The pride of the Finance Ministry – the “Price Resident” program, designed to lower the cost of housing for young couples – does no such thing, according to no less an authority than the International Monetary Fund. The IMF’s annual report was presented to Finance Minister Moshe Kachlon, listing the government’s economic hits and misses over the past year, the News One site quoted the report as saying.
While the economy was in overall healthy shape, the report said, it criticized the Price Resident program, which seeks to create a secondary, lower cost market for apartment sales to young couples and lower-income Israelis. Under the program, contractors are rewarded with building permits and projects for development if they reserve a percentage of apartments in their projects for sale at lower prices to eligible buyers.
The question of whether or not the program is successful is in the results – and the results show that housing prices have risen overall 8 percent in the past year. A major reason for that is the fact that there are not enough apartments being built to satisfy demand. Although the government has done some things to soften demand – such as implementing the Third Apartment Tax, a special excise tax on investors who own more than two properties – the only solution to high housing costs is to increase the number of apartments for sale. The Price Resident program succeeds only in creating two, parallel, markets where demand outstrips supply, instead of contributing to an increase in overall supply.
Despite the criticism, Minister Kachlon welcomed the report, saying that it placed Israel “at the head of the world economies in terms of progress, growth and stability. The report backs many of the moves and reforms we have undertaken, and the positive steps we have taken in many areas, including housing. Our reforms have increased competition and lowered the tax burden on Israelis.”