Another Solution to Israel’s Housing Crisis
There have been a number of articles (Arutz Sheva, Times of Israel, Globes) questioning why, with a surplus of housing units are prices not going down? Answers range from it depends on the city (or area) to the numbers being analyzed include units under construction.
One solution that is not being discussed, but should, is rentals.
Although, there are apartments for rent, 95% of are offered by private owners. The OECD estimates that most of Israel’s roughly two million renters live in privately owned and individually managed homes.
Therefore, nearly all of Israel’s rental demand is met by private owners, while only about 3% of Israel’s rental units are owned by professional long-term rental providers. Yet, in the United States, professional management is the norm. About 95% of U.S. large apartment buildings (50+ units) are managed by a professional management company rather than directly by the owner.
It is important to consider that for private owners, being a landlord is often a side gig investment, which does not play out well for tenants. It is not uncommon for Israeli tenants (after living in a location for a number of years, their children settled in with schools and friends) to be informed that the landlord has decided not renew lease because s/he wants to sell, needs the money, or wants give the apartment to a family member. With property management companies this isn’t usual because renting is their business; short- and long-term.
Apartment purchase prices in Israel have risen sharply (approximately 130% from early 2000 to 2022), while net household income rose by only 45% during the same period. A major cause of the availability and affordability crisis is a 189,000-230,000 shortage of housing units (2006-2022). As we all know, lower supply and higher demand are a basic economic driver in increasing prices.
Additionally, between 2013 and 2025 there has been a rise in the proportion of Israelis living in rented units and a corresponding decline in the proportion owning homes. Rental units grew by 2.7% between 2023 and 2024, faster than the overall housing stock’s 1.9% growth.
While the “housing crisis” in Israel is still news, it is worth looking at from a different perspective and offering some ideas to solve some of the problems.
Rental versus purchase is a viable solution for a growing percentage of the Israeli population. A rental option can be advantageous due to a variety of personal situations, such as a poor credit rating to qualify for a mortgage; low cash balance available to afford a large down payment; divorce; a preference to keep assets liquid; high fertility rates equaling more singles and young families; and projected increased immigration (olim); to name a few.
Private landlords dominate because Israel’s rental market is lightly regulated, small-scale ownership is tax-advantaged, and institutional rentals have historically offered weak returns and little legal certainty. Therefore, it is unfortunate that in Israel a vastly overwhelming majority of rentals are in the hands of individual landlords and not professional property management companies.
What is a property management company? Property management companies operate, lease, maintain, and administer real estate on behalf of property owners — usually institutions with many, many units, often in the thousands.
For the tenant, their monthly payment would include rent, arnona (taxes), and vaad-habayit (management and maintenance fees). Utilities (water, gas, electricity) would be paid directly by the tenant.
Again, a key benefit to having professional property management companies is that rental is their business. So, the tenant can be assured that for the short- or long- term of their lease, a non-renewal of their rental agreement is not likely to occur.
How do we increase and build this business model? We need to have the right government ministries (Israel Land Authority, Housing Ministry, and others) engage in a coordinated aggressive approach. Here are two unifying methods:
- As there are very few Israeli property management companies, there needs to be a dramatic increase of firms offering property management services to building owners. Therefore, the Israeli government should encourage foreign experienced property management companies to open Israeli divisions. There have been some efforts, such as tax incentives, but there needs to be more. And…
- Entice Israeli builders who construct multiple apartment building complexes for individual apartment sales (as is done now), to also sell or allocate other buildings in the complex to be managed by a property management company for rentals on the behalf of the building owner. This ensures continued and long-term income for the building owners, as well as dramatically fulfilling the need for rental properties.
As the country’s population grows, the housing business services must change, too. It is time now (if not, yesterday) for builders to be balanced and build more dedicated rental buildings (or convert unsold apartments) to be managed by property management companies countrywide.
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Sources: Shoresh Institute; Harvard University; Israel Land Authority; Reichman University; Times of Israel; Globes; Globes; Globes; Realty+; Israel Ministry of Construction and Housing; OECD; Bank of Israel; International Monetary Fund; Barena Law; Turbo Tenant
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About the Author: David S. Levine (MBA) is a retired NYC corporate Marketing and Finance executive, and university instructor. He has authored many articles and four books, including “How the Run the Business of YOU!” and “Hey Israel – You’re Perfect. Now Change!” Read more and follow him on theRealDavidLevine.Substack.com and X (Twitter): @DavidsLevine
