Israel Eyes End to Rent Tax Exemptions, Unified Housing Database

Israel's Ministry of Construction is proposing a radical overhaul of the rental housing market, aiming to increase tax collection and provide better oversight. The plan includes introducing mandatory reporting for all rental properties, regardless of the monthly rent, a move intended to curb tax evasion. Currently, landlords are exempt from taxes on rental income up to approximately 5,654 shekels per month, a loophole that leads to no reporting for many properties.

The ministry also intends to create a unified, reliable database containing information on rental apartments, prices, and lease terms. This database would serve as a tool for policy planning and address the current lack of comprehensive data, including details on illegally subdivided apartments or short-term rentals like those on Airbnb.

Beyond mandatory reporting, the strategic program suggests establishing a mechanism for addressing landlord violations of rental laws, with the possibility of imposing financial penalties to expedite accountability and reduce reliance on lengthy court proceedings.

Another key issue the ministry aims to tackle is the scarcity of long-term rental apartments, which forces tenants into frequent lease renewals, price hikes, and potential relocations, disrupting family budgets and stability. To make long-term rentals more attractive to developers, the ministry proposes incentives such as subsidized interest rates for construction financing, reduced land prices, tax breaks, and government loans.

Additionally, the plan includes lowering the acquisition tax for institutional entities that win tenders for building rental housing. Previous attempts to implement similar measures have failed due to a lack of support from the Knesset, Israel's parliament.