Wednesday, May 26, 2010

But What about the People Who Need the Loans?

In an almost unnoticed move, the Bank of Israel just changed the rules to make it more difficult and more expensive to get a mortgage. You can see the fine print (or at least an explanation) here, but the basic fear is that Israel is in, or might soon be in a real estate bubble.
It's no secret that real estate prices here have soared (Sadly, I'm a renter. I did not buy a house in Yad Binyamin.), almost doubling over the last few years. One reason for this is that it's relatively easy to get a mortgage, and real estate is considered a critical way for people to save their money. Israelis consider the notion of not owning property to be crazy. So they buy, and prices rise.
In a bid to curb this trend, the Bank of Israel has issued a rule forcing banks to set aside money if a loan is more than sixty percent of the value of the house, which many loans are, thus effectively raising the interest rate on these loans. Sounds harmless, but it's really not.
Last night on my way home, I was scanning the radio for something interesting to listen to, and I stumbled onto a Chareidi station on which a Chareidi banker
was literally screaming about this new rule. Young Chareidi families have literally no place to live; couples are living in converted storage spaces, tiny apartments, or other unsuitable housing because they simply can't afford the exorbitant cost of new housing. This rule will simply make it that much more difficult for them.
While I applaud the Bank of Israel's foresighted move to stave off a housing bubble and avoid the fate of the United State's real estate market, I think that they're shooting at the wrong target. Housing prices have risen so much because there's simply a shortage of housing. There aren't enough houses being built to accommodate new Israeli families, and the land for those families is taxed and levied ridiculously.
There's no officially permitted building in Judea and Samaria, two major areas where Chareidim built cities to alleviate specifically this problem, and getting permission to build anywhere else raises the ire of environmentalists, critics, basically anyone else who doesn't want the Chareidim to build near them.
I've got a proposal for the Chareidim: they should take over neighborhoods in secular cities. Especially in the smaller towns (far from the center of Israel), housing is cheap, and the chareidim could encourage enough families to move and establish a critical mass that could sustain the Chareidi way of life. And nothing gets a secular government moving like the thought of a Chareidi community moving into your neighborhood.
That, more than anything, could propel the government to take the housing needs of the Chareidi community seriously.