Regulators are asking the government to step in to fix what they say is a broken system in which property prices and rents, along with the total cost of living, have become prohibitively expensive. Already frustrated residents have resorted to tent accommodation in cities with higher rents, in a move reminiscent of large-scale protests in 2011 that also centered on rising housing prices.
Yad2, the most popular Israeli website for advertising apartment rents, estimated that during the first quarter of 2022 rents rose on average by 10 percent year on year. But by accounts, particularly in Tel Aviv, those renewing leases are often required to pay 30% to 40% more on apartments – and are forced to look for new housing within a few weeks if they cannot meet such large increases.
The housing market, which is up 15.4% from a year ago, is making headlines on a monthly basis. And while the government is marketing its subsidized home-buying plans — such as the current target price program (Miher Matara, successor to the Mihir Mashtakin, price-per-occupant program) — the rental market remains, as one tenant puts it, like the “Wild West,” with relatively little interest. The living conditions of nearly a third of the population are increasing.
The Times of Israel spoke with tenants and landlords, all of whom asked to use pseudonyms for this article. With the market in place, tenants feared being blacklisted and found it more difficult to secure housing, while landlords were worried about not finding reliable tenants.
Liat lives in a small apartment in the old northern part of Tel Aviv. She pays NIS 5,250 ($1,521) per month plus local property taxes (which are the responsibility of the tenant according to Israeli law) and utilities for 25 square meters (269 square feet) of living space. Its building demolition program is scheduled to take place in the next two years and the owner is looking to maximize profits in the meantime. As such, she says, her apartment has not been renovated and it is difficult to convince the owner to address issues that require spending money.
Another Tel Aviv homeowner, “Maya,” cut her apartment in half to make two apartments out of one—without a reduction in Maya’s rental cost and no additional soundproofing. The department doubled the owner’s revenue to NIS 12,000 ($3,477) per month for what was previously a two-room apartment in a less elegant part of town. Maya now has only a few weeks to search for a new apartment in Tel Aviv, and so far she’s seen a 16-square-meter (172-square-foot) property with a monthly rent of NIS 4,000 ($1,160). She is seriously considering leaving town.
This is something David has already decided. After renting in Tel Aviv for seven years and constantly fighting with landlords to make repairs and refrain from raising the rent each year, David gave up and moved to Ashkelon, where he pays 3,000 shekels ($870) a month for an apartment close to home. Sea.
David is fortunate that work does not connect him with Tel Aviv, so he cannot afford the transportation costs that have so far prevented Itai from leaving the city, although it is difficult to find affordable housing.
“I love Tel Aviv, I love the city, I love the cultural life,” Itai says. “I like that I can walk everywhere, and that there are a lot of opportunities in terms of work and entertainment. I don’t like it, but I am willing to pay 1,200 shekels or another 1,500 shekels. [$350 or $435] month to receive these benefits.”
Itai used to live with a companion in a 65-square-meter (700-square-foot) two-bedroom room in central Tel Aviv, where they stayed for four years. The rent increases were “only” about 400 shekels ($116) per year each. He then decided to give up the site and moved into his current apartment in the bohemian south of Tel Aviv’s Florentine neighborhood in 2020.
Itai was the first person to see the one-room apartment — 50 square meters (538 square feet) — and said he would take it in immediately. He works hard to keep the place in good condition, as he realizes that he has finally found a good landlady. She fixes problems right away, and rent is NIS 4,000 ($1,160) plus NIS 280 ($80) for electricity.
Itai is 42 years old, and he doesn’t think he will be in a position to buy an apartment of his own. He’s seen his friends spending more than half their salary on rent in the city, or being forced to move every year or two, often taking their kids from school to school while trying to keep an affordable roof over their heads.
Although rental issues may be more acute in Tel Aviv, it is not the only place where prices are skyrocketing and the quality of rental properties at the lower end of the market drops. Deborah, who owns two investment properties in Afula, on behalf of her children, said that after the market was up 30%, she felt compelled to raise rents to reflect that.
“I didn’t want to make things difficult for the tenants,” she says. And they were good tenants. But these apartments are my children’s future, their ultimate opportunity to make it up the housing ladder, and I can’t afford not to move with the market.”
