"Long-term rental is an essential component of a modern housing market"
Is the residential culture in Israel changing, or is the price surge forcing a new reality? While many are torn between the aspiration for homeownership and the economic need for stable rent, the housing market struggles to provide answers, and industry leaders explain why the only way to lower prices is to expand supply from all directions.
Rental prices do not stop rising, and the supply of apartments for rent in Israel is not increasing accordingly. The result is very high rental prices in some cities and a lack of adequate housing solutions for a growing segment of the population. If once most Israelis wanted to purchase an apartment, today there are quite a few who are willing to rent and would be happy to do so in long-term projects with stable contracts — a product that is almost impossible to find in the country.
Although the infrastructure exists, the economic feasibility in today's market is problematic, and the government does not give the issue sufficient attention. "The rental market has undergone a significant change in recent years," explains Amit Gottlieb, chairman of the Contractors and Builders Association of Tel Aviv and the Center. "More and more Israelis are living in rentals for long periods, but the market, based mostly on private landlords, struggles to provide the stability and certainty that households need for long-term life planning. Long-term rental should become an integral part of the housing culture in Israel, and for this, a change in perception is also required."
Gottlieb adds: "The most significant step the government should take is the restoration of incentive mechanisms under the Law for the Encouragement of Capital Investments, in a format that allowed entrepreneurs and institutional bodies to enter the field in significant volumes. At the same time, it is necessary to reduce the purchase tax, lower the cost of land, and reduce the taxes and levies imposed on long-term rental projects. As long as the fiscal burden remains high and yields are low, capital will continue to flow to other investment channels."
Eyal Handler, chairman of the Knaan Group, points to a possible solution: "The real solution to the rental distress starts with expanding institutional housing: projects with long-term contracts, fair prices, and without the sword of eviction over the neck at the end of every year. Alongside this, one cannot ignore the private sector: relief for investors who hold apartments for rent increases supply and prevents the emptying of the free market."
Yishai Rot, CEO of Shoval Handasa, also addresses the issue: "Special projects for long-term rental should be designated at a controlled price and with government subsidies. One must remember that an investment apartment today is considered part of the inheritance plan of Israelis for their children. The removal of private real estate investors actually strengthened the large real estate companies, which in recent years have equipped themselves with huge stocks of apartments for rent, in order to enjoy the benefits of the Law for the Encouragement of Capital Investments. Beyond the fact that the phenomenon fueled the rise in prices, these are apartments that were removed from the free competition market."
"Distress that requires a broad response"
Michal Gur, CEO of the Peretz Bonei HaNegev Group, explains why it is not possible to find long-term rental projects on a large scale: "Tenders for institutional long-term rental fail due to a lack of feasibility for entrepreneurs in a high-interest environment. Private investors do not increase the supply of new apartments in the rental market due to low rental yields and the halt in the rise of apartment prices, which does not guarantee a return from value appreciation in the near term."
Haim Froimovich, chairman of the government company Dira LeHaskir, believes that alongside increasing the supply of apartments in institutional rental, action should be taken to provide additional incentives also to private investors: "The rental distress will not be solved by one tool alone - it requires a broad response that moves all the wheels of the market simultaneously."
Yossi Perskovsky, chairman of Perskovsky Investments and Real Estate, emphasizes: "In the end, in Israel, similar to the rest of the world, the percentage of apartment ownership is decreasing, and there is an increase in people turning to long-term rental. Once this solution was born, people understood that they have a good alternative to renting an apartment, because the tenant receives financial security with a fixed price for five years."
Eran Anavim, CEO of Azorim Living, addresses another problem in the complex field, with an emphasis on the private market - enforcement: "One of the challenges in the private market is enforcement. Even if the state grants benefits to investors, it is very difficult to verify that they are indeed translated in practice for the benefit of the tenants. Compared to companies that operate under regulation and professionally, it is much easier to create a clear standard of service, responsibility, and transparency."
Hagit Laniado, a marketing and strategy consultant, summarizes: "Ultimately, the solution to the rental distress does not lie in one approach alone. Alongside the continued promotion of long-term rental housing projects, it is appropriate to also examine steps that will strengthen the feasibility of investing in apartments intended for rent, and encourage the expansion of supply in the free market."
