Tel Aviv Housing Crisis & the Rise of MacroUnits as a Possible Disruptive Force

Source: Pixabay No Attribution Required
Source: Pixabay No Attribution Required

Life’s a Beach’ in Tel Aviv, Israel, but the same cannot be said for the housing crisis in Israel’s premier tourist metropolis. Tel Aviv is the most desirable urban enclave in all of Israel, particularly the center and the north of the city, and along the pulsating coastline. From Metzitzim Beach, through Hilton Dog Beach, Gordon Beach, Banana Beach and Jaffa in the south, the appeal of this vibrant, multicultural city is nothing less than 100% pure energy, 24/7.

Unfortunately, it’s extremely difficult for singles, couples, or families to purchase real estate in any of the desirable neighborhoods in Tel Aviv. The Israeli press is peppered with complaints about the high prices of real estate in Tel Aviv. Haaretz ran an op-ed with the headline, ‘Only the Wealthy Can Afford an Apartment In Tel Aviv – But is That Such A Terrible Thing?’ The journalist went to great pains to extol the merits of homeownership in Tel Aviv which is now ranked in the top 10 most expensive cities in the world – even more expensive than New York City.

Renewal, resuscitation, and reinvigoration initiatives across the city have been cited as the reasons for skyrocketing prices of real estate in Tel Aviv. Rothschild Boulevard is one such case in point, and this has facilitated greater demand for Tel Aviv real estate. With rising demand comes higher prices, given insufficient supply. Residents across Tel Aviv are demanding more and more facilities, amenities, services, and value-added extras and this is also driving up costs.

For example, network and infrastructure upgrades such as new and upgraded parks, new roads, new lampposts, car sharing systems, bicycle systems, fashionable street furniture, complimentary tanning beds and umbrellas for beachgoers, and so forth are largely responsible for rising prices throughout Tel Aviv. Since funding is not derived from municipal taxes, it must come from real estate taxes. This is a natural incentive for the city council to jack up the prices of Tel Aviv real estate in order to generate additional revenue streams.

New Trends Developing in the Tel Aviv Real Estate Market

The changing nature of society has brought about some interesting developments in Israeli real estate. While Tel Aviv remains the focal point owing to all of its amenities, arts and culture, nightlife, sports, beaches, and general desirability, people are now seeking different types of homes. In the days of old, larger apartments were inherently more appealing, with 2, 3, 4 bedrooms dominating new home construction.

However, the exorbitant prices of real estate have put paid to that. Nowadays, there are many more singles and couples seeking out 1-bedroom apartments in cities like Tel Aviv, and the city council is reporting an uptick in the number of these developments that are being built. The mass protests that took place across Tel Aviv in 2011 kickstarted a social justice movement for affordable living in the city. Sadly, things are not moving fast enough for most people wanting to buy real estate in Tel Aviv.

The Central Bureau of Statistics found that the construction of 1-bedroom apartments increased to 1832 units in 2018, up 56%. None other than the government is driving this change, given the high demand for real estate in Tel Aviv, and the unaffordability of standard apartments. What they don’t let on is that the cost per square meter of 1-room apartments is substantially more than with 2, 3, or 4 room apartments. Most apartments across Israel are two-bedroom apartments, but now, these 2-room units make up just 4% of new residential construction across Israel. 4-room units comprise 40% of new construction across the country. In Tel Aviv, things are very different.

Is Tel Aviv Only for the Rich?

Very few people, besides extremely wealthy locals and foreigners with lots of money to burn can afford 4-room units in Tel Aviv. While small apartments may have lost favor with government officials in the 1990s, they are staging a strong comeback thanks to the surging real estate prices in Tel Aviv. Nowadays, young couples and the elderly cannot afford to buy or live in big apartments with 4+ rooms. The mortgage debt alone, the homeowners association fees, and the utility bills are bankrupting them. Add to that the rising rates of divorce, and smaller households, it makes sense that single room apartments are gaining favor in Tel Aviv.

Social change advocates tout many viable solutions such as the MacroUnit concept which is currently deployed in developments throughout Northern California. The MacroUnit is based on luxury and cost effectiveness. It encompasses an innovative design process which maximizes square footage and offers luxury-style living at cut-rate prices.

These types of projects are currently implemented at 674 23rd Street, 960 Howard Street, and 1919 market Street. Israeli real estate developers are looking for inventive ways to solve the Tel Aviv housing crisis by implementing these types of systems. They use flexible wall systems known as ‘Magic Walls’ to transform a one-bedroom apartment into a 2-bedroom apartment, with multiple added amenities.

The problem with the conventional model of constructing new buildings, apartments, and complexes is the extortionary cost of real estate in the highly desirable Tel Aviv locale. The alternative is to build affordable housing through vertical integration initiatives, with tremendous cost savings benefits along the way. The goal of providing premium-grade accommodation at affordable prices is challenging in a city like Tel Aviv, given that demand outstrips supply by a long margin, particularly from a foreign market of buyers.

The price per square meter remains high in Tel Aviv, making the cost of even 1-bedroom apartments really expensive. High land prices make it impossible for singles and young couples to buy property in the center of the country. Luckily, the millennial generation is less concerned about square footage than they are about living in the thick of it in Tel Aviv. It’s about having a place to crash, with all the buzz of Tel Aviv on your doorstep. For them, the Magic Walls may be the elixir Tel Aviv really needs.

About the Author
Housing developer focused on empowering people to live better by tackling the largest problem people face today: an affordable place to live.
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