Huge protests in Israel over housing, cost of living

Huge peaceful protests are taking place in Israel – and there are lessons we can draw.

There is also another lesson: Israel has been dismantling its welfare state, cutting expenditure on social services and reducing taxes on the rich – neoliberal policies which have made life more difficult for many Israelis.

According to the 972 mag website, at the heart of the latest protests is real estate: apartment prices are getting more expensive for the average Israeli. And governments in Israel, more interested in neo-liberal policies, have not placed much emphasis on affordable housing.

The best investments for wealthier Israelis were in real estate and together with those returning from abroad, they invested heavily buying property, driving up the prices for the rest of the Israelis.

A well-known method used to estimate real estate cost is to divide the price of an asset by the average monthly salary. Dr. Danny Ben Shahar of the Technion Institute for Science in Haifa, estimated that the median Israeli family had to spend 50 full salaries for an average Israeli apartment in 1989. Two decades later, this figure nearly doubled – in 2011, buying an average apartment would cost the same family 90 full salaries. According to Dr. Ben Shahar, An average apartment in Tel Aviv – just an average one – is too expensive for 90 percent of the population, even if they can spread their mortgage over 30 years.

Dr. Ben Shahar presented his findings in a panel at Tel Aviv University a few months ago. He told his listeners that the real estate market is “a social time-bomb.” I spoke with Dr. Ben Shahar a few days ago for a piece I did for an Israeli magazine; he admitted that he didn’t expect things to happen so fast. “If this problem isn’t taken care of, what you see now is just the beginning.”

In Malaysia, the average monthly household income is around RM3300. How many times of that monthly income does an average person in an urban area need to buy an average apartment? If an average apartment costs say, RM250000, that would make it over 75 times monthly income or over six years of income. If the apartment price is RM300000, that would be over 90 times monthly income or over seven years of income. (Bear in mind that home ownership in Penang is around 75 per cent.)

In the first half of the previous decade, Israel experienced a small scale economic crisis, a result of the second Intifada. The Finance Ministry, led by Silvan Shalom and later Binyamin Netanyahu (both from Likud) cut government expenses while lowering taxes for the more affluent Israelis. When the crisis ended, the best options for investment for those Israelis, and for money coming from abroad, were in the real estate market, especially in the cities.

Investors began buying apartments, driving prices up. Many of them were Jews – mostly from the United States and France. The richest of them didn’t even bother to rent out their assets to Israelis in their absence; they just wanted a house in Jerusalem or Tel Aviv. Such assets were considerably cheaper than in New York or Paris, and had special sentimental value for those Jews. The result is the now-infamous “ghost apartments,” occupied for only a few weeks each year. One luxury housing project in Jerusalem, overlooking the old city, is especially notorious for having no permanent tenants.

Young Israelis were angered by and resented this trend, and rants against “the rich Jews” became very common in the last few years. It was not surprising that a few days ago protesters in Jerusalem tried to break into some ghost apartments, ending up barricading themselves in the garden for a few hours.

All of this could have been similar to what happened in other large cities around the world – prices going up, investors coming in, locals and young people gradually moving out – if it weren’t for some unique factors in Israel, which complicate the situation: First and most important, Israeli cities have no efficient public transportation systems.

Of course, one of the major differences here in Malaysia is that rentals are cheap relative to home ownership price and landlords themselves are likely to ‘lose’ money if they are buying property to rent out. But house and apartment prices have been soaring.

There is a lesson here about the importance of ensuring adequate affordable housing and public transport for the population. We also need to turn away from those neo-liberal policies such as privatisation of essential services, and cuts in corporate/income taxes and corresponding cuts in spending on essential social services.