Controversial Tax on Owners of Three or More Homes Struck Down

Minister’s Kahlon’s plan to penalize primarily investors, with a special tax for owning three or more dwellings was squelched by the Israel Supreme Court.

There is definitely a shortage of affordable housing in Israel, especially for young, growing families. It is particularly acute in Israel’s center, less so here in the north or in the south. Minister Kahlon sought to address this issue by assessing a punitive tax on investors designed to open up the market and increase rental home stock in Israel. But, it was pretty much universally agreed that this approach would fail to reach its objective. During the time the proposed law was pending, there was a noticeable drop in the number of real estate purchases by foreigners.

It is not the end of the story. The Israel Supreme Court suggested that the Knesset re-examine the approach and come up with something better. Minister Kahlon remains dedicated to his cause so we can expect him to offer this plan again in the new session, once everyone returns from summer vacation.

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Investment properties in Israel–make sure you rent them out!

mailFor some time now, government officials and policymakers have been searching for a solution to the severe rental housing shortage in Israel. Several housing advocacy groups successfully drew a correlation between the lack of affordable rental housing and the plethora of empty apartments–dwellings purchased by overseas buyers who visit Israel for Chaggim and simchas, but do not rent out their homes in between visits. It was established that these “ghost apartments,” were creating a negative impact on the housing market, as well as, on neighborhoods, as a loss of residents means a loss of revenue for small neighborhood businesses.

yerushalayimnewaptsThere are a total of approximately 46,855 empty homes in Israel, the vast majority of them in the center: Jerusalem with 3,429, Tel Aviv with 4,746 and in the north–Haifa, with 3,445. The solution? taxation. If your apartment is sitting empty for 9 months out of the year, you will be required to pay double the arnona–municipal tax. Policymakers hope that if absent landlords face the prospect of double taxation, they may be inclined to rent out their homes. It is not a policy of punishment, but one of incentive to help with the nation’s housing shortage, plus to bring vitality to local neighborhoods. The policy will be re-evaluated after two years to see if it has met its targets.

Living facing south (1)Best solution? come often and stay in your home. Second best? rent it out. It does not have to be rented out on an annual lease–vacation rentals will suffice, and in this way you can still have access to your home when you come to Eretz. And, the vacation rental does not have to be constant to save you from this tax increase. A Shabbat or two a month will be sufficient. Cities will be using the electricity bill to calculate if your apartment qualifies for the double taxation. If you live in Israel, and this is a second home for you, it will not be subject to the double arnona charge. It may turn out that this solution is no solution at all for the affordable housing shortage, unless absent landlords decide to avoid the double taxation and rent out their homes long-term. But for many of these empty apartments and houses, the rent would be beyond the reach of the very population the government seeks to help.

In the meantime, if you have property in northern Israel, give us a call or send us an email to discuss our property management services. We can save you the double taxation and even put some money in your pocket, iy”H.