Hey everyone, welcome back to My Weird Prompts. I am Corn, and I am joined as always by my brother.
Herman Poppleberry, at your service. And we are coming to you from our home in Jerusalem where the housing market is, to put it mildly, a frequent topic of conversation over dinner. Actually, it is the only topic of conversation lately. It is early February, two thousand twenty-six, and while the rest of the world is worrying about A-I takeovers or the next fashion trend, we are sitting here in the Holy City looking at apartment listings like they are ancient, undecipherable scrolls.
Usually a very heated topic of conversation, actually. Our housemate Daniel sent us a really thoughtful prompt today about exactly that. He was looking at the numbers and noticed that ninety-three percent of the land in Israel is owned by the state or its agencies. It is a staggering figure, especially when you look out the window and see these massive luxury towers going up that stay empty while everyone we know is struggling just to find a reasonable two-bedroom apartment. Daniel used the word "trolling." He feels like the state is effectively trolling its own citizens by sitting on all this land while we all scramble for the scraps.
It is the great Israeli paradox, Corn. We have this incredible technological boom, a high-growth economy that has proven remarkably resilient even after the massive shocks of the last few years, and yet the basic dream of owning a piece of the land feels increasingly out of reach for the average person. Daniel’s question about whether this level of state ownership is common, and why it exists in the first place, really gets to the heart of why the market here behaves so differently than in, say, the United States or much of Europe. It is not just a housing crisis; it is a systemic design choice that dates back over a century.
Right, because in most Western economies, we think of land as a private commodity. You buy it, you own it, you sell it. But here, the state is the ultimate landlord. So, Herman, let us start with the first part of Daniel's question. Is this common? Are we an outlier in the world with this ninety-three percent figure? Because when I tell my friends in New York or London that the government owns almost everything, they look at me like I am describing a feudal kingdom.
We are a massive outlier among democratic, market-oriented economies, but we are not entirely alone. To give some context, in the United States, the federal government owns about twenty-eight percent of the land, but almost all of that is in the West and consists of national parks, forests, and rangelands. It is not land intended for urban development. In the United Kingdom, private ownership is the norm, though technically all land belongs to the Crown, but as you mentioned, that is a legal fiction that does not affect your ability to own your backyard. The closest parallel to Israel is actually Singapore, where the state owns about ninety percent of the land. But the outcomes are wildly different. Singapore uses that ownership to provide high-quality public housing for the vast majority of its citizens. Israel, on the other hand, has a system where the state owns the land but the market is supposed to provide the housing, creating this weird friction where the government acts like a private monopolist.
So if it is not the norm, how did we get here? Daniel mentioned the historical context, the British Mandate, and the Israel Development Authority. Was this an intentional design from the beginning of the state, or just a series of historical accidents that piled up? It feels like we are living in a house built by people who had a very different idea of what "home" meant.
It was very much by design, Corn, and to understand it, we have to go back way before nineteen forty-eight. We have to look at the Ottoman Land Code of eighteen fifty-eight. Under the Ottomans, most land was classified as "Miri" land, which meant it belonged to the Sultan, and individuals only had the right to use it. When the British took over in nineteen seventeen, they kept much of this framework. But the real driver was the early Zionist ideology of the late nineteenth and early twentieth centuries. The founders of the state, and the organizations that predated it like the Jewish National Fund, or the J-N-F, believed that the land of Israel should be the collective property of the Jewish people. They wanted to prevent the land from being concentrated in the hands of a few wealthy landowners or being sold off in a way that would undermine the national project. They were influenced by thinkers like Hermann Schapira and the ideas of agrarian socialism. The goal was "Geulat Ha'aretz," the redemption of the land, and they believed that private land ownership was a Diaspora habit that needed to be discarded in favor of national rebirth.
That makes sense from a nation-building perspective in the nineteen twenties and thirties. If you are trying to establish a state and settle a population quickly, you want control over where people go and how the land is used. You do not want a few speculators holding the country hostage. But we are nearly eighty years into the state's existence now. We have a population of ten million people as of last year. Does that ideology still hold up when it is creating such a bottleneck for housing? It feels like we are using a nineteen-forties operating system to run a twenty-twenty-six economy.
