Fair Rent

Yair Assaf-Shapira

Jerusalem Institute for Israel Studies

On November 24, the memorandum of the law for fair rent was published. The law states that the rent paid for an apartment will not increase by more than 2% per year, for three years. How different is the proposed situation from the prevailing one?

The average monthly rent paid for a 3.5 to 4 room apartment in Jerusalem stood at NIS 4,480 in the second quarter of 2014. This amount was much lower than the average paid in Tel Aviv (NIS 6,420), and much higher than the average paid in Haifa (NIS 3,010). The rent for these apartments in Jerusalem saw an average rise of 5.5% in the last year (since the second quarter of 2013 – during a period of four quarters), similar to Haifa (5.5%) and Tel Aviv (5.4%).

Compared to the proposed maximum stated in the law (2% annually), the rise seems to be steep. Compared to the cost of living, measured in the consumer price index, it is even more extreme, since the index rose only by 1% during the period. That means that the average rent rose by more than twice the proposed maximum, and more than five times the rise in the other components of the consumer price index.

Rent prices of smaller apartments in Jerusalem rose by lower percentages (1.3% rise and 4.3% rise in 1.5-2 room and 2.5-3 room apartments, respectively). Rent for larger apartments, sized 4.5-5 rooms, rose more dramatically, by 6.1%.

Will the proposed law change the balance between real estate rent and sell markets? Average purchasing prices for 4 room apartments in Jerusalem stood in the second quarter of 2014 at NIS 1,925,000. These prices rose during the previous year (from the second quarter of 2013) by 9.5% - a very steep rise. Will the prices' change rates be affected by the new law? Only time will tell.

Data sources: Ministry of Construction and Housing – Division of Economic Analysis: Data Tables

www.gov.il – Israel Government Portal

Home Owner

Yair Assaf-Shapira

Jerusalem Institute for Israel Studies www.jiis.org

29 percent of people aged 20 and above in Jerusalem, reside in an apartment they are renting. The rest reside in an apartment they own (60%), or use other arrangements (11%), including an apartment owned by a family member or a friend. This is revealed by the Central Bureau of Statistics' social survey, for the years 2012-2013 (years were averaged to minimize inaccuracy).

The percentage of renters in Jerusalem equals the one in Haifa (29%), and is low compared to Tel Aviv (42%). Interesting to note is the percentage being equal to that in Haifa, since Jerusalem is home to a very large population characterized by a traditional way of life, and we could have expected a lower percentage of renters.

Most of these renters do not own an apartment, but a considerable share does. 16 percent of Jerusalemites residing in a rented apartment (15% in Tel Aviv and only 10% in Haifa) own a different apartment, possibly renting it to others. As a result, the total percentage of home owners in Jerusalem is higher than the 60 percent residing in their own place, and stands at 66 percent in Jerusalem, 61 percent in Tel Aviv, and 71 percent in Haifa.

Of course the people residing in their own apartment sometimes own another one as well. This describes 12 percent of the people that live in their own apartment in Jerusalem, 15 percent in Haifa, and 22 percent in Tel Aviv.

Naturally, the rate of home ownership rises with age. Among young people aged 20-34 in Jerusalem, this rate stands at 55% - slightly higher than in Haifa (at 52%) and considerably higher than in Tel Aviv (at 39%). This percentage rises continuously with age in the three large cities, but in Jerusalem it rises slower, and comes to 79 percent at the age group of 65 and above – equal to the percentage in Haifa (at 79%), but lower than in Tel Aviv (at 86%). The change of the trend between the cities in the older ages may be connected to the difficulty of buying an apartment in Jerusalem, even for the people who are older today, meaning that the difficulty has been prevailing for years. But considering the high apartment prices in Tel Aviv, we can assume that it probably also stems in part from the phenomenon of young people leaving Tel Aviv, having failed to purchase an apartment there.

Data source: Social Survey, the Central Bureau of Statistics

The Young Renter

Yair Assaf-Shapira

During the years 2009-2010 (on average), among 431,000 residents of Jerusalem aged 20 and above, 262,000 (61%) lived in apartments they owned, and 133,000 (31%) lived in rented apartments. The rest had other living arrangements, such as an apartment belonging to a family member or friend. The percentage of renters in Jerusalem was comparable to the figure for Haifa (30%), higher than the figure for Israel (23%), and lower than the figure for Tel Aviv-Jaffa (41%).

As expected, the percentage of renters is not the same across the age groups. The highest percentage was measured among Jerusalem residents aged 20-29, of whom 42% lived in rentals, much higher than the figure for Israel (29%). As age increases, the percentage of renters decreases, but while the percentage of renters among residents aged 30-39 (40%) was only slightly lower than the figure for those aged 20-29, in the age group 40-54 the percentage dropped by about half (22%), and among those aged 55 and above it dropped slightly more (18%). Only in this group is the figure comparable to that of Israel (17%).

A large variance exists with respect to duration of residence between residents who rent an apartment and those who reside in an apartment that they own. While among renters in Jerusalem about a third (34%) had been residing in the apartment (at the time of the survey) for a period of 6 months to 1 year, among those who live in apartments they own only 6% indicated that this was the period of time they had been residing in their apartment. A residential period of 1.5-5 years was also more characteristic of renters (32%) than homeowners (15%). A residential period of 5.5-10 years was characteristic of both groups equally (16%), and the percentage of those residing for longer periods of time was much higher among homeowners (30%-34%) than among renters (7%-12%).

It is customarily assumed that apartment renters are people who cannot purchase an apartment, but the data indicate that a significant portion of renters in Jerusalem (14%) have another apartment that they own. A similar percentage was measured in Haifa (14%) and Israel (15%), and a slightly higher percentage was measured in Tel Aviv-Jaffa (18%).

Data source: The 2009 and 2010 social surveys of the Central Bureau of Statistics