundations of the state, revealing that the government plan largely remained on paper. “The Israel Land Authority (ILA) and the Ministry of Construction did not formulate an action plan to initiate detailed planning according to the strategic planning action plan,” the comptroller states, adding, “The Ministry of Construction, the Housing Headquarters, and the Budget Department in the Ministry of Finance, in coordination with the ILA, did not formulate an action plan for urban renewal in accordance with the government decision. In high-demand areas, housing units were planned at a rate lower than the strategic plan targets, while in the periphery, there were planning surpluses.”
The report also indicates that the Planning Administration – the body responsible for planning physical projects in Israel (subject to the Ministry of the Interior) – did not regularly report to the Housing Cabinet on the strategic plan as required by the government decision. Furthermore, the Israel Land Council – the body supervising the ILA – did not review the strategic plan and thus did not instruct the ILA to formulate a long-term work plan according to the plan’s targets. As a result of the utter malpractice of these bodies, nearly 30% of the plans submitted for approval to the planning committees between 2017 and 2021 were not approved.
Housing Prices Increased by 200% – Incomes by 50%
The detailed, in-depth report by the comptroller looked straight into the eyes of the Israeli planning bluff and successfully broke it down with a comprehensive analysis. Media outlets merely copy-pasted a small portion of the report’s summary, and aside from explosive headlines and dramatic slogans, did not enrich their readers with substantial knowledge.
“From January 2007 to July 2022, the housing price index rose by about 208%,” states the report, which reviewed a significant period of approximately 15 years. Most of the price increase occurred in the last decade, starting from January 2012, during which the housing price index soared by about 90%. By comparison, the consumer price index during that period rose by only 11%, meaning housing prices jumped almost nine times more than the prices of consumer goods and services, making the rise in housing prices formidable.
Far more concerning is that the meteoric rise in housing prices is dramatically higher than the income growth of Israeli citizens: between 2007 and 2019, the average gross household income increased by only 50%. Even when considering black market income and additional non-wage incomes (such as investments and inheritances), the gap is staggering. This disparity explains the immense burden placed on the average Israeli, especially on the lower deciles and the middle class.
In a country with proper governance, this issue could be dismissed by the “free market” principle – that is, price increases result from the strict rules of supply and demand. Meaning, if the demand for real estate is so high, private developers would be encouraged to begin a building frenzy, from which they would reap profits until prices stabilize. However, that scenario only applies when the state functions correctly and implements a free-market policy for its citizens. In reality, land policy in Israel is among the most centralized in the Western world, and perhaps among the most centralized globally: only about 10% of the land in Israel is privately owned, meaning that 9 out of 10 dunams in Israel are controlled by the state. If the state wishes, prices will drop; if it wishes, prices will continue to soar. What did the state choose? You guessed correctly. According to the National Economic Council at the Prime Minister’s Office, there is a shortage of at least 189,000 housing units in Israel “because the number of units built was less than required to meet housing needs.”
The most significant shortage is in the Central District (Sharon, Petach Tikva, and Rehovot sub-districts), the most populated area in Israel, home to about 2.4 million residents. This district lacks about 55,000 housing units. The Jerusalem District, the next most affected area, has a shortage of about 46,000 units. In the Southern and Tel Aviv districts, the shortage stands at 34,000 and 25,000 units, respectively. In Haifa and the Northern districts, the shortage is about 15,000 units each, but these figures may not fully reflect the actual situation, as will be revealed by further data.
In other words, the land monopoly known as ‘the State of Israel’ has built significantly fewer housing units than needed by its citizens. Naturally, when demand for apartments is high and the supply of apartments is low, prices skyrocket. And who benefits from rising prices? The state, of course.
Land Authority Revenues Soar by 700%
In 2022, alongside the meteoric rise in housing prices, the Israel Land Authority (ILA) celebrated an all-time revenue record of 41 billion shekels. This figure, which seemed like a wild fantasy just a few years earlier, underscores the dramatic financial shifts within the organization. To provide context, until 2016, ILA’s revenues were in the single-digit billions, ranging from 6 billion in 2013 to 9.5 billion in 2016. In 2017, revenues jumped to 16 billion shekels, stabilizing around 13 billion by 2020. The significant turning point came in 2021, with massive revenues of 31.5 billion shekels—an increase of 2.5 times compared to previous years. Most of this rise occurred in late 2021, and by 2022, another record was broken, surpassing the 40 billion shekel mark.
