Israel Considers Property Tax on Undeveloped Land to Boost Housing Supply
Translated & summarized from Ice by baba
Israel's Tax Authority is advocating for a renewed property tax on vacant land, aiming to increase housing availability and generate state revenue. Director Shai Aharonovich believes the tax, previously at 0%, could yield billions and is necessary due to budget challenges. The proposal, facing opposition, was separated from the Arrangements Law. The Tax Authority also seeks to reduce the purchase tax on second homes from 8% to 5%.
The story in 5 lines · by baba
- Israel's Tax Authority proposes a property tax on vacant land to boost housing supply.
- The tax aims to generate billions for the state amid budget challenges.
- Director Shai Aharonovich believes the tax is a necessary fiscal measure.
- The proposal faces significant opposition and was separated from the Arrangements Law.
- The Tax Authority also wants to lower the purchase tax on second homes.
Israel's Tax Authority is considering reintroducing a property tax on vacant land, a move aimed at encouraging landowners to build and thereby increase the housing supply. The proposed tax, which would be an annual levy on undeveloped land or land where construction is not yet complete, was previously set at 0% in 2000. The Tax Authority believes this measure could generate billions of shekels for the state, particularly to address significant budget challenges projected for 2027-2028, including increased defense spending.
The proposal for a 1.5% property tax on vacant land was initially part of the Arrangements Law but was separated in the Knesset Finance Committee in March 2026 and is therefore not currently in effect. Shai Aharonovich, Director of the Tax Authority, stated that the tax was nearly approved in the last Arrangements Law but discussions were interrupted by the "Operation Iron Swords." He believes that future finance ministers will need to find new revenue sources and that a property tax is a suitable fiscal measure.
While the Tax Authority supports the tax, it faces considerable opposition. Aharonovich acknowledged that implementing the tax will be challenging but expressed optimism that a more user-friendly appraisal system could be developed with the Government Appraiser. The final decision will rest with the future Minister of Finance and Director General of the Ministry of Finance.
In related discussions at the Urban Renewal Summit, Arbel Altshuler noted that about a third of urban renewal projects in Israel are planned based on a minimum developer profit of 18%, a figure that may become unrealistic as costs rise. He suggested that local authorities should actively support urban renewal projects. Government Appraiser Gil Blulu added that a fixed betterment levy for evacuation-reconstruction plans would be included in the Arrangements Law to provide certainty.
Aharonovich also warned that further delays could postpone a reduction in the purchase tax on second homes, which the Tax Authority wants to lower from 8% to 5%.
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