Israel Rewrites Its Rules to Get Rentals Built

Monday’s news was about supply and the rules that decide whether homes get built. The headline move: an inter-ministerial committee told the Tax Authority to loosen the rules on rental-housing REITs so they can sell some of their apartments and recycle the cash into building more rentals. In the same direction, the state wants to merge its two big housing arms, the land-development company Arim and the long-term-rental company Dira Lehaskir, into one body. The government is also putting about 1.5 billion shekels behind urban renewal in the north so projects there finally pencil out.

Two stories sit closer to a buyer or owner’s wallet. An appeals tribunal in the center quietly extended a tax break: the safe-room exemption from the betterment levy now reaches combination deals, not just owners who build for themselves. And fresh Bureau of Statistics data shows how slow building has become, with the average job now stretching past three years. Add a first-ever light-rail promise for Gush Etzion, a busy week of project approvals from Hadera to Bnei Brak to Raanana, and two eye-catching luxury closings, and that is the day.

What did not happen also matters. The Bank of Israel rate is still 3.75 percent after the May 25 cut, with the next decision on July 6, so the rate stories floating around are old. The big “is it a crash” debate and the 84,000 unsold new apartments are real but already live on this site, so they are refresh notes at the end, not new sections.

Three numbers we worked out

• About 12.5 times. Israel’s REIT market is tiny next to its peers. Using the figures in today’s REIT coverage, the United States holds roughly 3,630 dollars of REIT value per person against Israel’s roughly 290 dollars. That is about 12.5 times more per head. Our math: 3,630 divided by 290.
• About 77 percent slower than 1995. The Bureau of Statistics says the average apartment took 21.4 months to build in 1995 and 37.8 months in 2025 (its unit-weighted figure). That is roughly 16 extra months, about 77 percent longer than a generation ago. Our math: (37.8 minus 21.4) divided by 21.4.
• Roughly a third still unpinned. Of the 1.5 billion shekels earmarked for northern renewal, about 700 million is named for border towns and about 265 million for a group of Galilee cities. That is 965 million tied to named places, leaving about 535 million, close to a third of the pot, not yet attached to specific towns. Our math: 1,500 minus (700 plus 265).

The state wants REITs to sell apartments so they will build more of them

Start with the day’s biggest policy move, because it tries to fix the thing Israel needs most: rental homes. A REIT is a real-estate investment fund that ordinary people can buy on the stock exchange; in return for tax breaks it has to hold property for the long term and pass most of its income to shareholders. The catch for rental housing is that a fund that can never sell a single apartment struggles to raise fresh money to build the next project.

An inter-ministerial committee, made up of the Tax Authority, the Finance Ministry budget department, and the Securities Authority, handed its recommendations to Tax Authority director Shai Aharonowitz. The core idea: let a rental-housing REIT sell up to one third of the apartments in a central, high-demand project, and up to one half in a peripheral project, without losing its tax status, as long as the money goes back into more rental or income-producing real estate. The committee also wants to scrap the rule forcing funds to use at least 70 percent of building rights in the Galilee and the Negev, and to give projects three more years to be built.

This is a recommendation, not a law. The Tax Authority said it will work with the Finance Ministry to draft the legal changes, so nothing is in force yet. Why it matters: Israel’s rental market is thin and pricey, and REITs are one of the few tools that can add professionally managed rental stock at scale. The gap is stark. As our first computed figure shows, the United States carries about 12.5 times more REIT value per person than Israel, and only about six such funds operate here. If the rules change, expect more purpose-built rental buildings, especially outside the Tel Aviv core. Sources: Calcalist, Bizportal, Nadlan Center, June 21.

A tax break for safe rooms just got bigger

Here is a small ruling with real money in it. When your property gains value from new building rights, the city charges a betterment levy, usually half the gain. For years the law has exempted the value added by a mamad, the reinforced safe room every new Israeli home must have, but only when the landowner builds the home themselves.