That is the tension, Corn. The legal framework was solidified in the Basic Law of nineteen sixty, which states that ownership of Israel lands, which includes land owned by the state, the Development Authority, and the J-N-F, cannot be transferred either by sale or in any other manner. Instead of buying land, most people in Israel actually enter into long-term leases, usually for forty-nine or ninety-nine years, from the Israel Land Authority, or the I-L-A. This was meant to ensure the state always had the final say. But as the population exploded, the I-L-A became less of a "guardian of the national heritage" and more of a massive, slow-moving bottleneck.
I think that is a point that confuses a lot of people, even those living here. When you "buy" an apartment in many parts of Jerusalem or Tel Aviv, you are not actually buying the dirt underneath it. You are buying a leasehold. And when that lease expires, in theory, it reverts to the state. I remember the panic a few years ago when people realized some of the church-owned land leases in Jerusalem were coming up for renewal. It was a nightmare for homeowners.
Exactly. Now, in practice, for residential property on state land, those leases are almost always renewed, and since the two thousand nine reforms, many people have been able to convert those leases into actual ownership in urban areas. But the fact that the state still holds the title to ninety-three percent of the total land area means the state has a total monopoly on the supply of new land for housing. And as any economist will tell you, when a single entity has a monopoly on a vital resource and releases it very slowly, prices go through the roof. The state is essentially the OPEC of dirt.
This brings us to the "trolling" Daniel mentioned. It does feel like a bit of a slap in the face when you see the state guarding land so zealously in the periphery, like the Negev or the Galilee, while the center of the country is so densely packed that people are living in subdivided storage units. Why is the state so slow to release land? Is it just bureaucracy, or is there a strategic reason for the scarcity? Because looking at the data for early twenty-six, we actually have a record supply of unsold new apartments—over seventy thousand units sitting on the books—yet prices only dropped by about two point three percent in twenty-twenty-five. That is a tiny correction after a decade of massive gains.
It is a mix of both bureaucracy and fiscal strategy. On one hand, you have the I-L-A, which is a massive organization that has to balance agricultural needs, environmental protection, and security concerns. But there is also a fiscal element that people do not like to talk about. The sale of land leases is a huge source of revenue for the Israeli government. In some years, land sales and related taxes account for a significant chunk of the national budget. If the government flooded the market with land, the value of that land would drop, and the government’s revenue would take a hit. So, the state is in this conflicted position where it wants to lower housing prices to help citizens, but it also wants to keep land values high to balance the books.
So the state has a financial incentive to keep land prices high? That seems like a direct conflict of interest if their goal is also to provide affordable housing for their citizens. It is like a doctor who also owns the only pharmacy in town and keeps the price of medicine high to pay for his new car.
It is a classic "principal-agent" problem. The government as a whole says it wants lower housing prices because high prices are a major source of social unrest and economic strain on young families. But the agencies responsible for the land are measured by how much revenue they bring in. Plus, you have the issue of infrastructure. You cannot just release a thousand dunams of land in the middle of the desert and say "build." You need roads, sewers, schools, and electricity. The state often lags behind in providing that infrastructure, which delays the land release even further. And let us not forget the labor crisis we are seeing right now in twenty-twenty-six. We have a shortage of about forty thousand construction workers because of the restrictions on Palestinian labor that started back in twenty-twenty-three. Even if the state released all the land tomorrow, we do not have enough hands to build the houses fast enough.
Let us talk about that asymmetry Daniel mentioned regarding population density. We have this tiny country, but it feels like everyone is trying to squeeze into a tiny sliver between Gedera and Hadera. Does the state land ownership policy contribute to this lopsidedness? Because it seems like the "Start-up Nation" should be able to build a high-tech city in the Negev in a weekend, but instead, we just keep piling more floors onto Tel Aviv.
