Kachlon’s Next Target: Apartments for Rent

After seeking to lower housing purchase prices for young couples, Finance Minister Moshe Kachlon’s next real-estate venture takes aim at rental apartments. New incentives authorized by Kachlon will, he hopes, encourage contractors to build apartment buildings where rental apartments with long-term leases will be offered.

Nearly all of Israel’s market for rental apartments consists of private apartments that are owned by individuals; the concept of a real-estate firm that owns a building and offers long term renewable leases on the same apartment is unknown in Israel. The new effort by Kachlon seeks to create that kind of market. Incentives to be offered to contractors and real-estate firms, including tax breaks, will, it is hoped, prompt the jump-starting of such a market.

According to the rules being developed by Kachlon, the program, including holding a lottery for contractors interested in bidding on the rights to build rental apartments, will be administered by local authorities. Fifty percent of the homes in a project will be allocated to local residents. Among the incentives for the builders is the allocation of 20 percent of a building’s space for commercial rentals.

The program is not the only effort to expand the apartment rental market. A law proposed by MK Eli Cohen (Kulanu) would allow the owners of one-family houses to remodel and break up their homes into two or three apartments, depending on size. While there are many basement apartments in Israel – separate units which homeowners rent out to tenants – the vast majority of them are illegal, meaning that their owners are not authorized to rent them out, and that they cannot be coded properly for electricity, gas or other utilities. The proposal by Cohen is no less an important change for them as it is for young couples seeking cheap housing. Under the proposal, homeowners with houses with lots over 120 square meters will be able to split their homes into units of at least 60 square meters each. Each unit will need to have its own kitchen, bathroom, and entrance.

“Creation of a market for long-term apartment rentals at fair and supervised prices is an inseparable part of our efforts to solve the housing crisis,” Kachlon’s office said in a statement. “Along with our efforts to lower the cost of home purchases via the Price Resident program, we will seek to greatly increase the supply of apartments for rent. Our first two rental projects in high-demand areas of Tel Aviv will be offered to contractors in January. In the coming years we will offer contractors the opportunity to build 36,000 such apartments,” he added.