Israel's Housing Crisis Persists Amidst High Demand and Limited Supply

In 2025, approximately 152,000 households applied for Israel's "Apartment at a Discount" government program, which offered around 11,000 subsidized apartments. The tenth lottery alone saw 135,000 applicants, highlighting a demand-to-supply ratio of over ten to one. This persistent housing shortage is a recurring issue in Israeli election campaigns, even when less prominent in campaign messaging.

The "Apartment at a Discount" program provides a discount of up to 25% on market prices, capped at about 550,000 shekels, and targets areas with lower property values. While a significant benefit for the few who win, its utility varies by location and construction timelines. In the past summer, nearly 36% of new apartments were sold under government subsidy, indicating contractors' reliance on this program. Concurrently, about 86,000 new apartments remain unsold, with prices in the free market decreasing by approximately 1.8% over the last year. The Bank of Israel noted that the inventory of apartments for sale remains high and stable, with construction starts slightly down in the second quarter but still at a high level.

The core issue is less about the quantity of available housing and more about the mismatch between price, location, and buyers' financing capabilities. For young couples seeking to buy a home priced around 2 million shekels, a 40,000 shekel discount is marginal compared to the required down payment. Meanwhile, renters face rising costs. According to the Bank of Israel, rents for apartments with new tenants increased by about 5.3% in the past year, and by 2.4% for renewed contracts. The housing component of the consumer price index is rising at an annual rate of about 3.8%.

This trend suggests that rising rents may continue despite the large inventory, partly because potential buyers are remaining in the rental market. Homeownership in Israel stood at about 71% in 2024, with nearly a third of households renting. The long-term rental market, intended to provide stability, remains small, with the state-backed "Apartment for Rent" company having housed only a few thousand families over a decade. Public housing also faces challenges, with the stock decreasing over the past decade due to sales and minimal acquisitions, reaching about 47,000 units. While the public housing stock increased slightly in 2025, the addition was negligible compared to demand.

Political parties' election promises consistently include streamlining planning and licensing, expanding regulated rentals, increasing public housing, and decentralizing the Israel Land Authority (ILA), which manages 90% of the country's land. While some initiatives have led to legislation, implementation has been slow and limited. This election cycle, housing has a smaller role in party platforms, with most proposals focusing on buyer assistance. Economists caution that demand-side subsidies without a corresponding supply increase can inflate prices. The next government will face a high defense budget and limited fiscal space, potentially hindering large-scale housing initiatives.