Jerusalem enjoys building boom

Jerusalem Photo: Shutterstock

Housing starts are sharply up, building permits are at a 10-year high, and the number of high-rises is growing, but Jerusalem will remain a poor city.

The trend in construction in Jerusalem is changing. An investigation by "Globes" found that housing starts in 2018 were substantially more numerous than in previous years because of an increase in high-rises in the city, while the proportion of large apartments under construction has reached an all-time record. The rate of building permits, a reliable indication of the extent of construction in the coming years, is at a 10-year high, after years of negative cranes indices.

According to data from the Central Bureau of Statistics, housing starts totaled 2,875 in 2018, 2.9% more than in 2017. The clear upswing in construction is projected to continue in 2019, with housing starts so far outstripping their levels in 2018.

At the same time, the socioeconomic index for Jerusalem is 2 out of 10, and it is doubtful whether the accelerated pace of construction will persuade economically strong people to remain in the city and reverse the migration from the capital.

The Central Bureau of Statistics' figures show that 6,000 people left Jerusalem in 2017, more than the number who moved to the city. Despite these figures, the number of people living in Jerusalem is growing. The city's population rose by 18,700 in 2017, due to natural increase and new immigrants settling there.

Accelerated construction will also not solve the problem of housing prices, which remain high and out of reach of the average Jerusalem resident, especially for haredi (Jewish ultra-Orthodox) families. Furthermore, many of the apartments under construction are large, and therefore expensive, while there is a shortage of cheap apartments.

What accounts for the spurt in housing starts in Jerusalem? Israel Land Authority (ILA) deputy director and business division manager Yair Pines says that the reason for the change is the government's decision in the past two years to issue tenders for marketing land in Jerusalem.

"Jerusalem made a strategic decision in the preceding decade that there would be no new construction," Pines says. "The city is finding it difficult to provide a living for its existing residents, and certainly did not want to add more residents. It was therefore decided to halt housing construction and release offices. New construction took place only where the city rulers had no choice for political reasons.

"Today, the big story in Jerusalem is a switch in thinking, especially by new Mayor Moshe Lion, as shown by the roof agreement signed with the state."

The municipality is simultaneously promoting plans for hundreds of thousands of square meters of offices at the western entrance to the city and in other locations.

The willingness to release land for construction in Jerusalem is reflected in marketing. Last week, land for 778 housing units was successfully marketed to contractors, all of them in the framework of the Buyer Fixed Price Plan in the Mordot Arnona neighborhood, after the state marketed land for 659 housing units in the same neighborhood in March, also under the Buyer Fixed Price Plan. Since the beginning of the year, the state has marketed land for 1,437 housing units in Jerusalem, over double the amount of land marketed by the state in all of 2018 and almost four times the amount of land marketed in 2017.

"Today, however, it is almost impossible to talk only about employment," Pines adds. "The municipality realizes that new residents also create new businesses. Buyer Fixed Price tenders like the one in Mordot Arnona for the general population and the one in Ramat Shlomo for the haredi population are something that has not happened for years. The contractors waited for these tenders like farmers waiting for rain during a drought. We will also market land this year in Pisgat Zeev, the old Israel Broadcasting Authority compound, Ramot, and in the more distant future, there are more substantial plans, such as the White Ridge, the plan for the entrance to the city, covering Begin Highway and building housing on it, and Pi Glilot near Givat Shaul. These projects are on a scale that will change the city."

One of the companies that won tenders in Ramat Shlomo in October 2018 for 234 housing units under the Buyer Fixed Price Plan is Reisdor Development. Company owner and CEO Yaki Reisner explains the decision to begin activity in the city: "There is stable demand for housing in Jerusalem. As a result of the slowdown in activity by foreign residents, the city experienced a drop in demand for apartments costing around NIS 5 million, but the market for apartments costing NIS 2 million is a strong market, and this can be seen in the lotteries for people eligible for an apartment in the Buyer Fixed Price Plan, which are bringing thousands of registrants. The price of a five-room apartment in Ramat Shlomo in the Buyer Fixed Price Plan is NIS 2 million, while a similar apartment on the free market in the same neighborhood is sold for around NIS 2.3 million."

High-rise construction has begun to increase in Jerusalem, but too slowly. Last April, the Jerusalem District Planning and Building Commission approved a high-rise construction policy in Jerusalem, including construction of 20-storey and 30-storey buildings along the light rail route. Such buildings do not exist in many Jerusalem neighborhoods, but the question is whether a solution can be found for the ban in Jewish law on using an elevator on the Sabbath, which currently prevents haredim from living on high floors.

"No survey has been conducted of the effect of the haredi sector on high-rise construction in the city, which is an interesting question in and of itself. Haredim live in buildings with elevators everywhere in the world, however, including Israel," says architect David Kroyanker, a researcher, author, and expert in Jerusalem urban planning. Kroyanker is not sure that this is the real explanation why there is little high-rise construction in Jerusalem. "It might be one of the reasons, and even then only for specific places," he says.

Assaf Aviv, CEO of Jerusalem company M. Aviv, which is building the Lev Ha'ir project, says, "It is also hard for secular people to buy apartments on very high floors, because people in Jerusalem are conservative. In the end, however, there is a housing shortage in the city, and haredi society is also undergoing changes and will have no choice. What do haredim do in the US? Do they buy only apartments in low buildings?"