Absolutely. Because the state owns so much of the land in the periphery, it has total control over the development of new towns. If you wanted to start a new, private community in the Negev, you basically couldn't do it without a massive amount of government approval and cooperation. In a more private-market-oriented system, a developer might see the high prices in Tel Aviv and think, "I will buy some cheap land an hour away, build a high-speed rail link or a tech hub, and lure people there with affordable luxury." But here, the developer has to wait for the state to decide that it is time to develop that specific patch of dirt. The I-L-A uses a tender system where they sell the rights to the highest bidder, which often means the land starts out expensive before a single brick is even laid.
And that decision is often tied to political cycles or grand national plans that might not align with where people actually want to live or work. It creates this situation where the "demand" is screaming for more space, but the "supply" is being metered out through a very narrow, bureaucratic straw. It is frustrating because we see the potential, but the gatekeeper is asleep at the wheel, or worse, intentionally holding the door shut.
And let us not forget the security aspect Daniel alluded to. In Israel, land ownership is often seen through the lens of "sovereignty." There is a deep-seated fear in certain parts of the government that if land were fully privatized, it could be bought up by hostile foreign interests or that the state would lose its ability to ensure a Jewish majority in strategic areas. This "Judaization of the Galilee" or "settling the Negev" mentality means that land policy is often treated as a security issue first and a housing issue second. When you view land as a strategic asset for national survival, you are much less likely to let the "invisible hand" of the market decide where the houses go.
It is fascinating how these nineteenth-century ideas about land and soul are still dictating the rent prices for a software engineer in two thousand twenty-six. But what about the luxury towers? Daniel mentioned these developments that sit empty. If the state owns the land, why are they allowing developers to build massive projects that don't actually house residents? It feels like the ultimate troll: "Look at this beautiful building you can never afford to live in, and by the way, no one else lives there either."
That is where the "ghost apartment" phenomenon comes in. When the I-L-A puts a plot of land up for tender, they often sell it to the highest bidder. In high-demand areas like Jerusalem, the highest bidders are often developers who know they can sell these units to wealthy overseas buyers who might only visit for two weeks a year. These buyers don't care about the local rental market; they want a "foothold" in the Holy City. The state gets a massive payday from the developer, the developer gets a massive payday from the foreign investor, and the local resident who actually works in the city gets priced out of the neighborhood. Jerusalem is the biggest anomaly in the twenty-twenty-five data; while prices fell elsewhere, Jerusalem stayed high because of this external demand.
So the state is prioritizing its own balance sheet and the interests of the global elite over the people who actually live here. It is a strange form of success where we have secured the land, but we have made it too expensive for our own people to live on it. Is there any movement toward changing this? I mean, ninety-three percent is such a high number. Are there voices calling for large-scale privatization of land in Israel? Or are we just going to keep building luxury towers for ghosts?
There have been reforms. In two thousand nine, there was a major land reform that allowed for the transfer of actual ownership, not just leases, for certain types of residential property in urban areas. The goal was to reduce bureaucracy and give people more certainty. But it only applied to a small fraction of the land. The vast majority remains under state control. There are programs like "Mechir Matara," or Target Price, where the state subsidizes the land cost for developers in exchange for them selling apartments at a discount to first-time buyers. But these are often criticized for being a lottery system that helps a few lucky people while doing nothing to lower the overall market price.
Why not go further? What would happen if Israel decided to privatize, say, fifty percent of that state-owned land over the next decade? Would the sky fall, or would we finally be able to afford a three-bedroom apartment in Petah Tikva?
It would be an economic earthquake. On the positive side, it would likely lead to a massive surge in development and a significant drop in housing prices as the monopoly is broken. It would allow for more creative, market-driven solutions to density and urban planning. But the pushback would be immense. You would have environmentalists worried about unplanned sprawl, social activists worried about the "national heritage" being sold off to billionaires, and security hawks worried about the loss of state control over strategic territory. Plus, the government would have to find a way to replace the billions in revenue they currently get from land sales. It is a classic case of being "locked in" to a system that worked for the founders but is strangling the descendants.
