Kahlon proposes new apartment tax

Monthly tax of 1,000 shekels per apartment to be levied. But who will end up flipping the bill?

David Rosenberg ,

Moshe Kahlon
Moshe Kahlon
Flash 90

Finance Minister Moshe Kahlon (Kulanu) has proposed a new tax to bolster the state’s coffers – a flat tax on apartments targeting owners of multiple units.

If approved, the proposed tax, which would cost 12,000 shekels a year ($3,100) per apartment, regardless of the value of each housing unit or rent brought in by the unit, would net around one billion shekels ($260 million) annually, Finance Ministry officials say.

But who will actually pay for this billion shekel boon to the state’s budget?

The tax will be levied only on owners possessing more than three housing units. The annual fee would be charged on each apartment above the initial three. But apartment owners are likely to pass at least some of the tax on to their renters, causing the average price of rent to increase even further.

Owners of units with marginal profits and who are unable to significantly raise rent because of competition are likely to sell those apartments off and shift their investments, leading to a long-term decline in the number of apartments available for rent.

On the plus side, the sudden decrease in apartment purchases by investors and increase in sales could reduce the price of housing for buyers, though this effect is likely to be brief.

Because the tax is a flat, per unit charge, investors will likely shift from cheaper and mid-priced apartments to more expensive units, increasing the number of high-end apartments on the rental market, and lower the number of affordable housing.

According to the Finance Ministry, some 55,000 Israelis own four or more housing units, with some 85,000 apartments liable for the tax.