September 5, 2021

Israeli army joins battle to bring down housing prices

Globes, Arik Mirovsky, 05.09.2021

The Israel Land Authority (ILA) is banking on the Israel army being its secret weapon in the battle to boost new housing supply and bring down real estate prices. The better relations in the current coalition government have resulted in more coordination between the Ministries of Finance, Defense and Construction and Housing and more strenuous efforts to vacate army bases in high-demand real estate areas and free up land for construction of 20,000 homes. The ILA is confident it will already be able to issue tenders in the coming months to build thousands of homes on former Base 80 in Pardes Hanna and Rehavam base in Ramla.

Late last month, Israel Land Authority (ILA) director general Yaakov Kvint and Ministry of Defense director general Amir Eshel (Gen. res.) signed an agreement to bring forward the deadline for vacating 462.5 acres of army bases in Sirkin (Petah Tikva), Tzrifin (Rishon Lezion) and Tira (Haifa) to the end of 2021. As part of the agreement, the Ministry of Defense will hand over the bases as they are and the ILA will destroy the buildings on the bases and rehabilitate the land through the government owned Environmental Services Company Ltd. (ESC), which specializes in rehabilitating land.

Last week the agreement was expanded and the ILA and Ministry of Defense announced that a work team had been set up to decided on vacating more bases in high demand areas for the construction of new homes.

Where will new homes be marketed in the coming months

9,000 homes can be built in Tel Hashomer, the maintenance base in Haifa and 4,000 homes in the clinic, air force base and communications base at Tzrifin; 1,140 homes can be built in Base 80 in Pardes Hanna-Karkur; 2,000 homes in the Rehavam base in Ramla; 1,350 homes, 250 hotel rooms and 20,000 square meters of commercial and office space in the naval base in Bat Galim, Haifa, 72,000 square meters of commercial and office space in Nesher; and 660 homes and 330 hotel rooms in the naval base in Eilat.

ILA director general Yaakov Kvint says that now all that remains to be done with the overall principles agreed is to work out the individual details for each base and how much it will cost and how much time is needed to vacate each base.

The ILA has been in a rush while the Defense Ministry delayed things

Nothing can be taken for granted. In recent years the media has reported on repeated breakdowns between the ILA, Ministry of Finance and Ministry of Defense. While the ILA and Ministry of Finance have been in a rush to vacate bases, the Ministry of Defense has worked at its own pace.

A framework agreement signed six years ago spoke about vacating bases at Sirkin, Tzrifin, Tel Hashomer and Ramat Gan and promote construction in the areas vacated. The ILA transferred money to a special fund to vacate the bases but most of the money was never used.

But even if all of the nearly 20,000 new homes are built on the vacated army bases how significant is this? Discarding the fact that not all the new homes are in the highest demand areas, it would represent 40% of annual building starts, if everything moves ahead as planned, and the new homes are available in four to five years, it will still be no magical formula for bringing down housing prices.

Published by Globes, Israel business news - en.globes.co.il - on September 5, 2021