Issue 14
Words by

How Israel turned homeowners into YIMBYs

16th February 2024
32 Mins

Homeowners are often the biggest opponents of building new homes. An Israeli reform reversed this by making homeowners the main beneficiaries of development.

If your country speaks English, it’s sometimes said, chances are that it has a housing crisis. Apparently Israel speaks enough English for this to be true. While it has faced many of the same housing problems as the Anglosphere, Israelis have found an innovative solution that has begun to alleviate the problem. In an attempt to improve earthquake resilience and replace a dilapidated housing stock, Israel created two policies that applied nationwide, allowing small groups to opt in to denser zoning.

These schemes, known together in Israel as urban regeneration, or UR, have been incredibly successful: they now deliver one third of the country’s new homes, and more than half of the new homes in Tel Aviv, Israel’s economic center. Although the scheme has flaws and will be revised, its incredible take-up is a lesson to the rest of the world that opt-ins can break the housing deadlock and allow urban intensification.

Removing veto players to build more homes

What can we do about those who resist new housing?

Building new homes in urban areas has become much harder in the twenty-first century than it was for much of the twentieth century, let alone the nineteenth. Many blame those who supposedly say ‘not in my backyard’ to new housing near them. As housing supply fails to meet demand across the developed world, these incumbents, usually homeowners, see the value of their homes soar. Richard Florida calls them the ‘new urban luddites’; Edward Glaeser ‘the entrenched’; and William Fischel has coined the term ‘homevoters’ All paint a similar picture: older, wealthier homeowners control the political process and support rules that prevent the construction of new housing.

Policymakers and activists have traditionally tried to curtail the power of incumbent homeowners by moving the decision to a higher level of government, where the broader group of people who might benefit (who don’t yet live in the area) can have a say. This strategy understands the problem as one of disenfranchised potential residents. The people who would benefit from more building do not yet live in the neighborhoods where the building would take place, so they have no vote on the local level, but they do at the city-, region-, or nationwide level.

Renters make up a substantial part of the electorate in many cities, in some cases a majority. It is they who have to pay rising rents, so in theory they should have a clear incentive to support more house building.

This correctly identifies the problem: local governments are highly vulnerable to small, noisy groups of swing voters wielding a disproportionate influence on elected representatives to block development. In practice, renters tend to participate less than homeowners in municipal elections and are less active in local politics.

But the proposed solution, widening the relevant jurisdiction, making the planning process a regional-, state-, or even national-level matter, to give these would-be residents political representation, is flawed, for three reasons.

First, local authorities exist to serve a demand. People buy a home in large part for ‘location, location, location’ and generally want to prevent changes that worsen the quality of the local area. Local government is part of what they see themselves as buying: municipalities, especially small and suburban ones, exist to cater to their interests, so they have the strongest incentive not to cede planning powers – which are a major determinant of the character of their area – to higher political tiers. At best, taking those powers away is a difficult tug-of-war for higher levels of government.

Second, even where local authorities do lose the ability to stop development in their area, there is a growing demand in many countries for national rules that stop housing from happening, even if their stated goals are other things – like environmental surveys and reviews, historical preservation, archaeological digs, affordable housing, and excessive building safety (like requirements that apartment buildings over a certain height have two staircases, which provides little safety benefit but significantly increases the land needed for a given block of apartments). This is driven by campaigning from hard-core opponents of development. These can add so much cost that they make otherwise-valuable developments unprofitable to do in the first place.

And third, it is not even obvious that renters support upzoning, especially in high-rent cities. It is far from obvious to many non-economists that more supply means lower prices.

This is why countries with top-down control do not necessarily build more homes. The British housing secretary already has near dictatorial legal powers to rewrite local plans without any local government oversight, to create new by-right permissions to do whole classes of development, and to ‘call in’ individual applications to decide them the way they wish. But England still allows fewer homes per capita than almost every other comparable country. National preemption leads to national opposition, which vocal opponents can often win.

Could there be an alternative strategy, one that harnesses the self-interest of homeowners to promote urban development rather than prevent it? The experience of Israel’s urban regeneration program suggests so.

Housing and planning in Israel

Housing, especially the unaffordability of home buying, is considered one of the top policy issues in Israel. As in many developed countries, house prices have soared in recent years. From 2008, sustained low interest rates, low house building, and a relatively solid economic performance during the Great Recession have given Israel 15 years of rising housing prices. The rapid price rises after 2008 prompted mass protests about the high cost of living in 2011.

Even after 2011, prices continued to rise, especially during the Covid-19 pandemic. Nowadays, the average three-bedroom apartment across Israel – not just in the major cities – costs $700,000. Combined with Israel’s unusually conservative regulation on mortgages, limiting loan-to-value to 75 percent, coming up with a deposit is a serious hurdle for many first-time homebuyers.

Planning in Israel is already much more centralized than is common in other developed countries. The National Planning and Building Council issues national outline plans, known as TAMAs, for strategic, nationwide topics – for example TAMA 8 covers nature reserves, and TAMA 15 covers airports. There are then six district planners, also staffed by Israel’s central government, covering regions, and even doing some of the detailed local planning for areas.

Israel’s 256 towns, local regions, and cities have historically had more constrained planning powers than in other countries, though it varies. Municipalities provide many public services, such as education and welfare. They are also in charge of building and maintaining new roads, water systems, and sewage systems, and receive betterment taxes and infrastructure fees to allow them to pay for those when planning bodies (national, regional, or local) allow extra development in their area. They issue building permits, albeit partly in line with rules and plans they do not control.

As housing grew as a national issue, the Israeli government offered a mixture of populism and pragmatism. First, it offered discounted apartments for first-time buyers. These have had a very limited effect on affordability. Second, it has increased the housing supply. With a severe lack of land to expand into, Israel turned to densification and urban regeneration mechanisms, which now serve as a main pillar of the government’s strategy to increase housing supply and curtail prices.

In the 1950s and 1960s, Israelis built quickly with low standards in order to quickly absorb vast numbers of Jewish immigrants and refugees. By the 1990s, the physical dilapidation of these buildings was conspicuous. In 1996, the Israeli government established the Eiges committee (named after its chairman, a senior official in the Ministry of Finance) to ‘encourage the physical regeneration of the country’s urban centers’.

Because of Israel’s fast-growing population (about two percent per year, driven by very high birth rates) and the scarcity of land for future development, there was an obvious need to consider densifying existing built-up areas. The Eiges committee ended up proposing numerous financial and legal incentives to redevelop dilapidated buildings, and in 1999 the government enacted a program based on those proposals called Evacuate and Rebuild, or Pinui Binui in Hebrew.

Later that year, an earthquake killed thousands of people in northern Turkey. The fear of a similar earthquake persuaded Israeli lawmakers to seek further measures to strengthen older residential buildings. The modern Israeli standard for earthquake-proof construction only became mandatory in 1980, and shoddy buildings built before it came into force were and are common across Israeli cities, today making up about 30 percent of the total housing stock.

Six years after it was introduced, in 2005, Pinui Binui was mostly going unused. Proposals under the program were (and are) still subject to Israel’s lengthy zoning process. And local governments, homeowners, and developers hadn’t figured out how to use the scheme effectively yet. (Today, the program is doing better, as the different parties have learned how to use it.) Because it was not delivering on the goal of urban regeneration, a second program was enacted.

This program, called TAMA 38, allowed apartment owners in buildings built before 1980 to collectively opt to let their buildings be rebuilt with extra floors and larger land footprints, with new apartments in the building being sold to fund the redevelopment.

The stated aim of TAMA 38 was to reinforce buildings in the areas most vulnerable to earthquakes. Those are situated on the country’s eastern flank, which lies along the Jordan Valley fault. Given the high earthquake risk, among other factors such as distance from economic centers like Tel Aviv, there is weak housing demand. Prices are low and land value is almost nonexistent. The scheme gained little traction there.

Yet in the high-demand coastal areas, including Haifa and Tel Aviv, where earthquake risk is much lower, the program took off. The effect on Israel’s housing market and political economy has been seismic.

From just two percent in 2010, urban regeneration programs – TAMA 38 and Pinui Binui combined – now account for 37 percent of Israel’s annual housing production. The data is even stronger in high-demand areas. In the Tel Aviv district, Israel’s economic heartland, more than 50 percent of new construction is now achieved through the densification and demolition of existing housing stock.

How the densification schemes work

Both schemes – Pinui Binui and TAMA 38 – at heart are based on an agreement to develop between homeowners and developers. Under TAMA 38, homeowners need only make an agreement with developers; under Pinui Binui, they must also go through a zoning and planning process with the municipal, or even the regional, government.

TAMA 38, historically and currently the more productive of the two programs, offers by-right development for buildings constructed before 1980 provided the existing property owners agree, making it relevant for tens of thousands of residential buildings in Israel.

There are two main versions of the scheme: TAMA addition, in which the existing building remains, but is reinforced, and extra floors are added on top, along with added floorspace on the existing floors; and TAMA demolish and rebuild, where the entire existing building is demolished and replaced by another.

Developers can also propose projects through TAMA 38 that apply to several adjacent buildings, requiring consent from each, but most schemes involve single buildings. Development done through TAMA 38 usually adds three floors to each building, including one set-back top floor, normally referred to as 2.5 floors. But article 23 of the plan allows municipalities some flexibility in adjusting the limits upward or downward to meet the local context. Some municipalities allow TAMA redevelopments to add more floors, while others (mostly in high-demand areas) have limited the number below 2.5.

Demolishing an existing building (left) and building a higher building with more coverage (right), Pinui Binui.
Images from Nahariya's comprehensive urban regeneration plan, Studio MIA (Michal Iuclea Architects) and Sar-Shmueli architecture.

Pinui Binui, on the other hand, requires a rezoning process and usually applies to several adjacent existing buildings. It always involves the demolition of the existing buildings. If the buildings are rezoned under a local masterplan, that plan specifies the limits on the number of storeys and the ratio of the floorspace of the building to the area of the lot (called the floor area ratio). By contrast, the regions can in theory permit whatever density they like. Alongside classic planning considerations, such as available infrastructure (roads, parking, sewage, water) and public services (parks, nurseries, schools), planners tend to encourage more density in areas with lower land value, in order to make projects viable.

As the planning system in Israel works very slowly (not only for Pinui Binui), the rezoning process can take three to six years. This does not include the permitting process, which can take an additional three to four years. The construction itself can take approximately three years, so Pinui Binui projects can easily last a decade from start to finish, and sometimes much more if there are delays in the planning process or in forming the agreements between the developer and the homeowners.

The core mechanism in both schemes – TAMA 38 and Pinui Binui – is an agreement between a developer and the homeowners (but not renters) of one or a group of apartment buildings.

In both cases, the agreement specifies the size and interior specification of the new apartments, plus what other amenities such as parking and storage space will be built, along with expected timelines and withdrawal conditions.

Usually, before a developer is selected, a representative body of homeowners is elected by a general assembly of the homeowners. These representatives have the mandate to choose a developer based on criteria such as the size of the new apartments they offer, the apartments’ specifications, the developer’s experience and past developments, and its financial abilities. After a developer is selected, a legal agreement written by the developer is offered to all homeowners, who can sign it, comment on it, or refuse to sign, using their own legal advice.

If two thirds of homeowners sign, the developer can proceed with the planning and permitting process. Technically, all homeowners need to sign, but the developer can sue them to force them to do so if two thirds are agreed – so long as the objectors don’t have a very strong legal case not to sign. This generally only extends to unfair deals that don’t benefit all residents, cases where the developer hasn’t provided temporary accommodation during development, or risky cases where the objectors don’t have strong enough guarantees that the developer won’t disappear or go bankrupt. The majority have a strong bargaining position, as only a narrow set of grounds are accepted for refusal, and if the court rules that the refusal to approve the deal is unreasonable, it can even force reluctant homeowners to compensate the others for delaying or preventing the deal.

An apartment building before and after redevelopment through Tama 38.
Architecture by Bar Orian Architects. Photos taken by Amit Geron.

Initially, rules required 80 percent of homeowners to agree on a deal. Lawmakers reduced the threshold to two thirds, in order to streamline the process and lower the bargaining power of holdouts – especially those who hope to extract surplus profits from the project, on top of that available for the rest of the owners.

The two thirds majority for TAMA 38 addition was extended to Pinui Binui in 2021, and to TAMA 38 demolish and rebuild in 2023. These reductions were promoted by the Urban Regeneration Agency (URA) and approved by lawmakers, and were naturally supported by developers working in the field.

When the agreement reaches a sufficient majority of support to be approved, then apartment owners are effectively trading their rights over their building, and the land underneath it, with a developer. Usually this is for a new, improved, and bigger apartment, often with additional amenities such as a balcony and underground parking. The developer, on the other hand, gets to sell the additional units added to the building.

Regulators encourage developers to offer to enlarge the current owners’ apartments by an extra room each, or about 12–13 square meters. But this can vary enormously. In Tel Aviv, where building rights in historic areas are limited by the municipality and the value of a new apartment with a balcony and parking space is considerable, it’s common to see deals where the internal apartment size doesn’t change after demolition – the incentive is just for an improved apartment and, perhaps, a balcony.

On the other hand, Pinui Binui projects normally add as many as four or five new apartments for each existing one, meaning much bigger windfalls for homeowners, after the slower and riskier approvals process.

An apartment building before and after redevelopment through Tama 38.
Architecture by Bar Orian Architects. Photos taken by Amit Geron.

On the other hand, the need for economic viability can lead to less desirable places densifying the most – which can sometimes require building seven new units for each existing one in order to pay for the redevelopment. In the most desirable places, the biggest density gains are often missed out on, because providing the funds for renovating everyone’s home only needs one or two more units for each existing unit, and homeowners do not benefit from even more units being built beyond that.

These redevelopments add more housing units and replace existing units with more earthquake- and bomb-resistant ones – both major priorities for the national government, which supported the programs with tax relief to encourage them even more.

Typically when developers or homeowners use new planning permissions they have been granted, they pay a 50 percent betterment levy on the increased value paid to the local authority, so the local community can capture some of the benefits. Under TAMA 38, owners are completely exempt from the betterment levy; under Pinui Binui it is usually set at a reduced rate of 25 percent.

The political economy: why it's popular

Urban regeneration is controversial around the world. Even if there is a large potential benefit from redevelopment – old buildings could be replaced with newer, safer, better-insulated, and more attractive new ones, while also adding housing supply that relieves shortage and makes money – there are usually people who object.

Both TAMA 38 and Pinui Binui were designed to overcome these objectors. Local governments and their constituents knew that natural and man-made disasters would be catastrophic without building upgrades. And many residents would be willing to do a deal with a developer to upgrade their property, if the price was right. But apartment buildings needed unanimity, so they faced the problem of holdouts – where one person refuses to do a deal at any price.

Both TAMA 38 and Pinui Binui can were designed in part to get around these problems by using qualified majority votes to drag along recalcitrant residents, bringing them to the table with developers.

An apartment building before and after redevelopment through Tama 38.
Architecture by Bar Orian Architects. Photos taken by Amit Geron.

When such a system does not exist, new construction, especially densification, can be difficult in a representative democracy. The key issue is that people often care so much about development that they will change their vote (or threaten to), even if they prefer the party they are deserting on all other issues. These swing voters discourage elected representatives from voting for development, which means much less of it is permitted.

This dynamic also plays out through the creation of additional rules to make development more difficult, described as the ‘the NIMBY problem’ by Joseph Warren and David Foster. As discussed earlier, development can be framed as being a deal between those who want to move into a place and those who already live there.

The people who already live there tend to be a mix of those who are neutral or mildly against development – the large majority – plus a small minority of hard-core opponents. When development systems work successfully around the world today, developers offer enough incentive to existing residents to allow the development to happen. Most commonly, this is through the property taxes or impact fees the development will generate. In other cases they invest in the local area somehow – that could be building a new school or park, or by offering the new housing in a bundle with new job opportunities.

When this system breaks down, it is because hard-core opponents succeed in adding so much cost, delay, and process to the system through veto players (bodies whose approval must be sought to go ahead with building). Thus, the developer, who represents the people who’d like to move to a place (because those are the ones it will sell to), is unable to propose development that locals are happy with since they are unable to afford bundling amenities that would please existing residents and make a profit at the same time.

An apartment building before and after redevelopment through Tama 38.
Architecture by Bar Orian Architects. Photos taken by Amit Geron.

There are two ways around this problem. Either development can be approved directly by the central government, cutting out the veto players that gum up the process locally, as New Zealand recently did in the rebuilding of Christchurch, and like the Établissement publics d’aménagement development corporations in France that built, among other things, Paris’s La Défense skyscraper-heavy financial district

The other option is to establish, at the central government level, rules that allow existing residents to overrule objectors locally and approve development directly. A similar sort of mechanism exists in most countries with so-called strata title for apartment buildings, such as Australia, Canada, Japan, and Singapore. Strata title is a legal construct that allows residents to own their own property outright, plus a share in a sort of company, which manages the building, charges fees, carries out repairs and maintenance, and more. Previously, owners in a strata corporation had to get unanimity if they wanted to dissolve it – most often because they wanted to redevelop the land. This was generally insurmountable due to holdouts, but strata owners can now usually agree by supermajority to drag along objectors, if those are small in number. 

The impact on Israeli housing politics

In a paper published in 2023, I documented how the preferences and behavior of Israeli homeowners are now shaped by the feasibility of urban regeneration in their building. Based on a survey of 202 owners, I assessed the perceived feasibility for regeneration based on several questions and distributed respondents into four groups.

These four groups were those with no chance for future regeneration (Outsiders), those with some chance for regeneration but in the distant future (Pessimists), those for whom regeneration is very likely but not imminent (Optimists), and those living where regeneration is both very likely and imminent (Confident).

For the Optimists and Confident – the two groups that are most likely to experience regeneration in the near future – support is high across the scale, including in adjacent buildings and the neighborhood. Among these groups, strong opposition to regeneration is very low. Many Outsiders, however, show NIMBY tendencies, with strong opposition to the regeneration of adjacent buildings.

An analysis of planning objections paints a similar picture. Comparing the public’s reaction to two types of plans in the same time period and in the same neighborhoods – urban regeneration plans versus ‘classic’ developer plans – demonstrates that when homeowners can directly reap the benefits of redevelopment, their attitude changes dramatically.

In an upscale area of Tel Aviv-Jaffa, many homeowners filed upzoning objections to the urban regeneration scheme for their buildings – demanding that the plan should add more building rights, not less! By contrast, when objecting to ‘classic’ spot-zoning plans allowing construction on a lot owned by a developer, people in the same neighborhood reverted to opposition, citing noise, congestion, parking problems, and pollution as reasons to decline the proposed plan.

The data suggests that the NIMBY/YIMBY debate is not really about economic or cultural ideology, race, or class – it is about veto players and incentives. If incentives are closely tied to the decision about whether to upzone, and homeowners can make the choice for themselves, then developers can offer strong-enough incentives for new development to make homeowners the most powerful political engine in support of densification.

The effects and minor issues

Once the Israeli government realized that the real boon in urban regeneration was not about earthquake protection but about housing supply in high-demand areas, it didn’t revoke the project, but began to work deliberately to fix bugs in the system.

Every year, the national legislation process tweaks the TAMA 38 and Pinui Binui programs in response to the needs of owners, developers, and municipal governments by shifting supermajority requirements, adjusting tax exemptions, creating compensation mechanisms for legitimate objections and for vulnerable groups such as elderly owners, and improving the rules to protect homeowners from mis-selling, fraud, and predatory pressure.

The supermajorities for Pinui Binui and TAMA 38 demolish and rebuild were reduced from 80 percent to two thirds in 2021 and 2023, respectively. In 2018, in response to the unique needs and interests of elderly owners in Pinui Binui projects (that can easily last over a decade from start to finish), lawmakers amended the law to require developers to offer them alternatives to the new apartment. For owners above the age of 75, the developer must offer three choices in addition to the new apartment – to fund a stay in a senior home during the construction of the new building, to purchase an equivalent apartment instead moving to a temporary unit and then back to the new building (in order to avoid two moves), and to offer cash payment instead of a new apartment.

Mis-selling has also been a problem. Less-informed and less-well-off owners sometimes agreed to unfair deals with developers. Some signed binding agreements that didn’t allow them to switch developers even if the project was stuck, or committed to contracts with middlemen who later traded those without the consent of the homeowners. Some recent immigrant owners even signed agreements in Hebrew without knowing the language.

A 2017 law introduced the obligation to include timelines in agreements, and the need to inform the owners of the agreement in a meeting that includes at least 40 percent of the owners. The law also obliges developers to translate the agreement into any relevant languages.

The public agencies governing the schemes have evolved too. The Urban Regeneration Authority, which began as a department in the Ministry of Construction and Housing, became an independent authority in 2016, making it less political, more professional, and more powerful. It manages the yearly legislation to streamline and improve the process, actively promotes specific Pinui Binui plans (usually in less-affluent areas), tries specifically to encourage urban regeneration in Arab and ultra-Orthodox communities (where it is currently almost nonexistent), and publishes up-to-date data on the state of urban regeneration.

The Israeli Ministry of Finance, usually considered to be fiscally hawkish, nearly tripled the Urban Regeneration Authority budget between 2020 and 2022, indicating that the government believed the programs were working well. Municipal regeneration agencies, working inside the municipalities and supervised by the national Urban Regeneration Authority, were established to mediate between developers and homeowners, and are generally considered to have succeeded in getting municipal governments to be more committed to urban regeneration.

Alongside these public interventions, some practices have developed incrementally via markets. For example, it is now standard for owners to hire a lawyer and a construction supervisor specializing in TAMA 38 in order to help them decide among interested developers – the developer that wins pays them a standardized fee.

An apartment building before and after redevelopment through Tama 38.
Architecture by Bar Orian Architects. Photos taken by Nimrod Levy.

Despite the undoubted success of these programs in building more homes in the places people most want to live, house prices remain very high, both historically and internationally. An average three-bedroom apartment in Israel still costs 2.8 million shekels, or around $700,000. The ongoing densification of high-demand areas has not made housing affordable for average households by any common index. Far more homes are still needed.

Will it survive? Although TAMA 38 and Pinui Binui have substantially increased housing supply, and consistently retained the support of affected homeowners and central government, the schemes have severe downsides that threaten their political sustainability.

First, they have caused disruption with no upside for renters, who don’t have a say in the schemes, and are often kicked out to make way for development. Renters are practically invisible in the Israeli urban regeneration process, despite the fact that around a third of them have been living in their current apartment for five years or more. As most units will be demolished under the scheme, renters are physically displaced and no data is currently collected on what happens to them after that. This reflects the very weak political standing of renters in Israel and the almost nonexistent rental regulation.

If Israeli policymakers want to retain the urban regeneration schemes, they should consider making them work for tenants more directly. Other options exist, such as relocation assistance for the displaced renters (available in Washington, DC, Seattle, and Chicago), or more radical steps such as a right to a home in the new project (as happens in California). Perhaps the most obvious option is to include tenants in the vote on whether to implement the project (as happens with public housing tenants in London).

A second issue has been, paradoxically, the fact that TAMA schemes make homes nicer, better insulated, more modern, and bigger. Improving the housing on offer can sometimes reduce the number of options for those buying or renting at the lower end of the market. Israeli critics have pointed out that less wealthy owners can have trouble affording the higher maintenance costs and higher property taxes of a newer, better building – though if they sell their new apartment (as many do) this would still net out as a win. In Israel, policymakers are attempting to partly tackle this by baking prepayment for maintenance into the deals developers propose.

This solution won’t stop the system reducing the amount of ‘naturally occurring affordable housing’ – i.e., low-quality, dilapidated, crumbling, and small homes – on the market. Inherently, any scheme that improves the quality of existing housing will reduce the number of bad houses that are cheap because they are bad.

Worries from advocates of this type of housing are probably slightly exaggerated, as the evidence shows that building more homes tends to benefit all income segments. Households are given additional housing choices from homes left vacant by those who move into the newly built homes, giving them more power to demand better terms from landlords. But none of this may be obvious to people who only notice the downsides. And the direct effect of demolishing an older home is increased rent at the building level, an issue that could be mitigated by some sort of inclusionary zoning mechanism.

Further minor issues include a concern that places are being poorly maintained in expectation of redevelopment, and that the scheme has not achieved its original goals of earthquake protection in low-demand danger-prone areas, which may end up requiring subsidies to be viable. But if the community of owners of a building think that it would be better to replace it, then it would be not only unfair but economically damaging to force them to spend money on it that will be thrown away when the building is replaced. It is an issue that many buildings on Israel’s periphery are in poor condition, but TAMA 38 clearly doesn’t make this worse – in fact, the economic growth and additional government revenues it brings could help to subsidize necessary improvements in such buildings.

The biggest issue with urban regeneration

Most of these problems have rankled, but the other benefits of urban regeneration – both in terms of housing supply and in terms of improved homes for those who live in them – have outweighed them politically. The biggest challenge is local government.

Historically, local governments had not been major opponents of housing in Israel. Locals were generally comfortable with new neighbors as long as development was done appropriately and infrastructure was accounted for. However, during the urban regeneration building boom since 2010, many streets in quiet residential neighborhoods became construction sites and municipalities have lost control of the planning process.

Exemption from the betterment levy (a 50 percent tax on the value added to land by upzoning in all cases except TAMA 38) eroded the local tax base that provides the municipal development budget, paying for essential infrastructure like electricity, water, sewerage, roads, and more, plus amenities that make neighborhoods pleasant and desirable like parks. In general, development that doesn’t pay for itself tends to be politically unsustainable locally.

The planning system in Israel usually develops large blocks together, as through Pinui Binui, meaning that it is able to use the betterment levies taken to provide ample sites for public services such as kindergartens and schools. Without such a levy, Israel’s local authorities cannot always plan for, or even keep up with, the incremental development they see.

To begin with, TAMA 38 projects also faced very little in the way of building regulations, leading to projects where tall buildings were built extremely close to one another, and created claustrophobic feelings among some of the new residents. In some cases, tighter building regulations have already been applied to TAMA 38. Article 23 of the law allows local authorities to reshape the building rights given in order to accommodate local needs.

Not all authorities use this article to constrain rights to redevelop, but in several local authorities, most notably Tel Aviv-Jaffa, the local rezoning plans based on TAMA 38 didn’t upzone as much as the law normally provides for. This has created a legal battle between the municipality and the homeowners, who argue that they have been, effectively, downzoned, and require compensation.

Article 23 has been insufficient to bring local governments completely onside with TAMA 38, and as a result of their opposition, some politicians have proposed to replace it with a program that gives municipalities more control over public uses, design, and taxation. The Shaked alternative (named after the former minister of interior), which is intended to replace it, offers an alternative to the by-right process, but combines the planning and permitting process together in order to expedite them. To sweeten the deal, Shaked offers more extensive upzoning, while allowing municipalities to include public services (such as kindergartens) in the new buildings. The main fear is that the currently more productive and less lengthy TAMA 38 will become more similar to Pinui Binui as a result. 

Despite these attempts to change and replace the program, TAMA 38 has always survived in part because, although it upsets local governments, it is popular both with homeowners and central government. So far, this has proved a sufficiently broad and deep coalition to keep it alive. In the meantime, before the Shaked alternative comes into place, TAMA 38 is being extended in order to keep the market going and provide continuity. And existing plans based on TAMA 38’s article 23 are expected to remain in force even after, and if, it is replaced.

Israeli urban regeneration has not been perfect. Pinui Binui has picked up more slowly than some wished. TAMA 38, in attempting to overrule blockers, has undermined the coalition necessary to keep the policy in place, and we are yet to see whether the replacement policy will be as effective as the current one. But the project still has important lessons for policymakers and housing advocates around the world: give homeowners the right powers and incentives, and you have a good chance of delivering a lot more housing – with the enthusiastic support of locals.

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