Israel’s Urban Renewal Authority has sent a letter to planning committees warning that many evacuation and reconstruction projects approved in recent years are now struggling to move forward because their economics no longer work. The letter, titled "Focus effort on creating economic feasibility in a changing economic reality," was sent by Guri Nadler, head of planning at the authority, who said many projects were approved on the assumption that prices would keep rising, but are now facing major implementation problems.
Nadler said the deterioration in viability stems from a slowdown in construction, high interest rates, higher financing costs and sharp increases in execution expenses. As a result, some projects are being canceled or reopened with apartment owners to reduce the benefits promised to them. To address this, the authority is proposing, among other steps, raising the developer profit margin from the current 15% to about 18% to 20%, especially in high-demand areas. Nadler wrote that this is the default target and that local authorities and planning committees should not assume a lower profit is enough, and should report any demands that depart from this policy.
He also called for more planning flexibility, so that project economics can be improved later at the permit stage without materially harming the planning principles. He said this should preserve the overall building volume while allowing adjustments such as apartment mix, land-use mix, parking standards and the amount of special housing. Nadler added that under Planning Standard 21, appraisal reports should follow the authority’s assumptions and include sensitivity tests for compensation, parking requirements, changes in sale prices and construction costs, both up and down, to support better decisions.
The authority said its aim is to reduce the need to renegotiate agreements at the building-permit stage and to create certainty earlier in the project. It stressed that plans should have a fixed building envelope but flexible contents, so that apartment sizes and some rental options can be adjusted later while the number of units and building height remain unchanged. The agency also said it wants to speed approvals, arguing that plans approved within about two years are more relevant than those that take six years, and that it will work harder to reach that timeline while still producing strong plans.
