Israel Plans AirBnB Restrictions, Taxes to Curb Housing Prices

(Bloomberg) --

The Israeli government has unveiled a set of measures meant to tackle the high cost of housing in Israel, driven up by both investor demand and inadequate supply. 

The plan announced at a joint press conference on Sunday by Israel’s finance, interior and housing ministers aims to slow the surge in housing costs by lowering land taxes, cutting red tape, and restoring an 8% purchase tax on investment homes that was reduced during the pandemic. 

The government also hopes to free up as many as 13,000 apartments for long-term rental through new restrictions on renting homes on sites such as AirBnB.  

The measures come in addition to a plan contained in the 2021-2022 draft budget to add 280,000 construction starts through 2025. That would be about 40% higher, on an annual average, than in 2020. 

Soaring housing costs have plagued the country for more than a decade. A three-bedroom apartment in Tel Aviv, the country’s commercial and cultural center, costs more than $800,000 on average, while the average monthly Israeli salary is $3,700, according to government statistics. 

The high cost of home ownership, once common in Israel, is now out of reach for many, amplifying the gaps in a two-tier economy where the 10% employed in the high tech sector are flourishing and many others are struggling. 

Housing prices in Israel grew by 6.2% between December 2020 and August 2021, slightly below the Organisation for Economic Co-operation and Development average, according to the Finance Ministry. Finance Minister Avigdor Liberman said much of the increase had to do with issues beyond Israel’s control such as global supply chain problems that have driven up the costs of importing construction materials, and the low U.S. interest rate, which has influenced Israel’s and kept mortgage costs low.

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