The implications are clear: within less than a decade, ILA’s revenues soared by almost 700%, with a mostly linear increase. The official figures for 2023 have not yet been published, but it is known that despite a slight decrease compared to 2022, due to the global economic crisis and the war that broke out on October 7, 2023, ILA’s revenues still totaled at least 30 billion shekels.
If one suspects that the flood of money into ILA’s coffers was the result of meticulous budget planning, the opposite is true. The protocols of ILA’s meetings reveal how the budget was passed without oversight or prior approval, allegedly in violation of the law. On December 16, 2021, a meeting of the Israel Lands Council – the body overseeing ILA, chaired at the time by then Housing Minister MK Ze’ev Elkin – was held to discuss ILA’s budget. However, this was a pointless discussion: the state budget, including ILA’s budget, had already been approved by the Bennett government about a month and a half before the council meeting in November 2021. “It’s a bit absurd to me,” Elkin admitted to those present, adding, “We won’t make a mockery of ourselves by approving something that has already been approved, without us.”
Elkin and ILA CEO Yaakov Quint tried to evade responsibility and blame previous governments for the failure (“this has been the practice for at least two decades”), but this is misleading: the previous ILA budget, which passed at the beginning of 2018, was presented and approved by the Israel Lands Council before being approved by the Knesset—as required by law.
The chaos did not end there: ILA’s finance officer, Yair Carmel, predicted that the authority’s revenue for 2021 would amount to about 16 billion shekels. In reality, the revenues were almost double that figure. Ultimately, ILA exceeded its revenue collection targets by hundreds of percentage points: while ILA’s surplus revenues (profits) were supposed to amount to about 6.2 billion shekels, they eventually totaled 21 billion—a gap of 250%.
Although Elkin promised at the end of 2021 that there would be a “serious” discussion about ILA’s budget for 2022, the promise was not fulfilled. Throughout that entire year, not a single budget discussion took place. The lack of oversight had its effect as ILA enriched its coffers by monstrous proportions – unrelated to any budget planning. While the official budget book allocated ILA surplus revenues of less than 3 billion shekels, in reality, the figure was about 25 billion, at least ten times more. These figures were revealed in a study conducted by Attorney Ron Ruggin, an expert in land policy and an adjunct lecturer at the University of Haifa. “To the best of my knowledge, there is no precedent for this in the history of Israel’s budget laws,” says Ruggin, describing the current situation as a “historic catastrophe.” For young Israelis and unfortunate home buyers, “the enormous excess collection compared to the budget law is a significant strategic failure that points to a policy of imposing a heavy financial burden on home buyers in Israel.”
Land Component Soared from 140,000 to 550,000 Shekels
Most of ILA’s surplus revenues are transferred to the Ministry of Finance. In other words, the state exploits its monopolistic power to reap huge extra-tax revenues at the expense of its citizens – mostly from the productive sectors who serve in combat units in the army and pay high taxes. On the other side of the equation, these massive sums barely are hardly returned to the public in the form of new housing.
ILA was quick to boast about the fantastic revenue figures, adding data meant to signal that the enormous income was not at the citizens’ expense, but for their benefit: “ILA broke a record in marketing,” read a press release at the beginning of 2023, which quickly made its way to most media outlets. ILA CEO Yanki Quint bragged, “We marketed more housing units across the country than there are in all of Haifa.” But the facts indicate a completely different reality: the increase in ILA’s revenues did not result from increased marketing, but from a spike in land prices. In other words, Israelis are paying hundreds of percent more for the same piece of land, while the Israel Land Authority celebrates.
According to Ruggin’s research, land purchasers paid ILA an average of 140,000 shekels in 2014 for the land component (aside from development) of residential units. In 2015-16, the amount rose to about 175,000 shekels, and by 2019, land buyers had to part with 240,000 shekels for the land component per unit – an increase of about 70% within five years. The prices only continued to climb from there, and by 2021, the figure had jumped to 450,000 shekels. By 2022, it had reached about 550,000 shekels – a doubling of the payment within two years and a nearly fourfold increase in less than a decade. These inconceivable figures show that while ILA is reaping profits, the number of Israelis benefiting from them is stagnant.
