Israel Overhauls Rental Market with New Government Strategy

Israel's Ministry of Construction and Housing has launched a strategic program aimed at transforming the nation's rental housing market, which is currently valued at approximately 50 billion shekels annually and serves about 2.5 million people. The market is dominated by private landlords, with short-term contracts being the norm, and institutional investors holding less than 1% of the market. The new initiative seeks to bring order, transparency, and data-driven practices to the sector, while also boosting the prevalence of long-term rentals.

Official data reveals that around 30.4% of Israeli households rent their homes, but institutional long-term rentals account for under 1% of all rental properties. This instability is reflected in the average lease duration of just 13.5 months. Over the past decade, rental costs have surged by approximately 38% nominally and 21% in real terms. Israel's rental market regulation index is notably low at 0.03, the lowest among OECD countries, partly due to a lack of a single governing body, with responsibilities fragmented across multiple ministries and authorities.

To address regulatory fragmentation, the ministry proposes establishing a dedicated coordinating body within its structure, working with an inter-ministerial commission. This new entity will focus on data collection, policy coordination, and regulating tenant-landlord relations. A crucial component is the creation of a national information infrastructure requiring mandatory reporting on rental properties, aiming to capture the significant portion of the market currently operating outside state oversight.

The program also outlines measures to increase the supply of long-term rental units. These include adapting institutional tenders, allocating land specifically for long-term rentals, utilizing public land, and developing specialized rental housing construction models. The ministry also plans to expand the activities of "Dirah Le'Askir" (Apartment for Rent), a company that has already brought about 37,000 rental units to the market. Furthermore, proposals include establishing a complaint resolution mechanism with financial sanctions and integrating rental units into major construction and urban renewal projects.

The ministry intends to implement ten key steps, with some measures requiring government approval and legislative changes, potentially included in an upcoming economic regulation law. However, the program faces potential political and regulatory hurdles, as a previous plan from 2024 remains unapproved due to inter-ministerial resistance. The Ministry of Construction and Housing aims to consolidate the rental market under a unified state management system. Ministry Director General Yehuda Morgenstern emphasized the rental market's integral role in national housing policy, while Strategy and Policy Head Michal Aran highlighted the need for better data and coordination to inform policy and increase long-term rental supply.