Israel's Rental Market Crisis: Insufficient New Apartments Fuel Rising Rents

Israel's rental market is facing a severe crisis, with a significant shortage of new rental apartments being brought to market, contributing to soaring rents. Despite government efforts, the number of rental units marketed over the past decade falls short of demand, with fewer than 20,000 ready for occupancy since the program began before 2015. While the state marketed between 4,000 and 5,000 units in peak years, many of these are still under construction or awaiting permits, meaning the actual number of available units is considerably lower.

This scarcity is a primary driver of rising rental prices, as developers are not building enough dedicated rental properties. The situation is exacerbated by high interest rates, which make long-term rental projects less attractive to developers compared to other investments offering similar or higher returns. Developers are hesitant to undertake risky rental projects when interest rates allow for comparable profits elsewhere.

Furthermore, the Israel Land Authority (ILA) has been criticized for not marketing enough land suitable for rental housing development. This limited land supply restricts developers' ability to acquire plots and subsequently build rental units. The article notes that in 2025, the number of marketed units was lower than in 2021 and 2022, years that saw significant housing price increases and relatively higher land marketing volumes, including for rental properties.

The government has also incurred substantial financial losses, estimated at 1.24 billion shekels, from land marketing initiatives. This is contrasted with a much larger, though potentially less necessary, loss of approximately 40 billion shekels from the "Apartment Discount" program. The combination of insufficient supply, developer reluctance due to interest rates, and limited land marketing by the ILA has left renters struggling to find affordable housing, particularly in central Israel.