Official: ‘Third Apartment’ Tax Won’t Raise Rents

A plan by the Finance Ministry to impose a special tax on Israelis who own three or more homes will not have an impact on rents, as some opponents have charged, said Amir Levy, Director of Budgets in the Ministry. Levy said that the Ministry had done an in-depth analysis of the matter before proposing the tax, and had determined that rents would not be raised en masse as a result of levying the tax.

Finance Minister Moshe Kachlon is planning to pass the tax as part of the Arrangements Law, which is set to be presented to MKs along with the state budget. The tax will cost Israelis who own three or more homes as much as NIS 18,000 a year. The rule is expected to affect 50,000 people. 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 expense onto renters. However, Kachlon has told advisers that there are enough “second apartments” that will not be taxed which renters can take advantage of, Globes reported. According to Ohad Danos, Chairman of the Israel Real Estate Appraisers Association, “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 in the Israel of the 1960s.” The only benefit of the law, he said, “will be to add NIS 800 million to the public coffers.”

Levy said that this was not the case at all. “The maximum number of rental apartments to be affected by this law is 80,000, out of a total of 650,000 on the market,” he told Globes. “In addition, those who will have to pay the tax can well afford it. The average age of those affected is 56, with a monthly income of NIS 46,000. Given the competition for renters and the large number of options available, the Ministry does not see the tax as an opportunity for a general increase in rents,” he added.