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Wednesday, February 25, 2015
Special Report: Bombshell housing report falls on government 3 weeks before election

IMRA: Unfortunately, no English summary was apparently officially issued]
Special Report: Bombshell housing report falls on government 3 weeks before
election
By YONAH JEREMY BOB The Jerusalem Post 02/25/2015 18:00
http://www.jpost.com/Israel-News/Special-Report-Bombshell-housing-report-falls-on-government-3-weeks-before-election-392189

State Comptroller Joseph Shapira issued a bombshell report on the country’s
housing crisis on Wednesday throwing the political world into a whirlwind of
opposing parties trying to blame and avoid blame leading up to the March 17
elections.

In characteristic understated style different from his predecessor who took
aim at specific politicians, Shapira’s report does not overtly place the
blame on any one individual’s shoulders, using more amorphous phrases like
“the government and its offices have set national housing policy in a
deficient manner.”

But his focus on 2010 as the worst period of the housing crisis, his
blasting of the government for only acting in reaction to events, like the
summer 2011 social justice protests and for delaying the appointment of a
point-man to handle the crisis until June 2013, effectively places
substantial blame on Prime Minister Benjamin Netanyahu.

Shapira himself does go out of his way to spread the blame, also directly or
indirectly assigning a share to former prime minister Ehud Olmert, Housing
Minister Uri Ariel, former housing minister Ariel Atias (though again, often
by ministry and not always by individual name), the Interior Ministry, the
Israel Lands Administration (ILA) and local planning authorities.

The report also does make reference to the Finance Ministry, the Development
of the Negev and Galilee Ministry, the Justice Ministry, the Economy
Ministry, tax authorities and the Bank of Israel.

Surprisingly, the report does not focus on Yesh Atid party leader and former
finance minister Yair Lapid (the criticism of the Finance Ministry mostly
focuses on 2010 when Yuval Steinitz was finance minister) or on 10 recent
decisions in 2014 by the special “Housing Cabinet.”

Rather, a later report still being drafted is meant to evaluate the Housing
Cabinet’s decisions and Lapid’s signature plans, such as his controversial
0% value-added tax proposal.

The political dangers of the report to Netanyahu include criticizing him for
failing to reduce the overpriced housing market and altering the focus from
his more comfortable national security terrain to socio-economic issues,
where the Zionist Union is considered to have an advantage.

The timing of the report is not merely problematic for Netanyahu since it is
pre-elections, but also because some may view it as upstaging or sucking
some of the public attention and oxygen out of his upcoming speech on Iran
to the US Congress next week.

The comptroller's decision to issue the report pre-election came amid heavy
pressure to delay its release from the Likud party and equally heavy
pressure to not delay by other parties.

Shapira did go out of his way to battle accusations that the timing of the
report was influenced by politics saying, “the State Comptroller is not a
political player.”

He added that that the special housing “report was ready” for publication
during this time and that it was the politicians who had “advanced Knesset
elections to be early” and come out when the report was due to be issued,
not vice versa.

Shapira quoted former comptroller Eliezer Goldenberg as saying that
“oversight does not get silenced” even during elections season.

He said that the report was carried out “professionally and only according
to relevant objective considerations,” calling on politicians “to avoid
political actions regarding comptroller reports.”

The report itself describes the housing crisis from 2008-2013 in start
numbers, stating that housing prices skyrocketed around 55 percent during
that period and rental prices jumped around 30% during that period, while
salaries rose only slightly – failing to coming close to keeping up with the
new housing cost burden.

Shapira said that the housing crisis “most significantly impacts society’s
weaker sectors and the middle class,” representing 73% of the renters’
market in Israel.

Data from the report indicated that between 2008-2013, the average number of
months working it would take to be able to afford to purchase a home jumped
from 103 months to 137 months, and the percentage of a person’s monthly
salary needed for renting jumped from around 29% to around 38%.

He stated that the change was so pronounced that it was and could make it
difficult for people to make ends meet and could require them cutting back
costs in other critical areas in order to avoid losing their homes and stay
off the street.

Also, the report added that, if allowed to continue, it could even more
“negatively impact the entire economy” than it already has.

The report said that one of the most problematic aspects of the crisis is
that it has been well-known and received significant attention for years
without results.

