Israel is located in an active seismic region on the Syrian-African fault and has experienced devastating earthquakes, the most recent fatal one occurring in 1927 when 300 people died and over 1,000 buildings were destroyed. Accordingly, in 1980, the Israeli government instituted architectural and construction standards to ensure that new buildings can properly withstand earthquakes. However, over 100,000 older buildings were not designed to survive a strong earthquake, thus putting many Israeli residents at risk.
Thankfully, in 2005 the Ministry of the Interior approved TAMA 38, a plan which created financial incentives to encourage the private sector to bankroll the cost of strengthening older buildings to withstand earthquakes. The plan offers increased “building rights” – or rights to expand buildings beyond previous zoning allocations – for all buildings that become reinforced. The apartment owners can transfer these expansion rights to a construction company in return for upgrading their building. The apartment owners receive a reinforced and refurbished building and expanded apartments, as the developers add safe rooms (known as a “mamad”) to each existing unit. The contractor covers his expenses plus makes a profit by building and selling apartments on the new floors that they construct above the original building.
The plan is a win-win-win situation: (1) The existing apartment owners receive at no cost a reinforced building against earthquakes, a renovated façade, upgraded infrastructure, lobby and stairwells, and an elevator, all of which increases property values by over 20%; (2) the construction company profits by building and selling new apartments utilizing the expansion rights; and (3) the Government protects its citizenry from potential future misfortune, upgrades its housing stock, and gains additional tax revenue from the newly constructed units.
Parenthetically, TAMA 38 provides another option, whereby the developer knocks down the existing edifice and constructs a new building. In this scenario, the existing apartment owners would receive a new apartment. As this option is much more expensive to implement, between constructing a new building and relocating all the tenants during the period of construction, most TAMA 38 plans have implemented the less costly reinforcement plan.
TAMA 38 has taken a number of years to get off the ground. However, once the original batch of projects was successfully completed, the neighboring buildings’ owners who were initially skeptical have become more receptive to having their buildings reinforced, upgraded and beautified at no cost to them.
Interestingly, the most complicated aspect of the TAMA 38 process has been neither the construction challenges nor the bureaucratic obstacles, but the requirement to garner project approval from two thirds of the existing apartment owners. Once two thirds of the owners are on board, the developer may apply for the required building permits. Upon receiving the permits, the developer can then petition the court to expeditiously (within thirty days) schedule a judicial hearing whereby the apartment owners who had previously rejected the construction plan can present their arguments. Unless these owners present a persuasive reason for rebuffing the plan, the court will approve the project.
Gedaliah Borvick is the founder of My Israel Home (www.myisraelhome.com), a real estate agency focused on helping people from abroad buy and sell homes in Israel. To sign up for his monthly market updates, contact him at gborvick@gmail.com.