Israel – How do haredim pay for the apartments that they buy for their large numbers of children? And how does their housing plight threaten the market?
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Few people know about the pyramids of haredi (ultra-orthodox) free-loan societies (Gma”chim), charitable funds which do not necessarily rely on generosity of donors (whose numbers have diminished in the past couple of years), but which answer the question: how do haredim pay for the apartments that they buy for their large numbers of children.
To obtain money (tens of thousands of dollars) from a free-loan society, partly as a loan and partly as a grant, the average haredi borrower puts aside a much smaller sum (a few dozen dollars) toward the free-loan society when a child is born or shortly thereafter. In this way, money coming in from young parents immediately goes out to older parents who have to marry off a child. With the haredi population’s impressive growth rate (about 6% per year) the model has worked marvelously as the pyramid has a growing base.
The problem is that in these difficult times even putting aside a few dozen dollars is not a simple task. At the same time, the dollar model is no longer enough to buy an apartment priced in shekels, and in the absence of a steady expansion by the free-loan society, both because of the lack of cash and the lack of a guarantee that the parents will be able to withdraw the money when the time comes, the haredi’s financial – and real estate – model is hanging by a thread.
The problem is not only dwindling cash. The supply side of the equation also poses difficulty in finding solutions for the haredi sector. Over the past decade, while the average Israeli family dreamed of a large apartment in a good neighborhood, haredi neighborhoods have grown increasingly crowded and dilapidated, with apartments costing NIS 500,000-600,000, where virtually the only criteria have been the price per square meter and proximity to parents in Jerusalem or Bnei Brak.
The result is that haredim without extreme political views migrated to the territories, to new towns such as Betar Illit and Modi’in Illit-Kiryat Sefer. Without meaning to, haredim have become a critical mass of new settlers over the past 20 years.
However, Prime Minister Benjamin Netanyahu’s decision to freeze construction in the settlements for ten months, and the de facto freeze in place for months already, disrupted the haredi construction boom in the West Bank.
At the same time, cheap housing prices and the proximity to Jerusalem and Bnei Brak attracts haredim with slightly, and only slightly, deeper pockets to Beit Shemesh. Several weeks ago, Minister of Housing and Construction Ariel Atias, a member of the haredi political party Shas, took care to publish a tender for 1,400 lots in the town’s Ramat Beit Shemesh neighborhood exclusively for haredim. The winning contractor will be picked exclusively based on the lowest bids per apartment. Veteran Beit Shemesh veterans took exception to the tender, and in response to a petition, the courts issued an injunction against the haredi-only tender.
Ashdod is also slowly leaving the haredi housing scene, as prices climb and new land becomes increasing scarce.
Atias hopes salvation will come from the new town Harish in Wadi Ara; the city is planned to have 150,000 haredi residents. The obstacle is the strong farming lobby which has protected kibbutz land – held by Metzer, Ma’anit, Barkai, and others – in the area for decades. They refuse to hand over land for a haredi city, which in any case will not provide an immediate solution to the community’s housing shortage.
To further inflame the situation, an older ruling in Jewish law was revived, banning the use of elevators on the Sabbath, which aggravates haredi housing in buildings of more than three or four floors. Only in the hill towns, such as Kiryat Sefer or Beit Shemesh, does the topography make it possible to have the entrance in the middle of a high-rise; elsewhere, the entrance is on the ground floor.
All this is intended as a glimpse into the haredi courtyard, along with a reminder that their plight is very close to us. While Israelis continue to complain and throng housing fairs and sales sites, haredim are already deep in the heart of the problem. While the flames of this frustration are currently directed at outsiders – Intel’s fab in Jerusalem comes to mind the problem exists, and it pays to closely follow the handling of the community’s most explosive problem.
We’ve been searching intently for the weak link in the chain, for the item that threatens the soaring house of cards. Housing prices and demand for initial capital are simply no longer within reach of most young couples with whom we’ve spoken.
We conclude that we had better pay attention to the distress in the haredi housing market. We had better consider that it can be the initial detonation which can ignite, faster than we imagine, the entire Israeli housing market. We have more and more signs that the breaking point in the haredi community is approaching, which stands helpless more than others in the face of too many changes too fast in the past couple of years.
this isnt new, its happening in borough park, Williamsburg, Montreal the recipe for living in expensive apartments and not working just doesn’t work
The collapse of inflated housing prices in New York enabled us to buy a home. I know non-charedi Israelis who can’t buy a home and do not see that as a possibility for the forseeable future. Maybe the Israeli housing market is due for a correction? And the terms “pyramids” and “house of cards” may indicate that such may be long overdue.
