Official: Third Apartment Tax Plan ‘Out of the Bolshevik 60s’

Beginning January 1st, Israelis who own more than two apartments will pay a special tax, if Finance Minister Moshe Kachlon has his way. Kachlon on Wednesday officially inserted into the Arrangements Law a 1 percent tax per month on the assessed value of each home or apartment owned by landlords, beginning with the third property, up to a limit of NIS 1,500 per month, a total of NIS 18,000 a year. As the average value of homes in most cities is more than NIS 1.5 million, it is expected that most of the Israelis who will have to pay the tax will pay the full amount.

The rule is expected to affect 50,000 people, who own a total of 180,000 homes. The value of the home will be determined by a government-certified assessor, based on home value data supplied by the Central Bureau of Statistics for each geographical area.

The law is expected to face tough criticism and resistance. Because of this, Finance Ministry sources said, Kachlon decided to include the rules in the Arrangements Law, a codicil to the state budget that includes extra-budgetary funding for a wide variety of programs, making it much less likely to be voted down.

Economists have expressed concern that the tax will do nothing but raise the cost of rents, as homeowners slough off the new expenses on renters. However, Kachlon has told advisers that there are enough “second apartments” that will not be taxed that renters can take advantage of, Globes reported.

Finance Ministry officials were quoted as saying that the tax was aimed at discouraging investments in real estate, thus reducing the pressure on home prices. The increase in home prices caused inequality in the housing market. Besides discouraging investments in real estate by wealthy Israelis, the tax could bring in as much as a billion shekels in income for the state, according to the officials quoted in the report.

According to Ohad Danos, chairman of the Israel Real Estate Appraisers Association, there is nothing socially redeeming about the law. “The only ‘benefit’ of this law will be to add NIS 800 million to the public coffers,” he said. “Even if this succeeds, it will do nothing to benefit the real estate market. It will not add one apartment to the market, and will only reduce the number of apartments available for rental, driving up prices. In the end, the increase will be dumped on renters, and even those who have only one extra apartment and will not be taxed will surely take advantage of the situation to increase their rents. This a populistic, Bolshevik-style rule that would have been appropriate to the Israel of the 1960s,” he added.