Tel Aviv Tent Protesters Dismiss Netanyahu Pledge to Reduce Housing Costs

Israeli union and municipal leaders pledged to support protesters camped in the heart of Tel Aviv and help pressure Prime Minister Benjamin Netanyahu to find a solution to rising housing costs.

Unless Netanyahu agrees to meet with protest leaders by July 30 to discuss the issue, the Histadrut labor federation will bolster the youthful demonstrators camped out on Rothschild Boulevard, Chairman Ofer Eini said today. The leader of a body representing Israeli mayors also said it may call a daylong cutback in municipal services Aug. 1.

“Starting Sunday, we are joining the struggle with all of our means,” Eini said at a Tel Aviv news conference, declining to elaborate. He demanded a response by the weekend from the prime minister, whose spokesman declined to comment immediately on the threat.

Some 30,000 people rallied in Tel Aviv on July 23 to protest housing costs and the tent camps have spread to Jerusalem, Beersheva, Haifa and other cities. Home prices rose 13.7 percent in the 12 months through April-May, about triple the inflation rate, the Central Bureau of Statistics reported on July 15. Bank of Israel Governor Stanley Fischer warned July 8 that Israel must deal with a potential “housing bubble” that was fueling inflation.

Building Incentives

Netanyahu convened a press conference in Jerusalem yesterday with the housing and finance ministers to lay out a plan that would lead to the construction of 50,000 units across the country within 18 months. Incentives for building the cheapest rental apartments include free state land.

“He talks about free land and who’s going to get it -- the contractors and rich businessmen,” Daphne Liff, a protest leader told reporters afterward amid the hundreds of tents on Rothschild Boulevard in Tel Aviv. “What he’s offering us is nothing less than fraud.”

The Union of Local Authorities, which represents Israeli mayors, will hold a meeting tomorrow to decide on a proposal to join the protest by refusing to receive the public at municipal offices for one day next week, its chairman Shlomo Buchbut, told Israel Radio.

Israel’s inflation rate has exceeded the government’s 1 percent to 3 percent target every month this year and was at 4.2 percent in June.

Expected Inflation

The two-year breakeven rate, which reflects the rate of inflation traders expect, was at 2.97 percent at midday, compared with 2.95 percent yesterday at the beginning of Netanyahu’s press conference.

Netanyahu’s popularity has declined, with only one third of the people surveyed giving him a favorable rating compared with 51 percent two months ago, Haaretz reported yesterday, citing a survey by the Dialog polling organization. Eighty-seven percent said they supported the housing demonstrations. The survey of 493 people had a margin of error of 4.5 percent.

The protests are “a very significant event,” said Yoram Meital, chairman of Ben Gurion University’s Herzog Center for Middle East Studies in Beersheva. “It is difficult to see how the government will succeed in containing the demands.”

The demonstrations follow a Facebook group boycott over the rising cost of cottage cheese. More than 100,000 Israelis joined a Facebook group last month calling for a boycott of the dairy product whose price surged after government price supervision was lifted. The outcry prompted dairy companies, including Strauss Group Ltd., to lower the cost and the government to set up a committee to examine rising food prices. Another Facebook group, called “Buy Less - Bring Down Prices” is now targeting consumer products, including diapers and breakfast cereals.

Poland Trip

Netanyahu, 61, acknowledged the impact of the housing protests in a Cabinet meeting the day after the Tel Aviv rally, pledging to take steps to ease the situation. He also canceled a trip to Poland that was planned for this week to focus on housing.

“We’re going to unplug the cork,” the prime minister said yesterday. “The first thing we’re going to do is free the blockages to planning housing projects and the second thing we’re going to do is free the blockages to selling land for apartments.”

Fischer endorsed Netanyahu’s plan, saying in a statement that the key to solving the problem is to increase the supply of housing.

Construction Starts

In the past year, construction starts have increased 11 percent and gradually the number of homes completed is increasing as well, the central bank said. This, over time, is expected to have a moderating effect on housing and rental prices, the bank said.

Finance Minister Yuval Steinitz said an analysis by his ministry forecasts “a moderating and even a drop in prices by the end of 2011 or the first few months of 2012.”

Netanyahu’s plan to free up land for construction may benefit construction companies which would see more business, while cutting the value of the land they hold, which may harm companies which have borrowed money to buy land, said Yaniv Pagot, chief strategist for Ayalon Group.

Housing construction companies include Shikun & Binui Ltd. (SKBN), which has slid about 16 percent since the beginning of the year. The benchmark TA-25 index has declined about 5 percent in the same period.

“This needs to be handled with silk gloves,” Pagot said. “You could solve one problem and create a worse one.”

To contact the reporters on this story: Jonathan Ferziger in Tel Aviv at jferziger@bloomberg.net Alisa Odenheimer in Jerusalem at aodenheimer@bloomberg.net;

To contact the editor responsible for this story: Louis Meixler at lmeixler@bloomberg.net.

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