Everyone is the owner
On a Facebook page that Israelis use to vent their frustration with the rental market, there were reports of a two-bedroom apartment in Rishon LeZion without a living room and an owner still living in the apartment with the tenants, which is worth NIS 6,800. ($1,970) per month; Studio in Modi’in big enough to wrap around for 2,450 shekels ($710); and a three-room apartment in Kfar Saba (no children allowed) for 5,150 shekels ($1492). Even the NIS 9,500 ($2752) rent in a Tel Aviv tower between Namer and Ayalon Highway offers only two bedrooms—one of which shares a window with an internal staircase.
And everyone is an owner these days: in 2003, fewer than 60,000 Israelis owned two or more homes, and they acquired real estate mostly by inheritance. Today, IRS data puts the number at 348,717, which means 13% of the population can choose to rent an apartment if they want to.
But rental yields in Israel are not particularly high compared to other countries, said Daniel Goldstein, director of the Beauchamp Real Estate Agency in Tel Aviv. The average return in Tel Aviv last year was only 2.5%, while the capital value of real estate rose 22% to 28% between 2020 and 2021 for an average three-room apartment in Tel Aviv – from NIS 2.28 million ($659,845). to shekels. 3.36 million ($97,404). It’s a similar picture across the country.
Housing policy experts suggest that housing and utilities costs combined should not consume more than 30% of a tenant’s gross income. In Israel, it is not unusual for people to spend 60% of their income on housing, according to Jill Jean Moore, head of the Social and Civil Rights Unit at the Association for Civil Rights in Israel – and then struggle with other costs. .
But it’s not just financial pressures that make the rental experience so difficult. Anat Levy, managing partner at the Jerusalem law firm Decker, Bex, Ophir & Co., says the majority of landlords download model leases from the internet and then add additional clauses to give them leverage over the tenants, who were not given choice in the matter.
While bad tenants exist, says Jean Moore, the balance of power is more often than not fixed with the landlord rather than the tenant: apartments are rented in poor condition, landlords fail to perform basic repairs and maintenance, and leases are limited if any. Tenant protection in relation to contract extension or rent hike. This means that tenants – who include some of the most vulnerable groups in Israeli society such as pensioners and young families – face constant uncertainty.
“Everyone has the right to live with dignity,” says Gan Moore. “This market does not allow that to happen.”
Some false starts in addressing issues
After the cost-of-living protests a decade ago, Tel Aviv Mayor Ron Huldai promised to tackle the issue. To date, the city has almost 300 apartments intended for affordable housing. Another 10,000 promised. But it is estimated that there are 250,000 tenants in the city.
Last year, the government partially attempted to help reform the rental market by passing tax benefits intended to encourage long-term rents. Some of the new residential projects are promising to allocate a number of apartments in the long term, but the incentives have not been enough to attract large numbers of developers.
The Tel Aviv municipality has posted a sample “fair rent” contract on its website for tenants to download and use. However, it is up to the owners to decide whether to accept these provisions or use another contract whose terms are in their favour.
There is a fair national tenancy law – seldom followed and seldom enforced, as many disputes can only be resolved through lengthy and costly court cases that many tenants and landlords alike cannot afford.
But, attorney Levy says, a properly enforced fair rent law across the country will work best for both sides of the rental partnership. Such a law would, for example, increase the notice period on the contract from one month to two or three months, should either party wish to leave the agreement. It will also state which side is responsible for damages to the apartment, hold the landlord responsible for anything not visible at the time the rent began, and properly insure the tenants’ deposits – perhaps by preventing the landlord from cashing the deposit check and spending the money and then refusing to return it at the end of the lease. In addition, it will provide a condition for what happens if someone dies in the middle of the decade.
Take her to the streets again
Research indicates that the majority of the Israeli public believes that public protests are effective in influencing government policy. Organizers of the Tel Aviv rally in July are calling for legislation to help bring immediate and sustainable changes to the housing market to make housing more affordable to rent and buy.
It is common in commercial leases to link rent increases to a consumer price index, providing a mechanism for increasing rent in line with the cost of living. “There is no reason why this should not work with residential leases,” says attorney Levy.
As real estate prices rise, the rental market will inevitably grow.
“The government needs to move away from focusing on home ownership, to understand that it has a responsibility to provide a decent place for everyone in the country to live in,” says Association for Civil Rights in Israel Jan Moore.