Israel's Rental Market Faces Long Road to Relief, Expert Warns

Despite government plans to market thousands of rental apartments, significant relief in rental prices is not expected soon, according to Moshiko Erez, CEO of the Shachaf Group, a real estate and public infrastructure firm. Erez, formerly the CEO of Rehovot Municipality and deputy CEO of Rishon LeZion Municipality, explained in an interview with Maariv that the process from marketing a tender to a tenant occupying an apartment is lengthy. He emphasized that increasing the supply requires sustained policy and collaboration with local authorities.

Erez highlighted that the core issue is not just the number of tenders the state plans to market, but how many actually proceed to bidding, construction, and availability for rent. He stated that a tender is a crucial but distant step from a ready apartment. The true measure of government success, he argued, should be the actual number of rental units added to the market, their completion dates, and their prices.

A review by "Ice" revealed that the Israel Land Authority planned to market 25 tenders for long-term rental apartments by year-end, but only four tenders, comprising a total of 497 units, have had their booklets published. These include 120 units in Tayibe, 89 in Pisgat Ze'ev, Jerusalem, 118 in Herzliya, and 96 in Jaljuliya. Other planned tenders for hundreds of units in Netanya, Sderot, Bnei Ayish, Tel Aviv, and Ramat Hachayal are still pending publication, while a tender for 180 units in Jaffa, Tel Aviv, was canceled.

Furthermore, Erez pointed out that not all units in a project are necessarily designated for long-term rent. For instance, in the Tayibe tender, only 60 out of 120 units are for rent for at least 15 years, with the rest for immediate sale. The entire process, from tender publication to occupancy, involves developers, financing, detailed planning, permits, construction, and final occupancy, making immediate price impacts unlikely.

Erez proposed a public tracking system for each tender, detailing the number of actual rental units, rent-controlled units, and expected dates for winning bids, permits, and occupancy. He stressed the need for clear, binding timelines, noting the impact of move-in dates on school registrations for families. He also observed that Israel's rental market heavily relies on private landlords, lacking sufficient institutional long-term supply that offers tenants stability and professional services.

He cited international comparisons, noting that in countries like the Netherlands, Austria, Denmark, and the UK, social housing constitutes over 15% of the housing stock, compared to less than 3% in Israel. While direct replication of foreign models is difficult due to differing financial, ownership, and tax structures, Erez believes the principle of making long-term rental housing a consistent policy component is key to building significant stock over time, rather than relying on annual announcements.

Erez suggested practical steps for Israel, including measuring success by units marketed, built, and occupied for rent, and ensuring infrastructure and permits are pre-arranged with local authorities. He also advocated for a diverse housing mix, incorporating market-rate rentals, rent-controlled units for eligible individuals, public housing, and subsidized housing for working families, all with clear contracts, stable terms, and professional maintenance. He emphasized the crucial role of municipalities in tailoring projects to local needs, employment, transportation, and residents, citing examples of accelerating permit processes for bomb shelters and student dormitories during wartime.

He concluded that local authorities can proactively promote rental housing by identifying suitable urban land, initiating tenders or partnerships with institutional developers, and leveraging municipal economic companies to integrate rental complexes with public transport, employment, educational institutions, and community services, ensuring they become part of functioning cities.