On Sunday at midnight, the window of opportunity for local authorities to determine the rate of the improvement levy on evacuation-construction projects in their area closes. According to regulations drafted in the Arrangements Law, the improvement levy across the country will stand at 25% by 2027, unless the authorities have had time to determine otherwise by May 1st. Thus began the blitz of the authorities’ announcements of the improvement levies set in their area. From Kiryat Ono and Jerusalem, which did it first, to Ashkelon, which did it on the very last day.
As the deadline for a decision approached, more authorities announced their decisions, and slowly a clear trend emerged: many authorities opt for the maximum improvement levy, despite the possibility of setting a 25% levy or a full exemption from the levy.
Thus, the municipalities of Bat Yam, Herzliya, Givatayim, Holon, decided to apply a 50% improvement levy in all parts of the cities; Or Yehuda also decided on a 50% levy in most parts of the city, except for the southern neighborhoods project, where a 25% levy will be applied; The Ramat Hasharon municipality has also determined that the levy rate will be 50%, with the exception of the Morasha neighborhood – where it will be 25%.
In Petah Tikva, a “graded” class was decided upon, according to neighborhoods and urban renewal complexes: in some neighborhoods, Amishav, Ramat Werber, Yoseftal and the city center and the heart of the colony, as well as in two projects – Ansky-Degel Reuven and Vogel-Bachar, an exemption from the improvement levy was determined; In the Schiffer, Tkuma and North Orlov neighborhoods, a 25% levy will be charged; In the rest of the city – a maximum improvement levy of 50%. In Yehud-Monosson, a 25% improvement levy was decided on all evacuation-construction complexes in the city, as well as in the Bnei Brak municipality, where the city council did not convene at all, and the 25% levy rate in the entire city was automatically set as soon as May 1.
The reason in Even Yehuda was decided twice
Not in all municipalities the decision was made quickly and easily. Thus, the Kiryat Gat municipality decided on the matter only last Thursday, setting a 25% levy rate throughout the city, even though it threatened to set a maximum levy; In Ashkelon, it was decided to fully exempt from the improvement levy, with the exception of areas that are not “urban renewal-oriented”, around the industrial areas, where the improvement levy will be 50% – a decision made on Sunday evening.
In Even Yehuda, it turned out that the head of the council, Avi Harari, accidentally attended a council meeting that discussed improvement levies on the two evacuation-construction complexes in the council on Thursday, despite his and his daughter having an apartment in one of the complexes. “Immediately after realizing he had made a mistake, the head of the council asked for the decision to be overturned,” the local council said. The council convened again, on Saturday night, to re-vote without Harari, and decided to grant an exemption from the improvement levy for both projects.
Increased to do Eilat Municipality, which set an improvement levy rate of 25% – but stated that it may request an extension for further decision on specific areas, for which the work of the professional team has not yet been completed. The government authority for urban renewal stated in the matter that “according to the law, it is not possible to receive an extension beyond May 1,” and that “so far no request has been received from the Eilat municipality to postpone the decision.”
In the city of Kfar Saba, a council decision was made a few days ago, according to which the levy will be 50%, but on Sunday evening it was decided to submit an amended version of the decision to the council for approval. To date, the details of the new decision have not been released.
The cities that chose to exempt the developers from the levy
What caused the great difference between the municipalities, and why did many of them choose the maximum improvement levy rate? Some municipalities, such as Jerusalem, benefit from recently signed umbrella agreements for urban renewal with the state, which give them a budget increase depending on the number of building permits issued in urban renewal, and thus can “waive” certain expected revenues from improvement levies.
Jerusalem Mayor, Moshe Leon / Photo: Reuven Kapuchinsky
Other municipalities, such as Haifa, have chosen the intermediate route, 25%, so that the municipality will not completely lose its potential revenue from the improvement levy, but on the other hand will not charge a maximum levy – to benefit the developers. Haifa, like other municipalities, has chosen a maximum improvement levy in specific neighborhoods where the possibility of urban renewal is low, or where land values are high and guarantee economic feasibility even given a 50% improvement levy.
The municipalities that have opted for a maximum improvement levy in the entire area of the city apparently believe that the land values are high in their entire area, and therefore do not require any reduction in the rate of the improvement levy in urban renewal. It is not surprising, then, that most of the municipalities that have chosen this rate are in the heart of the demand areas. In contrast, many developers view municipalities that have chosen to apply a maximum levy throughout the city as those that are not eager to promote massive urban renewal in their area.
Encourages or harms urban renewal?
Adv. Yishai Itzikovich, partner, director of the real estate department at Agmon & Co., Rosenberg Hacohen & Co., notes that although most municipalities have already published their decision on the matter, no regulations have yet been formulated regarding how to calculate the improvement levy. “Days will tell if there are regulations to promote or thwart the promotion of projects.
“Since before the amendment the local authority could, with the approval of the interior minister, grant an exemption for a particular project, without requiring a five-year standstill, the question arises as to whether the market is now in a state of ‘lost wages’.”