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Israeli government’s disputed residential construction program extended

The Israel Land Council has decided to extend the government’s Mehir Lemishtaken residential construction program until December 31, 2020. The program provides land at reduced prices to developers who in turn sell the homes, notably to first-time home buyers, at less than market value. It has been a flagship program of Finance Minister Moshe Kahlon in his effort to boost the housing supply and moderate the rise in housing costs. 

Kahlon welcomed the council’s action and made reference to the current political stalemate that the country has been in this year, following two inconclusive Knesset elections that have not resulted in a new coalition government. The council, he said, “didn’t let the political mess prevent a decision benefiting young couples.” The program, he said, “has brought about a revolution in the housing market by finally putting young couples at the top of national priorities. 

The program has been criticized for not reducing the cost of homes. Critics claim that it has also distorted the housing market. The land council, which is headed by Kahlon and which sets policy for the Israel Land Authority, said the decision to extend the program from the end of this year to the end of next year was taken in part to create certainty in the housing market. 

For his part, Israel Land Authority director Adiel Shimron said: “The Mehir Lemishtaken program, combined with the sale of residentially zoned land by the Israel Land Authority, of a scope that had been unknown in the past, has as a practical matter wiped out the shortage of residential land that had been created in prior years and has created a good opportunity for Israel’s citizens [to buy] a home.”

According to Israel Land Authority data that was presented to the council, since the program began, 133,500 families who at the time did not home and another 8,153 who were home owners have registered for the program. More than 68,000 of those registering won the right through one of a number of lotteries to purchase a home through the program, but only 26,700 selected an apartment. It is projected that as of the end of this year, participants in the program will have taken possession of just 4,666 housing units and that by the time the program ends next year, about 12,500 will have. 

Roughly 5,000 homes that were made available by lottery were not purchased and were resubmitted to the lottery. They are also eligible for purchase by people who already own a home and who are seeking to upgrade their housing. Most of these unsold homes are in locations where the program created supply that exceeded demand. 

The discount that participants in the program receive compared to market prices is between 19% and 25%, which translates into a savings of from 150,000 to 700,000 shekels ($43,000 to $200,000).

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