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Part Five - The Economic Plan

Land Reform
Returning the land to the people

Zehut's construction reform is designed to address one of the main causes of Israel's high housing prices - the regulatory barriers that make construction in Israel difficult and more expensive. The real estate reform is intended to address the second factor in the cost of housing - the high price of land.

The high land prices stem from a low supply of land for construction, which fails to keep up with rising demand. The low supply is not due to a real shortage of land in Israel, but to an artificial shortage stemming from monopolistic control of the land by the Israel Lands Authority.

Zehut believes that citizens, not the state, are the real owners of the land. We also believe that only trade in land with no unnecessary restrictions on the free market will enable them to derive maximum benefit from it from sellers, purchasers, and the economy as a whole.

The Zehut land reform will dismantle the monopoly or the Israel Lands Authority, transfer ownership of the land to citizens, and remove all the obstacles that prevent their development and free trade.

Dismantling the Israel Lands Authority

93% of the land in Israel is controlled by the State, through the Israel Lands Authority. The Authority allocates lands for various uses and decides which lands will be sold and which will be kept as building reserves for future needs - all at its sole discretion. This means that the ILA has an almost complete monopoly over the land in Israel.

The land monopoly gives the ILA and the state power and influence. Creating an artificial shortage of land by selling them under restrictive conditions and at a slow pace allows the state to maintain this power.

In the best case, the state uses this power to implement a centralized policy and to navigate the economy according to its political worldview, rather than relying on the free market economy to meet the real needs of Israeli citizens, which causes damage to the economy as a whole.

In the worst case, this power is used to grant favors to cronies and to strengthen improper ties between capital and power.

You can see the damage of this monopoly today, where much of the land lies fallow. This is because the Authority allocates them for politically desired but unnecessary uses, such as agriculture, or because it is unwilling to sell them at all. At the same time, the insufficient supply of land for housing causes housing prices to rise.

We believe that this monopoly must be dismantled and that the lands under its control must be returned to the citizens of Israel.

Reclassification of land use

The ability of the Israel Lands Authority to restrict the permitted use of land leads to their inefficient exploitation, to the point that they are incompletely used. Where these lands are used for the most desirable and necessary purposes, they are limited in such a way that they can only be used to promote the political goals and interests of pressure groups. This harms the economy, slows growth, and ultimately increases the cost of living.

The value of land restricted to unneeded use, such as agriculture, can rise sharply if reclassified to allow for more useful use, such as commerce. Control of the land classification system enables decisions that have enormous economic implications for landowners as well as for developers who wish to build on them. For this reason, the land classification mechanism constitutes a fertile ground for corruption and the granting of favors to cronies.

The Zehut land reform will completely abolish the private land classification. The existing distinction between private land designated for commerce, industry, agriculture, housing, etc. will be canceled. Privately owned land will be classified as land for private use and landowners will be able to use the land in any way they wish.[28]

Transfer of state land to civilian ownership

The lands controlled by the State will be divided into three categories:

Nature reserve areas: streams, lakes, archaeological sites, etc., along with buildings or facilities for the benefit of nearby visitors, such as trails, camping areas and kiosks.

Public infrastructure: such as roads, railroads, water and gas pipelines.

Government areas: Lands used for government buildings, public buildings, research institutes, security establishments, military camps, training areas, and the like.

All the lands that do not fit into one of these classifications will be removed from the hands of the Israel Lands Authority and transferred to the citizens.[29]

There are several models for land transfer to citizens. We will consult the relevant experts and examine the facts and implications of the various models in order to choose the most appropriate and efficient model. Any method chosen will comply with the following principles:

After the elimination of the classification of private lands and after the removal of unused state lands from the Israel Lands Authority, the Authority will lose most of its functions and can be closed. Some of the necessary functions, such as the removal of squatters from state land[32] or the purchase of land for the state,will be transferred to appropriate departments at the Ministry of the Interior.

The dispute over handing over unjust lands in the past should not delay privatization

Most of the state land was given to the settlers by the state or the Jewish National Fund, for no consideration, in order to work the land. The lands were not transferred directly to the families of the settlers, but through intermediary bodies: party settlement movements and the associations (moshavim and kibbutzim). The "gift" was not registered in the land registry as owned by the settler or by the intermediaries, but remained in the hands of the state. Thus, the settlers received an intermediate status on the land - "right holders" - which allows them to use the land but does not give them any proprietary right over it.

There is currently no argument over the fact that the settlers have rights to land for the simple reason that they have been holding them for two or three generations and there are no other direct personal claims. However, the state also has rights to these lands, rights that must be transferred to Israeli citizens in the framework of land reform. As long as the land rights are in dispute, it is impossible to develop them and derive profits from them - a situation that affects both the settlers and the economy as a whole. Therefore, it will be necessary to formulate, as soon as possible, an arrangement for the division of land between the settlers and the state.

In the present situation, where dozens of sectors and cronies have received presents from the state for decades, there is no way to calculate exactly who got what and turn the clock back. The agricultural settlers, through the kibbutzim and moshavim, received free land. At the same time, industrialists received free enterprises, cronies received exclusive production, marketing and import licenses, transport cooperatives received subsidies and monopolies, and so on. At this stage, it is impossible to decide fairly and impartially what part of the land should be transferred to the ownership of the settlers. Therefore, we must make sure when formulating the arrangement that the damage caused by the delay in the transfer of land to citizens and their development does not exceed the benefit that we can attain by continuing negotiations. It should be remembered that the land reform will lead to a significant reduction in land prices and sting of the debate will be blunted.

Prohibition of the sale of land to hostile elements

Once the ILA is dismantled and the state lands are transferred to private hands, it will be necessary to ensure that hostile elements will not be able to purchase land in the State of Israel.

Zehut will pass a law that prevents the sale or lease of land in Israel to hostile elements. For this purpose, clear and comprehensive criteria will be defined for who is a hostile entity, which will be part of the formulation of the law. Hostile states and hostile organizations will be considered hostile elements, as are citizens of enemy states and members of hostile organizations. Companies, organizations and corporations controlled by hostile elements will also be considered hostile.

A list of enemy states will be compiled by the Ministry of Foreign Affairs and the Ministry of Defense. A list of hostile organizations will be compiled by the Ministry of the Interior and the Ministry of Defense, along with clear criteria for defining an organization as a hostile organization. Both lists will be submitted for Cabinet approval and will be updated from time to time, depending on the circumstances.

Sales or leases to hostile parties will be deemed void by law. The sale or lease of land to hostile elements can result in a heavy and deterrent fine.

[28] Subject to the DPA, where it applies, and to any other contract.

[29] It will be possible to leave a small percentage of unused state land to the state for the implementation of planned projects that meet one of these definitions. If the planned projects do not end within a specified period of time, these lands will also be transferred to the citizens.

[30] This does not rule out public sale for the highest price by the state, because the state can not exercise judgment and interfere in such a sale. Of course, this is only one of many possibilities.

[31] Except for the flat tax that applies to all types of income and therefore will also apply to income from the sale of land.

[32] An invasion of state land may still be a problem, especially an invasion of training grounds, although its dimensions will greatly decrease after the state relinquishes the unused land.

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