Why Free Markets Will Make More Room In Israel
July 28, 2011 17 Comments
With the average price of a four-bedroom apartment in Tel Aviv coming to over $660,000 (2.25 million NIS), and after seeing a 12 percent housing price increase in the first quarter of 2011 alone, its no wonder Israelis are so disgruntled. While Israeli unemployment is at the low level of 5.67%, wages have been stagnant, and the average worker would need to labor for twelve years in order to cover the cost of a home.
It is a shame that the tent-dwelling protesters against high property prices on Rothschild Blvd. and elsewhere have the softness of heart that too often gets to the head. No doubt Likud MK Ofir Akunis was exaggerating when he claimed “part of the protest going on at the moment on Rothschild Boulevard is being driven by a gang of anarchists”, and that many protesters come from “the adjacent Ahad Ha’am Street, where, as you know, the main branch of the Communist Party is located”. Yet it is true that over-represented at these protests are environmentalists and leftists that don’t realize capitalism is not what is breaking the Israeli working man. The vestiges of socialism in Israel are, and the only solution is simple and elegant: more freedom. Let us hope this new movement is not too hostile to that.
The first priority for those who want more affordable housing should be dismantling the relic of socialism that is the Israel Lands Administration. This state body owns and administers 93% of the land in the country, making it something that really belongs behind the Berlin Wall during the Brezhnev era. The ILA has released land very slowly to buyers, in order to obtain extremely high prices for it. Selling off most of the land in the ILA’s responsibility would see prices fall drastically and should be supported by all those who want to aid the working poor. Even the expectation of mass privatization of ILA holdings would likely see prices for current marketable properties plummet.
Something interesting yet relevant is that the land situation in Israel would be significantly worse without the economic struggle the kibbutz movement faced during the 1980’s. The debt crisis in the kibbutzim necessitated privatization schemes that permitted many of them to sell their lands, which ended up spawning many new housing projects. Privatization proved highly profitable to the kibbutzim on the narrow coastal Gush Dan region, where most of the Israeli population and economic activity is based. Many kibbutzim became suburban communities for the expanding cities of the Tel Aviv metropolitan area. In light of this, Israelis should consider the effect massive agricultural subsidies are having. They may be preventing kibbutzim from engaging in more economically useful activities.
A note to the Israeli environmentalists among the tent-dwellers: Many worry land privatization would see all the forests torn down for shopping malls and coffee shops springing up in every corner of every city park. I have seen the state of many nature reserves and parks in Israel and have been appalled, like many Israelis, at the amount of trash left by visitors. I even remember a Roman era theater near an archaeological park full of shopping bags, cartons and so on. Something like that would be unheard of in many countries. Ten years ago veterans of elite naval commando unit Shayetet 13 and their families were given compensation by Shaul Mofaz for the possibility that their training in polluted rivers like the Kishon had made them more prone to cancer. The fact is the ILA and state control have allowed this to happen. Private ownership of waterways and nature reserves (by an individual or even conservationist or sporting groups) would ensure greater incentives exist to guard against pollution, especially with the possibility of individuals taking legal action against those who do pollute. In the UK, fishing rights in rivers are privately held. The Anglers Co-operative Association has brought literally thousands of lawsuits against those who damage fish stocks and has been a powerful force in keeping British waterways cleaner than their Israeli or American counterparts.
I guarantee many of the tent-dwellers cling to sacred cows that harm their own stated agenda: more affordable housing. Israel is not a big place. Unfortunately, like a lot of countries in Europe there exists a bizarre aversion to building upwards. The norm for Israeli apartment complexes is that they are under nine stories. Tel Aviv may be bustling, but it is far less densely populated than Paris, London and other perfectly liveable cities. It could easily afford exceeding the currently accepted limits. Everybody loves New York, right? Look at the number of film and other artistic depictions of Manhattan. A city simply doesn’t need strict height limits to remain breathable or to retain character. Environmentalist organisations are once again major culprits in progress prevention. Many influential, dedicated organisations in Israel have campaigned against more road and highway building to outer suburban areas and towns, in the fanatical campaign against urban sprawl. They are helped by the perception that because Israel is a small country, it is critical to curb human development soon before all of nature is destroyed. Yet road projects that faced opposition on environmental grounds have taken significant population and traffic pressure off cities and opened up cheaper housing opportunities for city workers. The CATO Institute’s Randall O’ Toole has done great work exposing the farce that is anti-road, highway, car and urban sprawl fanaticism, as well as the constant push for alternatives such as light rail by urban planners.
Finally, and this will be highly contentious, is that immigrants deserve some blame. Tel Aviv’s southern neighborhoods, rough around the edges but historically a source of cheap apartments, are now a haven for illegal African migrants. Controversy reverberated around the world when the decision was made to deport many children of these workers who were raised in Israel. The Israeli left championed the rights of asylum seekers and migrant workers to remain. The thousands of Sudanese people that call southern Tel Aviv neighborhoods home have certainly increased costs for the natives. That factor cannot be ignored. To be fair, a similar effect has been seen in Mamilla in Jerusalem and Beit Shemesh, where many prosperous Anglos have purchased holiday homes. The solution to these problems does not rest exclusively with protectionist measures, however, but once again primarily putting more land on the market.
Now it is more important than ever for Israelis to embrace the market, not the state.