A check by the Jerusalem Institute for Israel Studies over the years shows that the proportion of apartments being constructed in buildings with eight or more storeys is 40-50%, with upward deviations in certain years. Yair Assaf-Shapira, a researcher at the Institute, says, "In recent years, people are talking about numbers of storeys never before seen in Jerusalem. In Kiryat Hayovel, for example, all of the buildings for which urban renewal is planned are very high. There is no longer any worry about thinking big. People look at Tel Aviv and ask, 'Why can they do it and we can't?'"

In other large cities in Israel, the proportion of apartments in buildings with eight or more storeys long ago exceeded 60%, and eight storeys is no longer considered high-rise construction. The proportion of apartments in Jerusalem in the past decade in buildings with 10 or more storeys, which is also not very high, is only 20%, a very low rate.

Prices: A rising trend - Haredim also want large apartments

The average apartment price in Jerusalem in 2018 was NIS 2 million, 2.9% more than in 2017 and higher than the nationwide NIS 1.8 million average. This average includes both luxury apartments in projects built in the city center in recent years and Buyer Fixed Price Plan apartments.

"The poverty of the city's residents dictates the type of construction. Do you think that there is someone in Jerusalem who could have paid NIS 70,000-80,000 per square meter in some tower? There's no market for it at all," Kroyanker says. "Foreign residents, who constitute this market, want to live within walking distance of the Western Wall. Most of the buyers, who are now buying in Rehavia, which is close to the Great Synagogue of Jerusalem, the town center, and within walking distance of the Western Wall, are haredim and other religiously observant people."

Another trend emerging in Jerusalem construction is a jump in the number of large apartments, which are naturally more expensive. Assaf-Shapira says, "Part of this is a nationwide trend towards larger construction, and they're also building fewer small apartments. Part of it is the increase in the haredi population. Some of them are able to buy large apartments.

"The haredi population is very diverse, and the gaps within it are wider than the gaps between haredim and non-haredim. As soon as you have to house a very large family in an apartment, it can't be a small apartment."

Urban renewal: Numbers rising - 4,500 housing units approved

The proportion of urban renewal projects in the permits granted over the past year is not large, but according to Amit Pony-Kronish, head of the urban renewal administration in the Jerusalem municipality, it will increase substantially in the coming years. "Five years ago, Jerusalem decided that it would not allow market forces alone to determine the situation. It was decided to establish a municipal administration and to exempt urban renewal projects from betterment tax.

"In 2018-2019, carrying out of urban renewal projects that had been promoted for years began. The first was in the Kiryat Moshe neighborhood, and it was followed by another project on Tehon Street in the Kiryat Yovel neighborhood. There are now 300 housing units under construction in urban renewal projects, and permits have also been issued around the city for 321 housing units in the Tama 38 framework.

"These numbers are only the beginning, however; they will jump in the coming years, because 4,500 new and old urban renewal housing units have been approved and are in various stages of requesting permits."

Pony-Kronish is not worried about the construction constraints typical of the haredi sector hampering urban renewal in haredi neighborhoods. He says, "The advantage in Jerusalem is that its topography can be a solution. You can build a 16-storey building with some of the floors below ground level and some above it. We're promoting several sites, including in Ramat Polin, Neve Yaakov, and Kiryat Shmuel, in which urban renewal is definitely possible, whether through low construction over a high land cover and putting a lot of apartments on a floor or through supplementary land."

The urban space: The factor affecting this planning is haredization

In Kroyanker's opinion, haredization of the city and the poverty of its residents are the two main factors affecting planning and construction in Jerusalem. "The center of Jerusalem has been boosted to some extent by the light rail, but it has hardly developed at all, and caused no substantial change," he says.

"It is true that the street looks a little better, but the building facades look rundown. Look at the intersection of Jaffa Street, King George Street, and Strauss Street, where there are one-storey buildings with tiled roofs dating back to the early British Mandate period (the 1920s). The stores on King George Street, Ben Yehuda Street, Jaffa Street sell rags for $4 and cheap shoes - it's one big open-air market stall.

"Jerusalem is a poor city. There is no purchasing power, and when there's no purchasing power, nothing happens. On the Alrov pedestrian mall in Mamilla, there are ornate stores, some of which moved there from the city center. Lev Ha'ir declined for a very simple reason: in the 1950s, 1960s, and 1970s, it was a meeting place for young people with 12 movie theaters. Today, there's nowhere to go there. Everything is concentrated in shopping malls."

"Globes": There is a lot of commerce on the street in the haredi neighborhoods.

"The Mea She'arim neighborhood is the most rundown neighborhood in the world. No inspector sets foot there. The conclusion is inescapable: the main factors influencing planning and construction in Jerusalem is haredization."

Kroyanker therefore has a hard time seeing anything changing in the equation of poverty and haredization in the foreseeable future. "Demography is what will determine this city's future, and it tells a very clear story. The haredi population is growing by leaps and bounds, and the city is staying poor," he declares.

Published by Globes, Israel business news - en.globes.co.il - on June 5, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

Jerusalem Photo: Shutterstock
Jerusalem Photo: Shutterstock
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