This, despite the fact that “the state has great power” over the issue since
“it manages most of the land” in the country.

The report’s main recommendations for change involve the government: setting
a serious affordable housing policy, increasing the efficiency of the rate
of approval for new housing – which should also help decrease the need for
short-term knee-jerk band-aid-style policies, establishing a global policy
to better balance housing supply with housing demand, improving government
data on the issue, including establishing a joint central data center,
better attuning state actions to the status of available land and the target
group for housing offerings and others.

There are four main sections to the report.

Section one lays out the current housing situation from the perspective of
trends between 2008 to the end of 2013.

The section also notes that the crisis dates back somewhat to 2002 when the
balance of the supply of new units to demand by new persons seeking housing
began to tilt to heavily in favor of inadequate supply to satisfy demand.

The report’s second section lays out the government’s policies for dealing
with housing issues in the years right before the prices started to spike.

From 2005-2007, the state made a number of decisions to deal with housing,
but they were not implemented, delayed and some were not even started.

This meant that once the housing crisis began to hit in 2008, there were no
ready tools or policies moving through the pipeline to cope with it.

Shapira criticized the Olmert government for failing to recognize the
severity of the crisis and for failing to advance any special strategy to
address the issue.

Between 2008-2010, the imbalance tilting toward high demand with
insufficient housing supply grew even more, at a rate of 36% in real terms,
said the report.

Shapira said that as housing prices skyrocketed to unprecedented levels
starting in 2008, inexplicably, Netanyahu’s government only started to
discuss the issue in July 2010, more than a year after it took office.

Even after Netanyahu’s government finally started to declare that it would
try to fight the housing crisis, the prices continued to jump higher in
2011-2012, though not quite at the same rapid rate.

Shapira said that following the summer 2011 social justice protests and the
2012 Trachtenberg Report, named for then apolitical but now new Zionist
Union candidate Manuel Trachtenberg, the state took some steps to address
the problem.

However, the steps were poorly planned, based on a low level quality of data
and unrealistic in light of planning and infrastructure limitations and
joint intergovernmental work on the issue was deficient in translating the
general goals into specific policies.

Shapira noted that even the Director-General of the Prime Minister’s Office
admitted in a December 2013 letter that he had realized that the housing
programs and goals of the government were unrealistic.

Also, the report slammed the Netanyahu governments for failing to appoint
one minister, the Housing Minister, as the point man for addressing the
housing crisis until June 2013.

The report added that the Bank of Israel’s policies of keeping low interest
rates to keep consumer prices stable and support broad economic growth, did
not help or sometimes even indirectly aggravated the problem by creating
more housing demand and without incentivizing corresponding growth in
housing supply.

Other Bank of Israel policies, such as loosening up lending terms and
increasing funds for banks to lend to certain groups seeking housing loans
were also ineffectual.

Real estate tax related steps designed to address the issue were performed
deficiently and on a very delayed and ineffectual basis.

The third section discusses failed efforts to expand housing supply.

It slams the Interior Ministry for mismanagement of available land for
building new housing units, including not even having data on the land, such
that no effort was made to prepare the land for development.

The report criticized the ILA for not developing any broad multi-year
strategic plan, for setting shorter-term unrealistic targets for developing
the land and for failing to tailor its local planning efforts to local
housing needs.

Also, only 4 out of 71 local municipal authorities have updated development
plans, said the report.

There was also heavy criticism for the red tape of local planning
authorities who held up approvals for new housing units for unreasonable
amounts of time, leaving 50,000 units in the pipeline which could have moved
forward.

Shockingly, the report found that some approvals were drawn out for up to
5.5-7 years, with it sometimes taking an incredible total of 12 years from
the time a development proposal was filed until people could move into
actual housing.

The fourth section states that there was no set legal or administrative
framework to encourage affordable housing and specific targets in that
regard.

Programs for new housing and long-term rent control units produced little,
especially for the weaker population sectors that they were designated to
help.

Here, the report blasts the Housing Ministry, the Interior Ministry and the
ILA for not properly defining what category of persons they were targeting
for new more affordable housing.

Only 4 out of 10 special public offerings of affordable housing in 2012 were
successful, and out of 1,412 units offered, only 406 were seriously marketed
and only 114 units were rented out.

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