At the end of last week, the draft Law on Settlements was published for review. Along with significant reforms in the field of taxation and renting apartments, there is a significant revolution in everything related to urban renewal.
According to the Ministry of Finance, the Urban Renewal Authority Law in its current form, which is intended to stimulate urban renewal in Israel, is insufficient to meet the strategic goals set by the government according to the plan of the National Economic Council. If the situation continues as it is today, according to the Ministry of Finance, a shortage of 420,000 apartments is expected by 2040. To this end, the law proposes several changes to the current situation.
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Adding detached houses for urban renewal
Today it is accepted that urban renewal projects are carried out mainly in old housing estates with many apartments. No more. According to the draft, the intention is to reduce the urban renewal complexes even to places with less than 24 housing units, of which at least a third are detached.
In the explanatory notes to the law, it is stated in this regard: “Currently, plans are being promoted to create mass transit networks in the central region, primarily the future metro lines, where there are approximately 4,500 detached housing units within 500 meters of the future metro stations. The construction of mass transit routes requires a significant density of the housing units near them in order to allow more residents access to the transportation systems, something that will significantly improve the lives of the residents in these areas.”
The Treasury also reports on many detached housing units located in urban areas where there is a high potential for construction. For example, in the city of Holon the number of housing units attached to the ground is 7.5% of the housing units, but the area on which those units are built is about 26% of the areas.
According to the wording of the law, the director of the Governmental Authority for Urban Renewal will declare a complex as designated for urban renewal, if there are at least 24 units in the area, and a construction evacuation plan or thickening of the existing construction is proposed for the area, which includes the higher of doubling the number of existing apartments or 70 apartments. The manager will be able to declare the complex, even if there are less than 24 apartments in the area, but there are at least 8 detached housing units.
Cancellation of the possibility to claim compensation according to section 197
It is also proposed in the draft Law of Arrangements to cancel the possibility of claiming compensation for a harmful plan (Section 197 of the Planning and Construction Law), if the harm is what is known as “indirect harm”, and to examine the increase of the entrepreneurial profit.
The Planning and Construction Law does not distinguish between the types of damage to land due to the approval of a plan, it only emphasizes that the plan must apply to the area where the property is located, or to bordering land. Over time, two types of damage were defined: the first – direct damage, where the plan applies to the land itself and changes the rights that apply to it (for example, lowering the building rights); The second type of damage is “indirect damage”, where the offending plan applies to adjacent properties and causes the blocking of scenery, light or air, for example. The bill proposes to exclude the possibility of suing the local committees in such cases of indirect damage.
It is true that this is not something new, since they already talked about it 13 years ago, but they failed to pass this proposal in the third reading, and now the treasury is trying to bypass the normal legislative procedure.
Splitting apartments in a quick procedure: also detached houses
In February, the temporary order that allowed the legal splitting of apartments will expire, and now it returns in the Settlements Law in a format quite similar to the law that was originally initiated by the current Minister of Foreign Affairs, Eli Cohen.
The current proposal also includes the legal option to split a detached apartment and add 45 square meters to the existing housing unit while charging an improvement levy. The bill prevents the realization of this option in the cities where the metro line will pass. “However, it is worth noting that under the previous order of the hour homeowners did not rush to legally split them and so far hundreds of permits have been issued for such splits.
Also this time, by the way, it is a one-time order for five years only.
Corrections in the reform: increasing the entrepreneurial profit
Another matter that is mentioned in the draft law of settlements is the lowering of the majority required among the tenants to sue a tenant who refuses an urban renewal project from 80% of the tenants today, to two thirds, whose apartment areas are attached to at least two thirds of the common areas.
Another matter included in the draft is the exemption from taxation on apartments that are included in eviction and construction projects. Until now, tax exemption was granted only to owners of rights in only one apartment in the complex. From now on it is proposed to extend the exemption to people who own a larger number of apartments.
The proposal also includes the update of the appraiser standard 21 in the spirit of increasing the entrepreneurial profit. This is to allow urban renewal projects to remain viable even in a situation of falling apartment prices. This is because when prices fall, the feasibility of the project for entrepreneurs decreases, and there is a danger of its realization.