Bloomberg News

Israeli Army Eases Housing Crisis With Vacated Bases: Mortgages

August 21, 2012

Israeli Army Retreat From Pricy Property Opens Land for Housing

The Israel Land Administration estimates that 35,000 housing units will be built over the next five years on vacated army land. Photographer: Uriel Sinai/Bloomberg

Israel’s army, with bases spread over 39 percent of the country, plans to vacate properties for development into residences needed to ease a housing shortage.

About 80 percent of Israel’s land is either directly under the military’s control or subject to its restrictions, more than any other country. The Israel Land Administration, which will oversee the transfer of the land for development, estimates 35,000 homes will be built on the army land within five years.

“Freeing up the land is an excellent idea,” said Dorit Shabtai, a 39-year-old computer programmer who’s been trying to purchase a home in the greater Tel Aviv area, the country’s economic capital. “Buying somewhere isn’t realistic at the moment, so I’m sure this will help people like me.”

Bank of Israel Governor Stanley Fischer is trying to slow home-price growth by restricting some types of mortgage lending. After succeeding in the second half of last year, prices began to rise again in the first half of 2012. The shortage of housing in Tel Aviv continues to push up prices. The average apartment value in the city rose 6 percent to 1.94 million shekels ($480,000) in the three months through June, the Central Bureau of Statistics said in an Aug. 16 report.

It’s not unprecedented for the army, officially known as the Israel Defense Forces, to vacate real estate for private development. Three apartment buildings are under construction on a site in Tel Aviv that was part of the Kirya, the military complex where Israel’s Mossad intelligence agency plotted to kidnap Nazi war criminal Adolf Eichmann. When they’re completed, the Sarona towers will overlook a 10-acre (4-hectare) leisure complex and the Army headquarters with its rooftop helicopter pad.

Netanyahu Reforms

Prime Minister Benjamin Netanyahu has made reforms in the housing market a keystone of his government’s economic program, especially opening up to private development more of the 93 percent of Israel’s territory that is under some form of government control.

Fischer, who’s cut the benchmark interest rate twice in 2012 to stimulate growth, is also trying to make home purchases less risky for borrowers and the banking system. Last year variable-rate mortgages were restricted to one-third of the value of the total loan. Still, a record 4.9 billion shekels in housing loans were approved in July, according to Israel’s Central Bureau of Statistics.

“The lack of housing in the country’s center is definitely helping to push this program forward,” said reserves Brigadier General Hezi Meshita, who’s in charge of a project to relocate more than a dozen bases in the country’s most densely populated areas to the southern Negev desert over six years.

Property Prices

“Tens of thousands of new housing units in an area of demand will certainly constitute a significant contribution to a decline in property prices,” Housing Minister Ariel Atias said in an e-mailed statement.

Residential property prices in Israel have risen about 21 percent since the start of 2010, according to the central bureau of statistics. That compares with the consumer price index’s 6.6 percent increase.

Housing costs were a key factor in spurring protests last year in which tens of thousands of demonstrators erected tent encampments in the center of Tel Aviv and other Israeli cities.

Uri Ariel, chairman of the parliament’s State Control Committee and National Union Knesset representative, wants the army to go further. “The amount of land it controls affects our entire cost of living,” he said by phone. “Much more land needs to be opened up.” Ariel said he plans to hold a parliamentary hearing on the issue.

‘Too Slow’

The State Comptroller’s office published a report last year that was critical of the military’s land management policy. Army bases occupy about 2.8 million acres and a similar amount is restricted for such military uses as firing ranges and training areas, according to the report.

While much of the latter territory is in the Negev, many of the bases, including dozens no longer in use, are located in the central coastal range where most Israelis live. The comptroller’s report said the defense establishment has been moving too slowly to relocate its bases, and in some cases has failed to carry out proper environmental clean-ups. “Findings indicate that for years the supervision and control of civilian bodies on land management in the Israel Defense Forces were lax and fundamentally flawed,” the comptroller said.

Soldiers Transferred

A Defense Ministry official, speaking anonymously because he was not authorized to give his name, said the report failed to take into account the bureaucratic hurdles the army faces in relocating its facilities. He said that the military can’t start relocating its bases until it has built new ones, and it took years to obtain necessary funding for the new Negev facilities now under construction.

More than 30,000 soldiers will be transferred to the new southern bases and about 25 billion shekels will be invested in developing infrastructure in Israel’s south. The army estimates that the project will end up adding about 6 billion shekels to the country’s gross domestic product each year.

At the Sarona project, where development started prior to the current plan, a three-bedroom apartment in the towers built by Gindi Holdings Group is on sale for 3.15 million shekels. The only reminder of the property’s military past will be an antenna tower once used by Mossad to broadcast secret communications for missions such as the 1960 kidnapping of Eichmann from Argentina to Israel, where he was convicted of war crimes and executed two years later.

Security Concerns

Some of the military real estate to be opened up to private development is on other prime sites in the greater metropolitan Tel Aviv area. This includes bases in the neighboring city of Ramat Gan, one of the country’s leading business districts, and the base housing Army Intelligence headquarters at the Glilot junction next to the city of Herzliya.

The land occupied by the Glilot intelligence complex is worth an estimated 20 billion shekels, according to a Defense Ministry study. Relocating it will also spur more development in the surrounding areas, Meshita said. Because of security concerns, severe building height restrictions were placed on properties adjacent to top-secret intelligence facilities, he said.

The plan to develop former army bases drew praise from Nissim Bublil, President of the Association of Contractors and Builders in Israel.

“The transfer of army bases can assist over the long term in the availability of land,” Bublil said in an e-mailed statement. “In order for the plan to succeed, the Israeli government also has to improve transportation access to outlying areas and remove bureaucratic barriers in order to enable rapid development and construction at the evacuated areas in central Israel.”

To contact the reporter on this story: Calev Ben-David in Jerusalem at cbendavid@bloomberg.net.

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net; Rob Urban at robprag@bloomberg.net.


Steve Ballmer, Power Forward
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus