M-RCBG Associate Working Paper No. 162

Affordable Housing Policy: Effectiveness and Social Impact

Yair Pines
Yuval Yacobi



In July of 2011, with Israeli housing prices soaring, the country experienced major social protest that would come to be known as the “housing protest” and the “tent protest”. A young woman evicted from her rental apartment in Tel Aviv pitched a small tent in the city center and urged others to join her and set up a city of tents in protest at the high cost of housing. Within a month, some 3,500 protest tents had been pitched in 41 encampments up and down the country. Record increases in apartment prices between January 2008 and June 2015 amounted to approximately 70% in real terms, while household income had only seen a moderate rise in the parallel period. In consequence, households were experiencing a major burden on their expenses, with the lower and middle classes being most heavily impacted.

The protest prompted the government to initiate a series of integrated steps to promote affordable housing. One of these was a government resolution in 2015 to introduce the Homeowner's Fixed Price Scheme which would enable households who did not own a home to purchase an apartment in various projects throughout the country at less than market price. The Homeowner's Fixed Price Scheme fundamentally changes the way government-owned lands are marketed for residential purposes. The Scheme would set in place land tenders where the bidders (land developers /constructors) would compete for the lowest possible price per square meter they could offer for a residential apartment. Under the Scheme, family households (or single individuals over the age of 35) could purchase an apartment provided that they do not already own a home. In construction projects where the number of eligible people enrolled exceeds the number of apartments on sale, a lottery would fix the order of precedence.

The Homeowner's Fixed Price Scheme is the State of Israel’s flagship scheme for resolution of the housing crisis, and its objective is to provide affordable housing solutions on a grand scale. The Scheme is under constant review and examination by government entities, the Bank of Israel, leading bodies in the real estate market, economists and other experts, as well by the eligible public. Much has been said in Israel about the macro-economic effects of the Scheme and its effect on the lowering of housing prices relative to its financial cost. The purpose of this paper, however, is to study certain socio-demographic aspects of the Scheme and evaluate its effects on certain distinct populations in the social and demographic periphery in Israel.

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