Ruggin’s research received strong backing from the highest professional authorities, foremost among them the Governor of the Bank of Israel, Prof. Amir Yaron. “The pace of marketing has decreased, the rate of unsuccessful tenders has risen, and this phenomenon could lead to a slowdown in the rate of construction starts,” the governor said in July 2023 during a Knesset discussion on the housing crisis. The governor regularly criticizes ILA for its failures in marketing land – a failure that directly leads to increased housing prices.
Earlier this year, Prof. Yaron clarified that ILA is as much to blame for housing prices as the war. “Land prices need to adjust so that the return to contractors is balanced,” the governor explained in another Knesset discussion. “This should be done by adjusting land prices, conducting tenders with existing infrastructure, and lowering minimum prices. The number of successful tenders has significantly dropped, so even without the war, we would have seen some reduction. The key is to increase supply in all processes, from planning onwards.”
The governor is not alone in his opinion, and the State Comptroller has also spared no words to highlight ILA’s repeated failures. The Comptroller’s examination revealed that no less than 35% of the public tenders published by ILA for land marketing between 2017 and 2021 failed miserably. About half of the unsuccessful tenders were published in the periphery— the south, the north, the Golan, and Judea and Samaria. According to the Comptroller there was a drop of about 20% over those years in the actual transactions carried out by ILA, after ILA independently decided to reduce its transaction target by a third, from 45,000 to 30,000 housing units, without approval from – or even informing – the government. “ILA does not have comprehensive and up-to-date information on the extent of residential land for which agreements with developers have expired and on which housing units have not yet been built,” the Comptroller states. “ILA does not monitor the extent to which developers meet the terms of the agreement regarding the completion of construction, and therefore does not have a complete picture reflecting the construction status on the lands it allocated.”
As a result of this scandalous conduct, the percentage of housing units marketed out of all the housing units approved in Israel Land Authority plans was only 2% in 2019. “This is a low rate of utilization of planned land for marketing purposes, especially in the years 2019-2021,” the report states. Clearly, the existing planning potential for residential purposes is not sufficiently utilized for marketing.
Manipulative Presentation of Data
The State Comptroller’s report also found that 35% of the 328 plans approved between 2017 and 2021 faced inherent development obstacles, most of which occurred during the marketing phase. It appears that ILA manipulates data to create a misleading appearance of success that does not reflect reality. “In plans with significant obstacles, ILA classifies all housing units in the plan as ‘blocked,’ even though, in reality, only some are blocked,” the Comptroller states. “In such a situation, it is difficult to obtain reliable information about the extent of any given obstacle, prioritize solving it, or formulate an appropriate action plan to remove it.”
The manipulation of numbers does not stop there. According to the reports ILA submitted in its annual reports, it met the government’s land marketing targets in all years except in 2019. However, it turns out that these optimistic figures are not accurate. “Housing units were published in a land marketing tender in a given year and reported as marketed that year, but when the marketing fails, they will be reported again if they are marketed in another tender in a different year,” the Comptroller stated in revealing ILA’s misleading practices. “Hence,” the report concludes, “the cumulative reported number of marketed housing units over the years is greater than the actual number added to the market.”
The reported data also included marketing done without a tender, although the government’s targets for ILA referred only to marketing through tenders. Sometimes, it turns out, ILA publishes tenders at the end of the year that are not sufficiently mature and include obstacles known at the time of publication. For this reason, some tenders are repeatedly postponed or canceled and then republished. “Housing units in these tenders are sometimes counted in the number of units ILA marketed both in the years their marketing was canceled or failed and then again in the year they were republished,” the Comptroller concludes.
Unfortunately, were it not for the Comptroller’s reports, no one would have exposed ILA’s bluff. The reason is that the Israel Land Council – the oversight body that “made a mockery of itself,” in the words of former Minister Elkin – did not perform its duties: “From 2017 to 2022, the council did not discuss the issue or examine whether ILA fulfilled its obligations according to the strategic plan and whether its targets aligned with the plan’s goals.”
The accumulation of data leads to a painful conclusion: the body that should be concerned with the welfare of citizens primarily looks after itself, as if it were a business entity aiming to maximize profits. This is a unique case where the more ‘successful’ the ‘business’ is, the less satisfied the boss (the Israeli government) and the customers (the country’s residents) are. The problem is that the government and citizens’ ability to influence ILA is limited, at best.