Two appeals committees in the Central District, one in Petach Tikva chaired by attorney Dvir Seglovitz and one in Raanana chaired by attorney Maya Ashkenazi, ruled last week that the safe-room exemption also applies in a combination deal, where a landowner gives a developer part of the land in exchange for finished apartments. In the Petach Tikva case the exemption was worth about one million shekels. The decision was a majority one, with appraiser Noa Sirkis dissenting that an exemption without the owner actually building is too generous a gift at the public’s expense. The committees said a city may tie the break to a real commitment to build, to stop abuse.

Two cautions before anyone banks on this. It is an appeals-committee ruling, the tribunal stage, not a binding court precedent, so cities are likely to appeal. And it is a separate question from the rent premium safe rooms command, which we cover in how safe rooms are reshaping the rental market. Why it matters: if you own land going into a combination deal in the center, this could cut your levy bill by a serious sum, but get it in writing and assume the city will push back. Source: TheMarker (June 21), Nadlan Center (June 22).

The state moves to merge its two housing companies

The Government Companies Authority, led by its director Roy Kahlon, is pushing a plan to fold six state companies into three. The one that matters for housing pairs Arim, the state’s land-development company, with Dira Lehaskir, the government’s long-term-rental company, into a single body that would run a site from planning all the way to marketing the rental homes on it.

One number is floating around that needs care. The roughly 80 million shekels a year of savings being quoted belongs to a different pair in the same reform, the merger of Cross-Israel Highway and Ayalon Highways, not to the housing companies. No saving figure or timetable has been published for the Arim and Dira Lehaskir tie-up, and the specifics here rest on a single Globes report, so treat it as an early-stage proposal. Why it matters: combining the body that prepares state land with the body that builds state rentals could, in theory, speed up public rental projects, the slow-moving supply most renters never see. Source: Globes, June 22.

1.5 billion shekels to make northern renewal worth a developer’s time

Urban renewal only happens when a developer can earn a profit by adding apartments on top of the old ones. In much of the north the math does not work, because prices are lower and, since October 2023, the security risk is higher. The government’s answer is money. About 1.5 billion shekels is being put toward demolish-and-rebuild and fortification in northern and border cities where projects are not viable on their own.

The pot splits roughly like this: more than 700 million shekels for communities along the Lebanon border, a group that includes Kiryat Shmona, Nahariya, Maalot-Tarshicha, and Shlomi, and about 265 million for a cluster of Galilee cities, namely Safed, Tiberias, Acre, Nof HaGalil, Carmiel, and Afula. As our third computed figure notes, that leaves roughly a third of the 1.5 billion, about 535 million, not yet tied to named towns. Elazar Bamberger, who used to head the state urban-renewal authority, called it a turning point because the state is now putting up budgets, not just plans. The caution: approval is not the same as built, and these projects take years to clear permits and rise. Why it matters: if you own or are eyeing an old apartment in a northern renewal zone, public money closing the viability gap is exactly what gets a stalled project moving. Sources: Ynet (June 22), Mako.

Building an apartment in Israel now takes more than three years

A quieter data story explains a lot of the supply problem. New Bureau of Statistics figures show the average time to build an apartment, measured from laying the foundation to finishing the building, has crossed three years. The unit-weighted average was 34.3 months in 2024 and 37.8 months in 2025, up from 21.4 months back in 1995. That is the roughly 77 percent stretch in our second computed figure, and it does not even count the permit wait before the first shovel.

One honest caveat: the simple per-building average, which weights a tiny project the same as a giant tower, is a bit under three years, about 32.3 months in 2025. The “past three years” headline is true for the unit-weighted measure, which leans toward the big towers where most new homes actually are. Why it matters: longer build times mean today’s approvals reach the market later and cost more to finance while they crawl, which keeps finished supply tight even when cranes are everywhere. This is the build-it side of the question we ask in can Israel actually build the homes it approved. Source: Central Bureau of Statistics data, via Calcalist.

A first light-rail promise for Gush Etzion

Transport Minister Miri Regev said her ministry will advance plans for a light-rail line linking Gush Etzion, Efrat, and Betar Illit to Jerusalem, which would be the area’s first direct rail connection to the capital. Gush Etzion Regional Council head Yaron Rosenthal called it a historic announcement.

