Building Israel

Israelis should return to construction.


JPost Editorial
15 June '10

In yet another attempt to solve Israel’s chronic housing shortage, the Treasury this week launched a program aimed at making more land available. The goal is to spark a resurgence of housing construction by issuing 140,000 new building permits in 2011 and 2012.

The Treasury’s program will make it more difficult for intransigent tenants to stop new projects and make it easier to rezone fallow land once used for agriculture. The Treasury’s is just one of many building reform initiatives that have been launched in recent months by the Interior Ministry, Bank of Israel governor and the Construction and Housing Ministry.

All aspire to solve an endemic market failure: Housing prices have steadily risen, yet demand continues to exceed supply. Housing prices are up 40% since the end of 2007 and 21% in the last year. This should have translated into a building boom as contractors scrambled to cash in. But building starts have remained static at about 30,000, lower than the natural annual growth of households, which is 35,000 to 40,000. This has been going on for at least five years.

WHILE THE different reforms deal with the myriad ailments of Israel’s housing market, they ignore one important component. Who precisely will build those 140,000 new housing units in the Treasury’s plan?

The Association of Contractors and Builders (ACBI) has been complaining that there is a shortage of workers in the most labor-intensive aspects of construction, such as pouring concrete and laying floor tiles, fields presently dominated by foreign workers and Palestinians. As a result, instead of it taking 12 months to build a house, it now takes 30 months. And the situation is about to get worse.

At the end of the month, the 8,000 limit on foreign construction workers – most of whom come from China – will be cut to 5,000. The plan is to phase them out altogether by 2012. Contractors say that stiff fines and government crackdowns have practically eliminated illegally employed foreigners.

Back in April, meanwhile, Palestinian Authority President Mahmoud Abbas announced that by the end of the year Palestinians must stop working in settlements in the West Bank – defined to include Jewish neighborhoods in Jerusalem – or face up to five years in prison and a fine of $14,000. In 2009, there were about 25,000 Palestinians legally employed in the building sector; many thousands more are employed illegally.

(Read full editorial)

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