Israel Proposes New Plan to Regulate Rent Market

Israel's Ministry of Construction and Housing has unveiled a new strategic plan aimed at addressing the country's escalating rental market crisis, which affects approximately 2.5 million Israelis. The plan, revealed by "Mamon" and ynet, proposes several key measures including mandatory reporting for all rental properties, the establishment of a government body to oversee the sector, and a dedicated complaint mechanism for tenants. The initiative also suggests allocating land for long-term rentals and reforming state land tenders.

The proposal comes ahead of upcoming elections, meaning its implementation hinges on the next government's decision. A similar proposal was prepared in 2024 but was stalled due to inter-ministerial opposition. The current plan is the result of extensive research involving the OECD, the Central Bureau of Statistics (CBS), various government ministries, developers, and academics.

Data presented in the plan highlights significant issues within the rental market. The average lease duration is about 13.5 months, with most contracts being annual, forcing tenants to renegotiate terms yearly. Over the past decade, rent prices have increased by approximately 38% nominally and 21% in real terms. Institutional renting, despite efforts like the establishment of "Diya La'Haskir" in 2013, remains a small fraction of the market, with only about 5,200 units occupied by 2024 out of 37,000 marketed.

A major deficiency identified is the lack of a comprehensive database detailing rental properties, prices, durations, and terms. Many property owners are not required to report to tax authorities due to exemption thresholds, compounded by unregistered units, sublets, and short-term rentals. The CBS surveys also lack granular neighborhood-level data. Responsibility for the rental market is currently fragmented across multiple government bodies, leading to disjointed policies and delays.

The plan also addresses the power imbalance between landlords and tenants, noting the absence of a public body for rights enforcement, leaving court as the primary recourse for disputes. It criticizes the current model where many rental units were originally built for sale and acquired by investors, leading to a lack of purpose-built rental housing. The proposal aims to create a central coordinating body within the Ministry of Housing to consolidate information, formulate policy, and enhance supervision and enforcement.

Further recommendations include designating land specifically for long-term rentals, integrating rental needs into urban planning, and establishing a mechanism for dispute resolution and financial penalties as an alternative to litigation. "This is the first time we are looking at this from end to end," stated Yehuda Morgenstern, Director General of the Ministry of Housing. "We cannot just look at how many apartments we plan, market, and build. About 30% of households in Israel live in rentals, and there is no solution for a healthy real estate market without addressing this market as well. I don't know who the next finance minister will be, and it's impossible to say that the entire plan will be adopted. This is an aspiration, but the professional work and the main elements will be the basis for the next Arrangements Law."