The Finance Ministry signaled support Tuesday for a newly proposed national framework to regulate the country’s rental housing market, saying it is prepared to adopt the plan crafted by the Planning Administration.
The move comes despite the ministry having previously supported a clause in the Economic Arrangements Bill — an omnibus legislative package passed alongside the state budget — that sought to reduce the number of long-term rental units. The proposal, which was part of a broader fiscal plan, drew criticism from housing advocates and developers who warned it would undercut efforts to stabilize the rental market.
At a real estate conference in Tel Aviv hosted by the housing news outlet Magdilim, Matan Yagel, deputy budget director at the Finance Ministry, confirmed the ministry’s alignment with the Planning Administration’s approach. “We didn’t do enough as a country to address the rental market,” Yagel said.
Yagel said the ministry agrees with the need for more rental units, increased urban density and fewer parking requirements. He added that the government is willing to forgo land revenue to encourage quality rental development. “In areas with no economic viability, it’s better not to market rental units at all,” he said.
The Planning Administration’s plan calls for a systemic strategy to increase supply and stabilize the rental sector. Implementation would require complementary tax and land marketing policies.
Yagel also commented on Monday’s interest rate cut by the Bank of Israel, which lowered the key rate by 0.25%. “We weren’t surprised,” he said. “It aligns with global trends, but the governor does not foresee continued cuts like during COVID. A single quarter-point cut, without projections for further reductions, is unlikely to spark major demand shifts.”
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Housing Ministry Director-General Yehuda Morgenstern and Finance Ministry Deputy Budget Director Matan Yagel
(Photo: Dror Sithakol)
Housing Ministry Director-General Yehuda Morgenstern addressed the ongoing decline in home prices, saying it proves sustained efforts are working. “It’s possible to bring prices down — that’s what we’ve seen over the past six months,” he said. “This isn’t random. It’s the result of years of hard work to expand housing supply.”
Yagel echoed the assessment, projecting that prices would continue to fall. “Our goal is to make homeownership more accessible to young couples,” he said. “Lowering the cost of living is a core policy goal, and as long as the government continues increasing supply, prices should keep dropping.”
He also addressed the ministry’s proposal to reinstate a property tax on undeveloped land, acknowledging its drawbacks but framing it as a fiscal policy tool. “It’s expected to generate significant state revenue,” he said. “This is capital taxation — not housing market policy.”
'Labor unions won’t decide for us'
Rafi Elmalich, director of the Planning Administration, criticized the Israel Aerospace Industries workers’ union on Tuesday over its opposition to relocating the Elta Systems plant in Ashdod. The move is intended to free up land for the construction of some 100,000 housing units.
“We can’t let labor unions dictate Israel’s planning decisions,” Elmalich said. “We saw the same reaction from union leaders during the rezoning of the Haifa oil refineries. In the case of Elta, we’re talking about 100,000 homes. We’ve planned, and we will continue planning with full momentum.”
At the same conference, Israel Land Authority Director Yanki Quint warned that a crisis involving wastewater treatment facilities is delaying the construction of 200,000 homes. “We can’t issue permits due to a collapse in infrastructure. It’s a catastrophic crisis that, if unresolved, poses a real threat to Israel’s housing market,” he said.
Addressing the land market, Quint noted a prolonged decline in developer bids for state land tenders — a trend reflected in land value indexes. “Developers are paying based on what they expect apartment prices to be in several years,” he said. He added that the Land Authority is racing to conclude dozens of tenders by year’s end and is preparing reserves for heavy land marketing through 2025.
Quint also emphasized the agency’s preference to develop land in previously disturbed zones or vacated military bases — such as the Elta site — rather than building on agricultural land.
Elmalich addressed the rental housing plan currently under consideration, which was prompted by a Finance Ministry proposal in the Economic Arrangements Law to reduce the share of long-term rental housing. He called the rental sector “a chronic issue the country has failed to resolve for years.” Public housing investment alone, he said, is not enough. “The government spends significant sums on public housing, but residents pay very low rents, and there’s no long-term path to urban renewal. Some of that budget should go toward building a meaningful supply of long-term rentals.”
Quint clarified that the Land Authority fully supports long-term rentals but views it as a property rights issue, not a planning one. “An apartment is an apartment is an apartment. The decision whether it’s sold or rented belongs to the Israel Land Council,” he said.
He also said the agency is working with the Housing Ministry to advance a “rent-to-own” model that would allow young couples to build equity during a rental period and eventually purchase the apartment at a pre-set price. He noted the model could serve as an alternative to subsidized housing plans in central Israel.