Be clear-eyed about what this is. It is a statement of intent. No route, no budget, and no timetable were published. If you see figures like 360 million shekels or a 2029 to 2032 window attached to it, those belong to the separate Jerusalem Blue Line already under way, not to this new line. Why it matters: rail access is one of the strongest long-run drivers of home values, so even an early promise is worth watching for anyone with property in the Gush. But a promise with no plan attached should not move a price today. For how transit timing tends to play out here, see metro delays, new towers and southern growth. Source: Jerusalem Post, Israel Hayom, Makor Rishon (June 21).

The approvals pipeline: where new homes moved a step forward

Four local milestones landed in the window. None is a finished building, and each is at a different stage, so the stage matters as much as the number.

Two of these are worth a second look. In Raanana the plan swaps 1,700 old apartments for about 5,360 new ones, which is roughly three new homes for every one removed (our figure: 5,360 divided by 1,700). And the two Hadera items are different projects often confused: Complex 13 is a state-land master plan in the city’s northeast, while Sela-Beitar is a private demolish-and-rebuild on the David Shamouni axis. The Bnei Brak figures rest on a single outlet, so treat the exact count as provisional. Why it matters: this is the front of the pipeline, the homes that, given the build times above, will reach buyers years from now, not this year. Sources: Maariv, Bizportal, Nadlan Center, Mako, Israel Hayom (June 21).

Two closings worth noting

At the top end, money is still moving. A duplex penthouse on Ussishkin Street in the Old North of Tel Aviv sold for 45 million shekels through Israel Sotheby’s, a completed deal rather than an asking price, with the sellers a Belgian family who called off their move to Israel and the buyers a local couple. The home has about 358 square meters of built space, which works out to roughly 125,700 shekels per built square meter (our figure: 45 million divided by 358), before counting its three terraces.

Far to the north, Globes reported two closings in one new Nahariya building on Herzl Street: a penthouse at 4.925 million shekels (155 square meters built, plus a 107 square meter terrace and a 90 square meter roof garden with a pool) and a smaller mini-penthouse at 3.45 million. Those Nahariya prices come from a single outlet, so read them as reported rather than confirmed twice over. Why it matters: a 45 million shekel sale in north Tel Aviv and a near 5 million shekel penthouse in Nahariya, on the same day, are a clean snapshot of how far apart Israel’s two property worlds have drifted.

Refresh notes (already covered here, new angle only)

These are real but the site already owns the beat, so they update an existing page rather than start a new one:

• Discounted-housing lottery closes today. Registration for the 11th Dira BeHanacha round (about 7,922 homes across 19 towns) closes Monday June 22. This belongs on our housing deadlines page.
• Developer-margin push, now better sourced. The plan to lift urban-renewal developer profit to 18 to 20 percent, which we covered yesterday from one outlet, is now carried by Globes, TheMarker, Nadlan Center, and Bizportal, naming planning chief Guri Nadler and a warning from appraisers’ chair Nehama Bogin that owners could pay for it. This updates Israel hands builders a bigger cut.
• 84,000 unsold, and contractors slowing the taps. TheMarker reports about 84,000 unsold new apartments, with builders throttling supply to hold prices up. This updates the housing freeze page, not a new post.
• Rates and inflation, unchanged story. May inflation sits at 1.9 percent with housing prices down about 1.3 percent over the year; the rate is still 3.75 percent. This is the over-covered rate beat and stays on our existing rate and split-market pages.

Sources

Calcalist, Bizportal, and Nadlan Center (REIT committee, Hadera, Bnei Brak, safe-room levy). Globes (state company merger, Nahariya closings). TheMarker (safe-room levy, unsold-stock). Ynet and Mako (northern renewal budget). Jerusalem Post, Israel Hayom, and Makor Rishon (Gush Etzion light rail). Maariv (Hadera projects). Mako and Israel Hayom (Raanana). Central Bureau of Statistics data via Calcalist (build duration). Bank of Israel and the Bureau of Statistics published no new in-window housing release; the rate stands at 3.75 percent with the next decision on July 6. Tracking parameters stripped from all links.