Policy Studies

 

No. 39                                                                                                 April 1999

 

 

Summary of Policy Study

 

 

ISRAEL’S TENANT PROTECTION LAW (RENT CONTROL)

By Ehud Menirav

 

 

Introduction

 

  The Israeli economy is characterized by extensive government intervention relative to developed Western countries. Government involvement does not stop at direct intervention through the state budget, i.e. tax collection, public consumption and transfer payments. The State also intervenes by means of legislation and regulations which are not in the budget and which restrict economic freedom. The Tenant Protection Law is an extreme instance of such legislation. As will be demonstrated in this study, the Israeli government has impaired the functioning of the private rental market and permitted the milking of property owners who rent out apartments and business premises. This situation has existed for the past 70 years, since the British Mandate, and has been the policy of all Israeli governments since then, regardless of which party was in power. This policy has been executed in broad daylight and with clear intent.

 

The Tenant Protection Law in Israel is based on state coercion of a specific financial relationship between property owners and tenants leasing the property. Protected tenants under the law enjoy three benefits: a) their rent is regulated by the government and represents only 10-20 percent of the market price; b) they are protected from eviction even after the rental contract has elapsed; and c) they are entitled to transfer their rights to other tenants and to receive substantial compensation in return.

 

According to the latest government survey conducted in 1992-1993, there are 38,000 protected apartments and business premises located in 6,500 buildings. Of these, about 23,000 apartments are designated as residences, and represent 1.5 percent of all housing units in Israel. Figure 1 represents the distribution of protected housing, according to type and ownership.

 

 

 

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