Jan 26, 2010

Subsidizing housing in Jerusalem

Chaim Miller, director of the organization called "The Movement For Jerusalem and its Residents", is working with MK Ketzaleh (National Union) to pressure the government to build thousands of apartments in Jerusalem for young couples and large families, offering them grants and other means to make it cheaper and more affordable, rather than build thousands of apartments way out in different areas around Israel (specifically like Kasif in the Negev and Harish in the Wadi Ara). (source: Ladaat)

I am all for building in Jerusalem. Build thousands and thousands of apartments. If they can convince the government to do it, great.

There are two points about this that bother me.
  1. the idea that Haredim should only live in Jerusalem or other parts in the center of the country.
  2. The attempt to influence the real estate market by letting expensive land be sold cheap, or giving away money to buy that expensive land
Regarding point #1 - Many are upset that the haredim are being sent to remote parts of the country. The demand to build thousands of apartment in Jerusalem is only to avoid sending the haredim to buy in cheaper areas that are further away. There is no reason Haredim should say they can only buy in Jerusalem, and not in more remote areas. Land in the Jerusalem area is very expensive, and if they want subsidized housing they should be willing to accept land in cheaper areas.

Regarding point #2 - Whoever can afford to buy in Jerusalem, all the power to him. But to force the market by either driving prices down artificially or by offering subsidies so people who cannot afford suddenly can easily own expensive land is not right. This drives down the value of land held by people who invested their money in expensive land. Why should the government subsidize expensive land when they can subsidize cheap land? Nobody owes anybody anything in this regard, so the demand to cheapen the land so a specific sector can buy it is illogical, and unfair to others who paid full value.

Let the government build thousands of apartments in Jerusalem and sell them at full value. Then whoever really wants to live in Jerusalem, and can afford it, will buy those apartments.


  1. I disagree with you Rafi. At the moment we have a situation where the properties in Jerusalem are so expensive that only "rich Americans" and the French are able to buy them. Israeli families who have lived in Jerusalem often for generations can't afford it - even where both work. Many of the "foreigners" don't actually live in their homes, using them as investments and visiting twice a year. This means that when it comes to election time, there are less Jewish voters each time. This is actually a proven fact, and something that we should be very concerned about.

  2. and the answer to that is building housing for others and giving away money for them to buy it? Then the value of the apartments shoots up because it si in jerusalem and they only paid half the value (or whatever the percentage might be)?

    Why do they deserve all this free money?

    Find a solution. I agree. Maybe expand outwards to areas like Tel Zion where land is cheaper. Maybe something else is a better solution. But giving away free money on the backs of people who paid full value and will be harmed in the process is not the answer.

  3. There are times when a community needs/wants younger members. In such cases financial incentives to help encourage the move is appropriate.

    The problem is this is not a long term solution to the failed economic model that lead to the demand in the first place. What happens when it is time to marry off there children. There will be no more land left and they are going to have to sell off their homes for a huge profit to buy apartments in less expensive areas.

    If the plan was to subsidize housing for young people across the board there may be something to talk about. In the mean time I hope there are going to be severe restrictions on the ability to sell off these government paid for homes.

  4. Rafi, I think you're being too dogmatic about the meaning of "free markets". Subsidized housing has been a part of almost every free market economy for ages. Rent control in NY? Low income housing in nearly every urban center in America? You're acting like this an idea straight out of the Soviet playbook, which I just don't think is the case.

    Look where unfettered markets got us in America. A big fat recession. There needs to be a balance between government interference and free markets. Why does anyone deserve any government largesse? If the gov't has an interest in populating J-m with certain types of pple (young, Jewish, working, Zionist, university students) then it will provide incentives for these people to stay.

    ehwhy, if there's one thing we learn from the U.S. housing bust, is that housing prices do not rise forever. There will probably be a bust or a downturn sometime between now and when these young families' children need to buy, so I really wouldn't worry too much about their children.

  5. Shalom: There are hundreds of thousands of people in Jerusalem, and only a few thousand empty apartments owned by rich foreigners. The overall impact is minimal.

    Abbi: Sometimes subsidies are necessary for a particular purpose, but they should be kept to a minimum. Beggars can't be choosers, and if you're asking the government to build new housing for you, there's no reason why the government should be forced to build it in the most expensive part of the country.

    Also, Jerusalem prices will never be cheap because the supply of land is inherently limited and, with growing population, demand will go up not down.


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