Israel’s Urban Renewal Authority has launched an effort to rescue redevelopment plans that are becoming less financially viable because of changing market conditions. In a letter sent to planning committees, the authority said many evacuation-reconstruction projects approved in recent years were based on assumptions of continued price rises, but now face serious implementation problems due to the slowdown in construction, high interest rates, rising financing costs, and a jump in execution costs.
The letter, signed by Guri Nadler, head of planning at the authority, says projects are being canceled or reopened with apartment owners in order to reduce the compensation offered to them. To address this, the authority wants planning assumptions updated, including raising the developer profit benchmark from 15% to about 18% to 20%, especially in high-demand areas. Nadler wrote that this should be the default and that local authorities or planning committees seeking lower levels should inform him, because such demands do not match the authority’s policy.
Nadler also urged planners to build in more flexibility so economic conditions can be improved later, at the permit stage, without materially changing the plan’s core principles. He said the focus should be on keeping the building volume fixed while allowing changes in apartment mix, land-use mix, parking standards, and the scope of special housing. He added that under Planning Standard 21, appraisal reports should follow the authority’s assumptions and include sensitivity tests for compensation, parking, sale prices, and construction costs.
The authority said its goal is to reduce the reopening of agreements during the building-permit stage and create certainty early in the project. It said plans approved within about two years are more relevant than those taking six years, and it will work harder to reach that pace. The authority also said Standard 21 should not be reduced to a simple 14% or 18% profit figure, but should examine different market scenarios to determine whether a plan can actually be carried out.
Nehama Boogen, chair of the Israel Association of Land Appraisers, criticized the proposal as too far-reaching and warned it could hurt apartment owners first. She said any extra developer profit would come at the expense of owners’ compensation, rights, or the project’s economic room to maneuver, and argued that existing adjustment mechanisms already deal with market changes. Boogen said appraisers should remain responsible for the economic analysis and preserve the balance set by the state appraiser.
