Israel's Long-Term Rental Housing Market Faces Severe Supply Shortages
Israel's long-term rental housing market struggles with low supply, high demand in central areas like Tel Aviv, and rising rents, despite new projects in Sde Dov and Lod.
The rental housing market in Israel remains underdeveloped, with only 30% of apartments rented and 70% owner-occupied. Despite a high volume of construction for sale, very few buildings are constructed for long-term rentals. Rents have risen recently, with new tenants paying 5% more on average than previous occupants.
Market Challenges and Trends
According to Ministry of Finance data, long-term rentals are distributed as 80% of market value for eligible applicants and market rates for the rest. Tenancies are typically capped at ten years with annual exit options. In some projects, 50% of units are discounted, and developers can sell the apartments on the free market after 20 years, or 10 years in certain tenders.
"Just 4,000 apartments a year is a grim figure, and it remains unclear how the rental housing market will overcome this obstacle as prices continue to surge."
Major Projects in the Center and Periphery
Last year, only 4,068 households won apartments through government housing lotteries out of 4,586 marketed units. Some units remained vacant due to partial demand in peripheral areas such as Yavne, Ma'ale Adumim, and Kiryat Gat, while Tel Aviv and Rishon LeZion saw full occupancy.
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Prashkovsky marketed nearly 1,000 apartments in Tel Aviv's Sde Dov area.
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Reiser will build 193 units in Lod.
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Union Live and Africa Israel will construct over 700 units in Sde Dov.
Developers in Sde Dov paid immense sums, totaling 1 billion NIS for land alone, securing inflation-linked rental revenues and potential property appreciation until final sale.
