Photo Credit: Shlomi Cohen/Flash90
Finance Minister Israel Katz (Likud) and Construction and Housing Minister Yaakov Litzman (UTJ).

Finance Minister Israel Katz (Likud) on Sunday approved the plan submitted by Construction and Housing Minister Yaakov Litzman (UTJ) known as “Reduced Cost Housing.” The plan was put in place about three months ago for Katz to sign, replacing the failed housing plan of his predecessor, Moshe Kahlon. After several disagreements, Katz decided Sunday night to approve the plan that will allow at least some of the 8,000 housing units that depend on special tenders to be realized.

According to the new plan, the country will be divided into three areas, where different marketing methods will be carried out, to enable a variety of housing solutions at a reduced price in different areas.


Minister Litzman, who is also Chairman of the Israel Land Council, said in a statement: “The updated range of marketing methods will enable more accurate solutions to be provided to various areas around the country – starting from land tenders in the most expensive areas in the country, outside the reduced cost housing tenders; through reduced cost housing tenders with significant but reasonable discounts, where, in some cases, the loss of income from the land will be reduced; to tenders in which the development costs will be subsidized considerably for the tenders to be successful.”

“I would like to thank Finance Minister Israel Katz for his mobilization for the new program to bring about a solution to the housing crisis in Israel,” Litzman said, adding, “My thanks to the Director-General of the Ministry of Housing, Yair Pines, to the Chairman of the Israel Land Administration Authority, Adiel Shimron, and the members of the Israel Land Administration Council, for their joint work.”

The following are the main components of the new plan:

• Marketing in a reduced-cost housing track will be carried out between the years 2020 – 2023.
• Marketing at the reduced-price housing framework will be carried out in areas that are not “luxury” areas.

Among the new marketing options approved by the council:

• Competition for the price per built-up square meter – the price of the land and development expenses is fixed in the tender, and the bidders will compete for the lowest price per built-up square meter when a minimum price per square meter is determined. The competition in this case will be for the additional payment for the land.
• Competition for the price of the land – the price per built square meter and development expenses is fixed in the tender, and the bidders will compete for the highest price for the land. Competition among the bidders will be over the cost of the development expenses.
• Competition for the size of the development expenses – the price per square meter of a built-up square meter and the price of the land are fixed in the tender, and the bidders will compete for the extent of the development expenses.

Some in Israel’s real estate industry have expressed their concern that the return of tenders where most bidders will be, in the central area around Tel Aviv, compared to large discounts and grants in the periphery, would drag the market into rising prices in the center and reduced prices in the periphery, which would widen socio-economic gaps.

The demand areas will be defined as second-tier cities such as Be’er Yaakov, Rehovot, Netanya, Modi’in, Yavne, and Ashdod.

Luxury areas will be defined as areas where apartment prices exceed NIS 22,000 ($6,736) per square meter, where discounts will be completely abolished.

According to the Litzman plan, grants will be distributed in the periphery for second-hand apartments up to the value of NIS 700,000 ($21,435), however, the implementation of this plan requires budget approval compared to a decision already made by the Real Estate Authority to cancel the discounts in the expensive center around Tel Aviv.

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