Housing Ministry Proposes Mandatory Rent Reporting, Overhauling Rental Market

Israel's Ministry of Housing and Construction has put forth a significant proposal to mandate the reporting of all rental property income, regardless of the amount. This recommendation is the most dramatic element of a new strategic plan for the rental housing market, aimed at creating a reliable database of apartments, prices, and rental characteristics. The ministry argues that current data is incomplete, largely due to an income tax exemption on rental income up to NIS 5,654 per month, which means properties below this threshold are not reported.

The proposed plan seeks to address the estimated NIS 50 billion that changes hands annually in the rental market, which currently comprises approximately 890,000 apartments housing 2.5 million people. The lack of comprehensive data and government oversight is seen as a potential avenue for tax evasion, a problem the mandatory reporting aims to curb. However, past similar proposals have failed in the Knesset, likely due to landlords' interest in avoiding reporting to evade taxes.

Beyond mandatory reporting, the ministry's plan includes establishing a new, centralized body to manage all aspects of the rental market, including planning, construction financing, taxation, and data collection. Currently, these responsibilities are fragmented across multiple government ministries and authorities. This new entity would consolidate data, formulate policy, coordinate inter-ministerial efforts, and monitor execution.

The plan also proposes mechanisms for addressing landlord violations of rental laws, with the aim of faster enforcement and reduced reliance on lengthy legal proceedings. A key issue identified is the scarcity of long-term rental contracts, which forces tenants into frequent renegotiations, price changes, and potential moves, disrupting family budgets and stability.

To attract institutional investors and large companies to the rental sector, which is currently seen as unattractive due to high financing costs and low returns, the ministry suggests economic incentives. These include aiming for a 5-6% return on investment, designating areas for permanent rental housing, allowing increased density and flexibility in project design, offering tax incentives, subsidized interest rates on financing, reduced land prices, and lower purchase taxes for institutional buyers in rental projects.

The plan's release is considered unusual given its reliance on complex legislative measures typically passed through state budgets and austerity laws, requiring significant political backing and cooperation from ministries like the Treasury. Implementation, if it occurs, would likely only begin with the next government.