The unregulated private rental sector and the impact on Israeli housing market

Abstract

Israel’s rapid population growth, deriving from its unique demographics, is generating a consistent rise in the demand for residential housing. The low interest rate environment in Israel since the beginning of the last decade has also contributed to the rise in demand for housing, which exceeded the available supply and led to a continuous rise in the price of housing. The various government programs all attempted to halt the rising prices, with no long-term success, if any. Policymakers focused on making ownership of housing affordable for young couples but directed their activity at repressing the demand for housing among investors and housing upgraders. This interpretive article focuses on analyzing Israel’s housing policy and indicates the built-in failure engrained in this policy, as the demand for housing in Israel is a rigid demand deriving from the country’s demographics and values and therefore attempts at repressing it are futile in essence. The housing policy aimed at making housing affordable for young people must examine, before it is finalized, their overall incentives to own housing on one hand and the obstacles they encounter that prevent them from opting for rentals on the other, and accordingly formulate the features and different terms of the policy. The research conclusion indicates the need to implement a public policy that will promote the rental alternative as an efficient way of meeting the demand for housing on one hand and of curbing the price of housing on the other.