“In this way, money coming in from young parents immediately goes out to older parents who have to marry off a child. With the haredi population’s impressive growth rate (about 6% per year) the model has worked marvelously as the pyramid has a growing base”
If true, how is this going to work long term-it smells like a well intentioned Ponzi scheme.
This is a classic example of a Ponzi Scheme. These schemes work as long as everything is fat, dumb and happy. But, just like Madoff, when the economy goes bad, we see what is and what is not built correctly.
Speaking as an Israeli, though not Haradi. I am working and to be honest 6 years after getting married and working a pretty good job I have no Idea how I could possibly afford to save up enough to buy a house in Israel.
Why don’t the young couple rent a small 1 bedroom apartment until they can afford to buy. Of course to afford to buy you have to work. Maybe after a year or 2 in kollel people should go to work and set up ittim kvuim l’torah. I know to many this is herasy but we gotta face the facts. Years ago I told my nephews & nieces that they will eventually have to go to work, even though their father sat & still sits in kollel because they do not have rich uncles, aunts or parents like their parents had.
I know a recent olah who works for a religious guy from BB who has a real estate firm. They have established the goal of “developing” Tiberias for the Anglo market. This means they are going after the Five Towns crowd. This acquaintance just bought a flat for around 600K and was offered twice as much in the month the deal has been going thru but not by Anglos. Just by some rich stupid Israelis with nothing better to spend it on. The flat is not worth that but is pretty large and would house a family decently if it were affordable. For the price to double in one month before it even closed is evil and unethical. Fortunately my acquaintances didn’t succ Tiberias still has nice NEIGHBORHOODS and a family atmosphere with decent housing. We don’t NEED fancy development that will jack up prices for everyone who has to work to buy.
Whether or not the housing is provided for haredim, the fact remains that this rush to build luxury housing is impossible here where real people with real incomes are being pushed into the streets. Had we not investigated Teveria, we’d be homeless in Jerusalem being neither haredi, we are religious however, nor having a large family as we’re empty nesters
If you don’t work, why should you have a house?
Just by some rich stupid Israelis with nothing better to spend it on.
Buying housing is a great way to spend money whether it is a vacation or regular home. Chazal says, ‘land in Israel is eternal..buy and buy”
Solution is simple it’s called education and work. Most Charedim are like Arabs who don’t like the idea of raising children for education and challenging careers. With a lifestyle that Charedim lead, it will be impossible in the future to raise 6 children and own a property. The Europeans and Middle Class Americans are understanding the demands of a modern life; less kids and more education will give you stable economic base to own a house, car, savings etc…
Chazal also say Ein Kemach Ain Torah
What’s happening here in Israel is that the haredim ofen go door to door collecting money for their childrens apartments. If the children and their parents worked, this might not have to happen. The Rabbis should be encouraging their “chasidim” to work instead of begging. It must be very painful for the parents to have to do door to door here in Israel and abroad to ask for donations. The children should be ashamed of themselves. Someone has to start speaking up and stop the shame.
The math doesn’t work. Even using very favorable assumptions.
–Assume every parent puts away $100 (USD) for each child (son and daughter) (in year #1 )
–Assume children get married at age 24 (in Year #25 ).
–Assume the population grows 6% every year, (population triples in 19 years population quadruples in 24 years). in year 25 there are 8 births for every wedding (wedding made up of 2 people the bride and groom)
–There would be enough premiums for each family (i.e. both the the bride and groom’s family) to take out $400 (for a total of $800) from the proceeds of the current year.
This is a far stretch from the articles suggestion of young couples depositing a “smaller sum (a few dozen dollars)” and being able to subsequently withdraw or even borrow “(tens of thousands of dollars)”.
Now even if we assume the money is invested (which defeats the purpose – isn’t it supposed to be used to lend it out interest free) and earns a generous 8%/year the $100 only turns into $634 in 24 years, not “tens of thousands”.
PLEASE remember-Israelis who work,two salaries per couple, do not come close to having enough money to buy apartments for their children- this has NOTHING to do with kollel or education. Also, renting is not a long term option in Israel,where there are no apartments built exclusively for rent. Many renters have to move YEARLY,which is both costly and very difficult for families with children.