It seems like we are stuck in this loop where the very policies that were designed to protect the "national interest" are now actively harming the "national interest" by making it impossible for the next generation to build a life here. It is a strange form of success where we have secured the land, but we have made it too expensive for our own people to live on it. We are essentially tenants in our own homeland.
That is exactly the point Daniel was making about the "trolling." It feels like a cruel joke. We have this beautiful, vibrant country, but the gatekeeper is the state itself. And because the state is also the one collecting the fees, there is very little incentive for the gatekeeper to open the door any wider than is absolutely necessary. Even now, in early twenty-six, as the market is supposedly "stabilizing," the average number of salaries needed to buy an apartment has only dropped from one hundred seventy-four to one hundred sixty-four. That is still over thirteen years of your entire gross income just for the walls and the roof.
So, what is the takeaway for our listeners, especially those who might be looking at the Israeli market or similar state-heavy systems? Is there a way for the "everyday person" to navigate this, or are we just at the mercy of the Israel Land Authority? Because it feels like a very rigged game.
For the individual, the takeaway is that you have to understand the rules of the game are different here. You aren't just buying a home; you are entering into a complex relationship with the state. You have to be aware of the lease terms, the potential for future "capitalization" fees when the lease expires, and the fact that the value of your property is almost entirely dependent on the state’s next move regarding land release in your area. You also have to watch the labor market; as long as that forty-thousand-worker gap exists, supply will be slow, no matter what the I-L-A does.
And on a policy level, it seems like the "aha moment" here is realizing that the housing crisis isn't just a lack of houses; it is a lack of available land caused by a century-old policy that might have outlived its primary utility. If we want to solve the density issues and the price issues, we have to address the ninety-three percent elephant in the room. We need to move from a "sovereignty" mindset to a "service" mindset. The land should serve the people who live on it today, not just the ideological ghosts of the past.
Precisely. Whether that means more privatization or just a much more aggressive and transparent land-release policy, something has to give. The current system is a relic of a time when we were a poor, agrarian society trying to survive. Today, we are a high-tech powerhouse, and our land policy needs to reflect that reality. Otherwise, we are just going to keep watching those cranes over the Jerusalem skyline and wondering who they are actually building for.
It is a lot to chew on. I think about this every time I see the cranes over the Jerusalem skyline. Who are those buildings for? And why is it so hard for a young couple starting out to find a place in a city that supposedly belongs to them? It is the defining challenge of our generation in this country. And it is not just an Israeli problem, though we have the extreme version of it. Many cities around the world are grappling with how to manage land for the benefit of their residents versus treating it as a financial asset.
Well, I think we have thoroughly explored why Daniel feels like the city is trolling us. It is a combination of historical inertia, bureaucratic monopoly, and a fundamental conflict between state revenue and public welfare. And a dash of security-related anxiety for good measure.
Naturally. Before we wrap up, I want to remind everyone that if you are finding these deep dives helpful, or if you just like listening to two brothers talk about the world from our living room in Jerusalem, please leave us a review on your favorite podcast app. Whether it is Spotify or Apple Podcasts, those ratings really help other people find the show. We are trying to reach more listeners who are curious about these weird systemic quirks that shape our lives.
They really do. We appreciate all of you who have been with us through so many episodes. This has been episode five hundred and one, which feels like a bit of a milestone in itself. We have covered a lot of ground since episode one, but the housing market remains our most requested topic.
It certainly does. You can find all our past episodes and a way to get in touch with us at our website, myweirdprompts.com. We have an RSS feed there too if you want to make sure you never miss an episode. We love hearing from you, so keep those prompts coming. Daniel, thanks again for the great question.
Thanks to Daniel for sending in this prompt. It gave us a lot to think about during our next walk through the neighborhood. Maybe we will count the empty windows in those luxury towers.
Absolutely. Thanks for listening to My Weird Prompts. We will be back next week with another one. Until then, take care.
Until then, take care.
Bye everyone.
