Israel Reshapes Affordable Housing Lotteries with New Eligibility and Location Rules

Last week, Israel's Ministry of Housing conducted a lottery for approximately 8,000 discounted apartments across 19 communities, marking the end of a decade-long era in affordable housing allocation. Two major changes are being implemented in the updated housing program: first, a Supreme Court ruling now prohibits yeshiva students who avoid military service from participating in these lotteries. Second, the lotteries will be limited to areas outside high-demand regions, following a policy shift led by Finance Minister Bezalel Smotrich.

Under the new policy, reservists' chances of winning have improved significantly. Previously, 20% of discounted apartments were allocated to soldiers; now, 50% of apartments in national priority areas and up to 35% elsewhere will be reserved for them. However, the total number of communities and apartments included in the lotteries has been sharply reduced, shrinking the available housing stock. Since 2016, about 143,000 apartments have been allocated via lotteries, nearly half in high-demand areas like central Israel and greater Jerusalem. Going forward, only communities where apartment prices do not exceed 20,000 shekels per square meter (about 1.8 million shekels for a typical four-room apartment) will qualify.

This excludes many sought-after cities such as Rishon Lezion, Rosh HaAyin, and Be'er Ya'akov, which previously had thousands of apartments allocated but now fall outside the new price threshold. The policy is set to remain in effect until December 31, 2027, with uncertainty about future extensions. Political complexities also arise in ultra-Orthodox cities like Beit Shemesh, where the Supreme Court ruling barred draft-evading yeshiva students from lottery participation, raising questions about future lottery announcements in such areas.

The policy also highlights disparities: ultra-Orthodox communities have received about 13% of discounted apartments over the past decade, often benefiting from access to lotteries in non-Haredi areas, while Arab communities have seen only 1.7% of apartments allocated in their towns, reflecting government reluctance to develop new state land housing in Arab localities. Meanwhile, peripheral cities like Ashkelon, Sderot, and Ofakim continue to benefit from discounted housing lotteries, supported by government subsidies for development costs.

The Israel Land Authority, overseen by a council dominated by politicians including Housing Minister Haim Katz and Finance Minister Smotrich, sets lottery policies. The recent changes represent a victory for Smotrich's approach to limit benefits and focus on peripheral areas, contrasting with previous officials who favored maintaining lotteries in high-demand regions. Historical data shows the peak of discounted apartment allocations occurred under former Finance Minister Moshe Kahlon between 2015 and 2019, with a sharp decline during government instability in 2020-2021. The current government has resumed activity, with upcoming lotteries planned in cities like Sderot, Yokneam, Tiberias, Safed, and Ofakim, reflecting ongoing efforts to stimulate housing development in the Negev and western periphery.